Retirement funds are usually protected from claims by the lender when a foreclosure results in a deficiency judgment. Other assets a creditor may take after a foreclosure are other real properties, such as another home or a new car.
If a house was applied as collateral, the lender can only take the house when foreclosure occurs. The bank will litigate to sell off the property to fulfill payment of the loan, since the home was pledged as collateral.
Upon foreclosure of property (such as a house), it is typically auctioned through a foreclosure sale. The amount of money the mortgage lender acquires by selling the house is utilized to cover the amount needed for the mortgage. Whatever proceeds the lender gains from the foreclosure sale may be insufficient for the mortgage, as well as the house's equity loans and the associated secured liens.
The deficiency balance comes into play here, “ it is the disparity between what the bank receives and what the property owner actually needs to pay. Note that in cases of foreclosure on home equity loans and mortgages, various states allow lenders to sue borrowers to recoup the amount of the deficiency balance.
Mortgage lenders may attempt to pursue property owners in various ways. The efforts could go from notification letters or calls to litigation. As stated earlier, the creditor may choose to file a suit to obtain the remaining deficiency balance.
When a lender sues and the judgment of the court is against the defendant's favor, the latter is potentially capable of setting a lien on other property the borrower has. Property owners are advised to collaborate with the lending entity and recompense the debt, “ this averts any of the negative repercussions that will occur when a debt remains unpaid.