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Deed in Lieu with 80/20 loan

Discussion in 'Deed in Lieu of Foreclosure - Do You Need Help to ' started by BrokeInGA, Oct 6, 2010.

  1. BrokeInGA

    BrokeInGA LoanSafe Member

    Wife and I bought a house in Georgia in 2006 for $156,000. It is an 80(AHMSI)/20(Greentree) loan. We divorced in 2008 and I took over the house and payments.

    The house is now worth $119,500.

    First loan principal balance is $119,238.58
    Second loan principal balance is $30,315.56.

    What are the chances of getting a deed-in-lieu accepted by both lenders and not have them come after me for the deficiency?
  2. Evan Bedard

    Evan Bedard Call 1-800-779-4547 Loan Safe Mortgage

    Deed in lieus are very difficult to achieve especially if you have two loans with different servicers, but it is not impossible.

    Here is some great advice another member (Professor Shays) posted about deficiency judgments in Georgia:

    How common are deficiency judgements?
    While there is a suggestion on the Internet that in Georgia, lenders seeking deficiency judgments are not all that common, I would suggest that it depends on a variety of factors including the borrower's post-foreclosure ability to pay the judgment if obtained. The good news, as indicated below, is the lender must react quickly relative to seeking a deficiency judgment so you will know early on after the foreclosure whether the lender is going to seek to take such action.

    "The foreclosure sale may not produce enough cash to pay the loan balance in full, after deducting expenses and accrued unpaid interest. In this case, the lender may be entitled to a personal judgment against the borrower for the unpaid balance. The lender is not required to seek a deficiency judgment and most commercial and residential lenders in Georgia do not seek deficiencies; however, it is allowed. Deficiency may also be obtained against any endorsers or guarantors of the note and against any owners of the mortgaged property who assumed the debt by written agreement. If any money remains from the foreclosure sale after paying the debt and other liens, such as the second mortgage or any mechanic's liens, expenses and interest, these proceeds are paid to the borrower.

    If the lender seeks a deficiency judgment in Georgia, the lender must file for a deficiency within thirty (30) days of the foreclosure sale and follow the procedures outlined in OCGA § 44-14-161, or the claim for a deficiency is barred. The foreclosure sale must be confirmed and the deficiency judgment must be approved by a judge of the Superior Court in the county in which the sale occurred."

    Are there any other financial consequences?
    Absolutely. With the drop in your credit rating associated with the failure to perform on the loan repayment, followed by the foreclosure, you can expect to find it difficult to obtain credit and you stand a likelihood of seeing interest rates rise on your credit cards due to the "universal default" provision (Google that term for a better understanding of its meaning).

    Can they see what's in my bank account?
    There are privacy protections that limit what your lender can uncover. Best under these situations to establish a new bank account with a lender that you have not utilized in the past.

    Can the PMI company come after me?
    Yes, but there rights are generally limited and are obtained through a process known as subrogation. They effectively have the same rights (and limitations) as your lender.

    Should I get a lawyer to advise me?
    Yes. Find one who is familiar with Georgia real estate law and debt collection practices.
  3. BrokeInGA

    BrokeInGA LoanSafe Member

    This is very good information, thank you. This goes completely against what my bankruptcy lawyer is telling me. He said that Greentree coming after me for the deficiency is highly likely. Not sure if he is telling the truth or just trying to drum up business for himself.
  4. Evan Bedard

    Evan Bedard Call 1-800-779-4547 Loan Safe Mortgage

    What I would do is contact a couple other local real estate attorneys to get their opinion on this. Most legotiamte lawyers out there will offer you the initial consultation free of charge..
  5. BrokeInGA

    BrokeInGA LoanSafe Member

    Thanks, Evan. I've got an appointment with another lawyer next Tuesday. We'll see how it goes.

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