Abandoning your home? Think again...

Are you so upside down in your mortgage that you think you will never find equity again?  Do you think a short sale isn’t worth the hassle?  Has the economy and the housing crisis made you begin thinking about abandoning your home?  Some have done just that, but have later discovered that perhaps abandoning the house was not the best decision to make. 

Not only will the abandonment of your home likely result in foreclosure and a big hit to your credit score… it could likely result in a deficiency judgment.  In today’s economy, the value of a home may not equal the amount of the outstanding mortgage.  Therefore, the lender may file a deficiency action against you to recover the difference.   A deficiency judgment is an unsecured lien against a borrower whose foreclosure sale did not produce enough funds to cover the mortgage in full.

You paid for private mortgage insurance (PMI)?  The PMI will pay the lender the difference between what the house sold for and what the borrower owed on his mortgage.  BUT, the PMI company can also seek deficiency judgments against the borrower for payments from the PMI policy.

If you still think you have no interest in a short sale, you should think again.  Through the short sale process, you and your realtor have much more leverage to negotiate a full release of your obligations to the lender and avoid a deficiency judgment.  A foreclosure or walk-away such as you might be considering is not negotiated and lenders and PMI companies can pursue, and are pursuing, deficiencies.