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And the WORD for Today Is …
Non-Recourse Loan
His bark is worse than his bite. You’re familiar with the expression but who knew that it applied to banks as well. If you are behind on your mortgage—and millions of people are—you have probably been barked at by someone at your bank. It is reasonable that they make an effort to collect the funds which you owe them, but when you are unable to do so, you have conveyed that you are unable to do so, frequently some barking gets started.
A non-recourse loan means the bank has NO BITE. They have no recourse, or option to do anything else to you after they take the house. They cannot seek a deficiency judgment. Without a deficiency judgment there is no way for them to:
- Attach your pay check (/garnishment/)
- Pursue any of your other assets
- This includes any/all retirement accounts
Once they acquire the home/property, whether that is via foreclosure, a deed-in-lieu or by trustee auction when the home was secured by a deed of trust, ALL THAT THEIR BANK CAN EVER GET IS THE HOUSE. There is no legal provision for them to ever come after the borrower for anything else.
The states listed below are generally non-recourse states:
- Alabama (some exceptions apply)
- Alaska
- Arizona
- Arkansas
- California (as long as non-judicial foreclosure is used, which is the most common)
- Colorado
- District of Columbia (Washington DC)
- Georgia
- Hawaii
- Idaho
- Mississippi
- Missouri
- Montana (as long as non-judicial foreclosure is used)
- New Hampshire
- Oregon
- Tennessee
- Texas (but even in a non-judicial foreclosure, the lender can pursue a deficiency judgment)
- Virginia
- Washington (as long as non-judicial foreclosure is used, which is the most common)
- West Virginia
*It is critical that the homeowner do several things:
- Seek legal counsel to be sure they understand the implications, based the specific mortgage or deed of trust involved
- Consider the specific financial resources and have clarity on what is at stake
- Evaluate the total picture, then make a decision based on a full assessment of the situation
***This should not be construed to be legal advice. SEEK COUNSEL.
"Remember, knowledge can be empowering!"
Mildred
Host: Home Ownership Matters Preservation Center, Inc. www.HOMPCI.org
Copyright © 2010. All Rights Reserved. Mildred Wilkins Consulting, Inc.
I'm grateful that you posted the states wherein judicial foreclosure is not applicable. That would mean the inability of creditors or lenders to file deficiency judgment. My friend, who is a mortgage broker in Calgary told me that deficiency judgment is not a serious matter. Once granted by the court to the lender, the mortgagor-defendant is required to pay the remaining balance of the mortgage debt despite the fact that a foreclosure sale has been conducted. There are times that a house may be sold in a lower price during a public auction. That's why many in Fort Mcmurray, mortgage company brokers are advocating clients to avoid mortgage foreclosure and other related problems of homeownership.
ReplyDeleteNice post, Mildred! Thank you for providing the list of non-recourse states.
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