Foreclosures can create a mess out of your finances, and leave you asking a lot of questions, one of which might be, does a foreclosure wipe out all of the liens on my home? The short answer to this question is that it depends on your particular situation; the answer will differ based on many different factors including the number of lien holder(s) you have. Many people only have one, their mortgage company, but many others may have 2 or even 3 lien holders. Additionally, your reasons for foreclosing are also taken into consideration.
Common reasons for foreclosure include:
- Medical Reasons
- Job Loss
- Pay Cut
- Relocating for Work
- ARM – Adjustable Rate Mortgage
If you are experiencing any of these issues, contact a real estate agent or real estate attorney as soon as possible to learn more about your options and the effects that foreclosure can have on you. Here are some questions you might be asking, and helpful answers from Benny Kass, an attorney in Washington DC and contributor for Inman News.
If a mortgagee forecloses on a home and it sells for more than the balance of the loan, what happens to the surplus?
“It has been a very long time since I saw a surplus. State law spells out the distribultion of all proceeds from a foreclsure whether or not there is a surplus.The lender must be paid in full (if possible). The administrative costs — advertising, auction fee, legal and trustee’s fees — must also be paid…If there is a surplus, after the above referenced charges have been paid (to the first lien holder), then the second-trust lender must be paid — again as much as is left over after paying all fire-trust expenses.”
If there is no surplus, what happens to the remaining liens?
“If there is no surplus, the second (and all subordinate liens) are wiped out. The second-trust holders cannot foreclose on the property, but since heir borrower signed a promissory note, the borrowers can be sued for nonpayment,” said Kass.
Can I be sued if I foreclose?
“Whether the lender will do so clearly depends on the circumstances. If the borrower has no money – and no job – it makes no sense to pursue the matter,” said Kass.
What if I am an heir of a home in foreclosure?
“The laws in many states require that all creditors be paid off”, Kass said, “which means that the personal representative of the estate may have to sell in order to pay off any outstanding mortgage.”
“The heirs will lose the property if they refuse to make the monthly assessments,” says Kass. “The deceased did sign a promissory note secured by a deed of trust. Unless that note and trust is paid in full, the lender can foreclose.”
Again, if you find yourself, or someone you know, struggling to make mortgage payments and possibly facing foreclosure, contact an agent or attorney as soon as possible.
Read the original article here.