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Lenders pursue homeowners after foreclosure

February 4, 2010

cnnmoneyAs terrible as it is to lose your house to foreclosure, at least it’s a relief to put your biggest financial headache behind you, right?

Wrong.

Former homeowners may still be on the hook if there’s a difference between what they owed on their mortgage and what the bank could sell it for at auction. And these “deficiency judgments” are ticking time bombs that can explode years after borrowers lose their homes.

It can even happen to people who got their bank to approve them selling their home for less than it is worth.

………………………….( click on MONEY icon for more )…………………………But even when lenders are willing, many borrowers may not be aware that they have to ask for release. So, if you are pursuing a short sale, be sure your attorney asks the bank to release you from any further obligation………………

“Banks are pulling credit reports to see if it’s a strategic default,” he said. “If you’re behind on all your other payments, you’re okay. But if you’re not, they’ll come after you.”

If borrowers have any doubts about their risks, they should seek legal advice. Or, at least, call non-profit organizations such as NeighborWorks for advice. According to Doug Robinson, a NeighborWorks spokesman, its counselors always try to negotiate away deficiencies when they facilitate short sales or deeds-in-lieu……………………………………..Robinson himself knows what can happen. He paid off a deficiency after his own New Jersey house went through foreclosure 11 years ago.

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