Your Liability

Are you potentially liable under the note?

You might want to ask the following questions when you meet an attorney.

  • Did I sign the note? There is a difference between the note and the mortgage. Sometimes other documents such as a personal guarantee or similar document might make you personally liable for the note.
  • Have I been or am I likely to be discharged in bankruptcy?
  • Is the house upside down or underwater? These are terms used to describe a property whose debt is larger than its value. If this is true, a deficiency is established for the values at the time the foreclosure process conveys title in a separate proceeding commonly called a deficiency hearing.
  • Are you a likely deficiency target? Not all foreclosures end in a deficiency hearing, even if the property was upside down at the time the title was conveyed by the court. The following are factors which might weigh on whether or not a deficiency will be sought by the lender.
    • The lender. Different lenders seem to have different methods of deciding which deficiencies to pursue.
    • Your income.
    • Your assets.
    • The nature of your hardship.
    • Type of loan.
    • Your exemptions


Deciding what’s best for you

The factors that may affect your decision regarding what is best for you include but are not limited to the following:

  • Do you owe more than it is worth?
  • Is there a second mortgage?
  • Does the house need a lot of repairs?
  • Do you want the house?
  • Do you need to relocate?
  • Is it a bad loan?
  • Are you filing for bankruptcy?
  • Do you have other debts?
  • Can you afford the house?
  • Would you keep it if the loan was adjusted to the value, or if the interest rate was adjusted to make the payments reasonable?
  • Do you see yourself in the house long-term?


Providing the Documents

If you are asking the bank to work with you to either:

  • modify the loan
  • waive the deficiency
  • accept a deed in lieu of foreclosure
  • accept a short sale offer

you most likely will be asked to provide documentation that will include some if not all of the following:

  • A hardship letter
  • A RMA or some sort of income/expense/asset statement
  • Tax returns
  • Pay stubs
  • Profit and loss statements
  • Dodd-Frank form
  • 4506-T form
  • Utility bills
  • Bank statements

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