Mortgage Payoff Recoveries – an overview

Contrary to common belief, when a home owner forfeits the property to foreclosure auction through the Courts, there ends the matter and they do no more owe anything to the lenders, here is the startling fact.

There are a lot of instances where the barrowers are kept on the hook for years and lenders pursuing the balance on the mortgage loan, through deficiency judgements. John King is one such example. He stopped payments on mortgage loan on his housing property at Coral Gables, Florida and was thinking the foreclosure ended his mortgage obligations. He was proved wrong when he was pursued by the lenders to pay another $44,000 based on a Miami-Dade Court deficiency judgment. King says “The big dogs get a bail out and the little man gets no mercy” – commenting upon the US government showing a lenient attitude in rescuing banks and big financial corporate companies.

Statistics go to show that the mortgage fiasco stripped the U.S. real estate a whopping $6.4 trillion or 28% from their value. The mortgage recovery in the first 9 months of last year rose to 48%, compared to the same period in the previous year to a record high of $1.01 billion. Recoveries in respect of defaulted home loans nearly doubled to $392 million.

Lenders can go after the defaulted home owners to put liens on their other assets, attach wages or tap bank accounts for the recovery of the balance mortgage loan after foreclosure. The situation was not that bad in the last 15 years, according to experts. This is going to be the “Next Big Crisis” for U.S.

The Mortgage Bankers Association said the foreclosure rate touched a 37 years’ record high -  4.5% of all mortgage U.S. homes combined in the third quarter – and one in every 10 mortgages was in default of at least one payment.

The Obama administration’s remedial  measures through Home Affordable Modification Program cutting the repayment amount of home owners by one third has a target of 4 million loans by 2012. So far, more than 850,000 modifications have been recorded till the end of December 2009, the Treasury Department reveals.

So walking away from defaulted mortgage loans properties is not the remedy and lenders can still pursue borrowers with a deficiency judgement.