![]() If objections prevent a homeowner from completing a consent foreclosure, they may need to consider other options. Because junior mortgage lenders may not be able to recover what is owed, they may object to a consent foreclosure. All lenders who have an interest in the property must consent to this type of foreclosure. A consent foreclosure will remove all liens from the title of the home, and a mortgage lender will waive their right to pursue a deficiency judgment to collect any additional amounts owed on a mortgage. Homeowners should also understand how junior liens such as a second mortgage or home equity line of credit may affect their ability to complete a consent foreclosure. If this will be a concern, a homeowner may need to determine whether completing a short sale or using a deed in lieu of foreclosure will be a more beneficial option. The completion of a foreclosure will be included in a person’s credit report, which could affect their ability to secure a mortgage in the future. However, homeowners who are considering a consent foreclosure should be sure to understand how this will affect their credit. UPDATE: A consent foreclosure, as described below, may be a beneficial way for a person to relinquish ownership of their home and avoid a deficiency judgment. National Consumer Law Center, said on NPR that the United States is "seeing an uptick" in the pursuit of deficiency claims, because technological developments have enabled large debt-buying institutions and mortgage insurers to more easily pursue former borrowers, who often don't know their legal rights.Originally published: J- Updated: November 8, 2021 ![]() In 2014 Geoff Walsh, a staff attorney with the U.S. In many states, items included in calculating the amount of a deficiency judgment include: the loan principal, accrued interest and attorney fees, less the amount the lender bid at the foreclosure sale. A deficiency judgment is a court judgment that is a public record of the amount owed and by whom. A "deficiency" is the difference between the amount owed on a loan and the total amount received/collected at the closing of a loan. It is important to note that there is a difference between a deficiency and a deficiency judgment. States that follow the lien theory of mortgages require judiciary foreclosure procedures, but allow deficiency judgments against the debtor, although some states have narrowed the time periods to seek a deficiency judgment. States that follow the title (trust-deed) theory of mortgages typically allow non-judicial foreclosure procedures, which are fast, but do not allow deficiency judgments. ![]() In short, many jurisdictions hold that the loans obtained at the acquisition of a property ("purchase-money") are non-recourse, and most, if not all, subsequent loans are recourse. In some jurisdictions, the original loan(s) obtained to purchase property is/are non-recourse, but subsequent refinancing of a first mortgage and/or acquisition of a 2nd (3rd, etc.) are recourse loans. The availability of a deficiency judgment depends on whether the lender has a recourse or nonrecourse loan, which is largely a matter of state law. A deficiency judgment is an unsecured money judgment against a borrower whose mortgage foreclosure sale did not produce sufficient funds to pay the underlying promissory note, or loan, in full.
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