Can foreclosing lender lien other property or bank accounts?

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In most states, the foreclosing lender (usually the first mortgage) has an obligation to declare how he will “collect” on his unpaid mortgage. If he chooses to foreclose as his method then pursuing the borrower in court is usually barred. Therefore no judgement and no ability to lien other property or bank accounts. If the foreclosure action and subsequent sale of the property and/or mortgage insurance claim didn’t satisfy the entire mortgage obligation paying back the lender in full…well too bad for the lender.

However, this is usually governed by state law, so get with a local real estate attorney, to be sure.

2 responses so far ↓

  1. 1
    Rob K. Blake // Jun 15, 2008 at 9:01 pm

    Jim B.,

    I can see why you might think that…and you are right up until the “collateral” is insufficient to paying off the lender’s debt in full.

    This “deficiency” is where the trouble begins. If the house at auction doesn’t payoff the lender in full, in some cases, they can pursue the borrower in court for the deficiency…get a judgement and attach other assets.

    It’s unlikely as I said in the answer in the case of a “purchase money home owner loan” as many states enacted anti-deficiency laws in those cases.

    But home owners who’s last loan was a refinance loan or homes used as rental are not protected by many state’s anti-deficiency laws. In those cases, the lender could pursue the borrower for the deficiency.

    Now “could” and “would” are two different things. Lenders are very sensitive to their beat up image that even if they had the right…it would be PR suicide and therefore highly unlikely they’d pursue it.

    Thanks for the comment!
    RKB

    June 15th, 2008 at 9:01 pm

  2. 0
    Jim B. // Jun 15, 2008 at 6:39 am

    I don’t understand how a mortgage lender can come after you at all on a foreclosure since they agree’d, upon writing the mortgage, that the home is the collateral. Once you default, they get their collateral which should satisfy the mortgage agreement.

    June 15th, 2008 at 6:39 am

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