Don’t Just Walk Away, Deed Away!
“Walk Away “as a Foreclosure Option
The decision to simply pack up and “walk away” from your home and loan obligation is a Foreclosure Option that seems to be gaining in popularity, most likely as a result of frustration with the entire Foreclosure Process. However, as you’ll see below the decision to walk away-however comforting it sounds in the short term-is the least effective solution for most homeowners and one that should rarely if ever be used.
In some states, and also depending on the specific terms and conditions of your Mortgage and Promissory Note many home loans are made on a “non-recourse” basis. What this means is that the bank can still take your home like most foreclosure cases, but they can’t chase you for the money that’s still owed on your mortgage also known as a Deficiency Judgment. This is true even if they sell the property for substantially less than your remaining loan amount which is a nice feature, but if it sounds too good to be true you’re right!
Although the lender can’t collect the mortgage balance in a “non-recourse” loan, they can still charge you for legal fees and costs incurred in filing the foreclosure lawsuit and processing the foreclosure sale which can quickly add up to thousands of dollars and continue to accrue interest until paid. The bank can also charge you for any damage to the property as well, particularly if you decide to walk away without negotiating or working with the lender. So, even with a “non-recourse” loan where the lender can’t collect the remaining mortgage balance, the likelihood of some costs being assessed against you is very realistic. Judicial v. Non-Judicial Foreclosure
To better understand your foreclosure rights and possible adverse consequences should you decide to “walk away” from your mortgage and property, we strongly urge you to consult with an attorney before making the decision to do so. By meeting with an attorney who has experience handling foreclosure defense and negotiating with lenders, you’ll likely avoid the double whammy of losing your home AND getting sued for the balance of your promissory note plus attorneys fees and costs. Defending Foreclosure Lawsuits
If you can’t afford to hire an attorney, learn as much as you can about the mortgage foreclosure process in general as well as the individual foreclosure options best suited for you. As you’ll quickly learn when compared with other options, particularly the deed in lieu of foreclosure, the decision to simply walk away is likely the least effective solution for you. Legal Defenses to Foreclosure
Walk Away v. Deed In Lieu of Foreclosure
In most circumstances, a Deed in Lieu of Foreclosure negotiated with the lender has several advantages over the decision to”walk away” from your property and loan.
Primarily, rather than working with a ticked off lender frustrated by the inability to work with you the deed in lieu of foreclosure gives you a measure of leverage because your offer to work with the bank saves the time and expense of filing a foreclosure lawsuit and minimizes the risk that you’ll trash the place before leaving. For homeowners, you’ll have the predictability of knowing exactly when you need to move out plus the likelihood of several additional months of free rent as a result of working with rather than against the lender.
In addition, with a negotiated deed in lieu of foreclosure you’ll have the comfort of knowing that the process is finished with no chance of any mortgage related claims against you. The decision to “walk away’ however, carries with it the risk for several years that the lender or a collection agency hired by the lender will pursue you for the mortgage balance and costs associated with the foreclosure process itself. Ten Ways to Stop Foreclosure