WALKING AWAY FROM AN UNDERWATER MORTGAGE? SERIOUS FINANCIAL CONSEQUENCES POSSIBLE!

"WALKING AWAY" FROM AN UNDERWATER MORTGAGE? SERIOUS FINANCIAL CONSEQUENCES POSSIBLE!

MORTGAGE BACKERS FANNIE MAE FREDDIE MAC TO MORE AGGRESSIVELY PURSUE HOMEOWNERS WHO "STRATEGICALLY DEFAULT!"

By now you’ve heard the stories – from several years ago in the hardest-hit Real Estate Markets in California Arizona Florida Nevada and other places. Highly-leveraged homeowners severely underwater on their mortgages just pick up and move away leaving their homes to face eventual foreclosure from their lenders.

Although many holding underwater mortgages are indeed in considerable financial distress hundreds of others do have the means to pay but simply want to move on unaware that such behavior might have considerable financial consequences. Indeed legally in most states including Illinois lenders can go after delinquent borrowers whose home is eventually foreclosed for the full deficiency between what they owe on their outstanding loan and what the mortgagee might net after a Foreclosure Sale minus any selling expenses and attorneys’ fees.

Further any mortgage debt actually forgiven by the defaulted-upon lender may be fully taxable under current IRS Guidelines.

Up until this time Fannie Mae and smaller Freddie Mac have not aggressively pursued deficiency judgments on past-due home loans. However that may change very soon as their oversight authority the Federal Housing Finance Agency wants to step up pursuit of delinquent homeowners. The Inspector General of that agency not only wants Fannie and Freddie to get back revenue from these bad loans but they appear to want to serve notice on other potential strategic defaulters that this practice will not be tolerated. (See Lew Sichelman’s article in the Chicago Tribune).

The FHFA estimates nearly 58000 strategic defaults may have occurred since mid-2008 representing roughly $4.6 Billion in potential recovered losses. The agency recognizes that much of that deficit may not be recoverable as many defaulters have subsequently filed bankruptcy or simply have no money. Even recovering a portion of these mortgage delinquencies would generate significant money for Fannie and Freddie.

The potential additional revenue for Fannie Mae and Freddie Mac to act more aggressively is huge! As of December 2012 Fannie alone owned over 105000 properties as a result of foreclosure with a defaulted mortgage value of over $9 Billion. They counted over 575000 homeowners at least 90 days in arrears on their mortgages living in homes likely to be foreclosed upon.

Although most states including Illinois have stringent guidelines for when a Deficiency Judgment can be pursued the FHFA feels following rules in place can still result in considerable recovery from defaulted mortgages.

They warn of a more aggressive stand against pursuing those who have defaulted but do have the ability to pay their mortgages in the coming months.

Have questions about YOUR options if your mortgage is underwater or you’re experiencing financial difficulty. Please call our Team sooner rather than later. Perhaps we can help!

DEAN MOSS & DEAN’S TEAM CHICAGO