Sunday, February 5, 2012

In the case that I default on mortgage payments on my investment property, can the bank go after my primary residence, which is paid off?

Question: I own two homes: one is completely paid off and the other has a mortgage on it. Due to certain events in my personal life I am worried that I might default on the mortgage of the second home. In the case that I do default on the mortgage, would the bank be permitted to go after the home that is paid off? I have not pursued any options yet. However, I also have very unstable tenants in the house and will have trouble making the payments if they move.

Response: The only way the bank can go after your home that is paid off is if after a foreclosure sale, there is still money owed to the bank (i.e. difference between the mortgage and the sale price). That should only be a concern if your home is "under water." Then again, the bank can't just take your home but can obtain a deficiency judgment resulting from the difference in price and put a lien on your other property (you are unlikely to be forced to sell your primary residence). However, when you do voluntarily sell your home, that is when you would have to satisfy the lien. Nevertheless, if your home has equity, then the bank will be satisfied with the proceeds from the sale and that would not be a concern. Although most banks have a policy in place to try to modify the loan on the primary residence, some banks try to find a workout option even on investment properties. It is possible that if you could get a loan modification or refinancing, your payments could be much lower and more affordable.

In the legal blog, Attorney Svetlana Kaplun addresses typical questions our firm has received from our clients, or come across from homeowners related to foreclosure, foreclosure defense, loan modification and bankruptcy topics.

The information contained in the legal blog of Attorney Svetlana Kaplun is for informational purposes only, and should not be construed as a legal advice on any subject matter. Please read our full disclaimer or contact the Law Office of Svetlana Kaplun, P.C. by telephone at 718-444-1115 for more information.
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