Consumers should take precautions before walking away from their homes or they could face unnecessary legal consequences.
That’s the word today from Consumer Credit Counseling Service of Greater Atlanta, which is warning homeowners they may be sued by the mortgage company if they just “turn in the keys.”
Instead, CCCS says, homeowners should get a document that frees them of all future liability before they walk away or they get could sued to recover the amount owed.
What’s more, consumers who sell their home for less than the amount owed — known as a “short sale” — can be sued for the unpaid balance. CCCS warns that can happen even after the sale of the home takes place.
“A borrower facing a foreclosure should assume that a post-foreclosure lawsuit is possible,” Emory University law professor Frank Alexander said in a CCCS news release.
“In addition, no homeowner should ever participate in a short sale without receiving a signed agreement clarifying that all outstanding debt has been forgiven. The same is true for all deed-in-lieu of foreclosure actions.”
This advice also applies to home-equity loans or second mortgages, CCCS says.
Alexander predicts an increase in the number of lawsuits filed by mortgage companies to obtain garnishment of a homeowner’s wages. That’s because some borrowers who walk away still have decent incomes.
Essentially, do not compound the problem with a half-baked solution.
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