When a person takes out a home loan, this loan is nearly always secured by the home itself, which acts as collateral. If the person goes into default on the home loan, the company that issued the mortgage may initiate foreclosure proceedings. In many states, if the home is foreclosed upon and sold, the former owner is no longer obligated to pay the lender anything. However, in some areas, he may owe additional fees, which the lender may attempt to gain through garnishment.
Foreclosure Fees
When a home goes into foreclosure after the borrower has defaulted on the loan, the lender is legally obligated to put the property up for public auction. In doing so, the mortgage company may incur a number of fees, such as legal fees and fees paid to the auction house. In addition, the company may not recoup the full amount that remains outstanding on the loan through the auction sale.
State Laws
In some states, such as Connecticut and Florida, a borrower who has walked away from a foreclosed home has no legal obligation to pay any additional money to the lender. However, in other states, such as Alabama and Arkansas, if the lender does not recoup the full cost of the loan and the foreclosure fees after the sale of the house at the auction, the borrower is legally obligated to make up the difference.
Legal Damages
If the former owner of the home is liable for the outstanding balance and refuses to pay, the mortgage company may attempt to force him to pay by suing him in court. Because the borrower's obligation to pay these fees is likely spelled out in his loan contract, the mortgage company may sue him for breaching the contract and demand damages in the amount of the fees, plus legal costs.
Garnishment
If damages are awarded to the mortgage company, the home's former owner will be given a chance to pay this money. If he fails to do so within the time period ordered by the judge, the judge may allow the mortgage company to take actions to collect the money against the borrower's will. Potentially, the mortgage company could be allowed to garnish the borrower's wages until the damages have been paid off.
0 comments:
Post a Comment