Can I Be Sued for Walking Away From a Mortgage?

If your mortgage payments have become unmanageable, you may be thinking about simply walking away from your mortgage and abandoning your home instead of working with your mortgage lender to bring your account current. However, walking away from your mortgage can result in severe negative consequences, including a lawsuit initiated by your mortgage lender.

Foreclosure

Walking away from your mortgage typically involves ignoring letters and phone calls from your mortgage lender, which demonstrates that you have no intention of bringing your account current. Ignoring your mortgage lender will typically prompt the lender to initiate foreclosure proceedings, usually after your mortgage has fallen two or more months behind. In a foreclosure, the mortgage lender takes possession of your home and sells it to recover a portion of your unpaid mortgage balance.

Home Sale

Mortgage lenders typically sell foreclosed homes at public auctions to the highest bidders. Although mortgage companies are required to sell foreclosed homes in a commercially reasonable manner, they are not required to demand a price sufficient to cover the balance of your loan or pay foreclosure costs such as attorney fees, court costs and auction fees. The sale price of your home may be substantially less than your account balance and foreclosure costs.

Deficiency

If your mortgage lender sells your home at a price that is not sufficient to pay off the mortgage balance and foreclosure expenses, the result is a deficiency. Although you no longer own your home after a foreclosure sale, you are responsible for paying any deficiency amount. If you do not voluntarily pay a deficiency, the lender may sue you for this amount in county or district court.

Judgment and Collection

After a lender sues you for a foreclosure deficiency, the court can award a judgment in favor of the mortgage lender. A judgment affirms that you are legally responsible for the deficiency amount. In most states, the mortgage lender may then pursue recovery of the deficiency through garnishment of your wages and bank account balances, as well as through liquidation of your personal property, subject to your state's limitations and exemptions.