Southern New Hampshire Real Estate and Short Sales: Think Foreclosure Is A Way Of "Walking Away"? Think Again

Think Foreclosure Is A Way Of "Walking Away"? Think Again

I've long held the position that THE SINGLE MOST IMPORTANT REASON a distressed Southern New Hampshire/Northern Massachusetts homeowner should consider opting for a short sale over a foreclosure is the little known "right to pursue a deficiency judgement" that many States, including New Hampshire, allow the lender.


Once a home is foreclosed on and subsequently sold by the lender, if the proceeeds are not enough to cover the amount the foreclosed upon borrower owed plus penalties and legal fees (which of course it won't be because I'm thinking if the house could have been sold for enough to pay off the loan, the distressed homeowner would have just done it and skipped the fun of a foreclosure...just a guess...), said lender has the right to pursue said borrower for the deficiency.


On the contrary, a properly handled short sale (sharp emphasis on the "properly handled" part) will include the bank's agreement (in writing) that they will not pursue the deficiency.


In the past the pursuit of a deficiency judgement after a foreclosure, although legal in many States including New Foreclosure Deficiency JudgementHampshire and Massachusetts, was rare.  However, that appears to be changing.  According to a recent article by Reuters, many thousands of Americans who thought they were walking away and closing a horrible chapter in their life when they allowed their bank to foreclose are now facing a new nightmare as debt collectors suddenly begin collection activity to pursue the deficiency.  Activity which, apparently, can include wage garnishment, attaching bank accounts and seizing assets.


The article goes on to say that the Inspector General has urged the Federal Housing Finance Authority to direct Fannie Mae and Freddie Mac to more aggressively pursue deficiency judgements in an effort to recoup some of the staggering losses that more than $1 trillion in foreclosed loans has left them with.  Fannie Mae, in particular, seems to have taken that direction seriously as that entity has gone after deficiency judgements in almost half the foreclosures it has been involved in over the last 2.5 years.  Apparently Fannie Mae is not the only one becoming more aggressive, as officials in many geographic areas indicate that they have recently noticed a sharp uptick in the pursuit of deficiency judgements not only by Fannie Mae but also by Freddie Mac and other mortgage players.


So, if you are a distressed Southern New Hampshire or Northern Massachusetts homeowner, I strongly encourage you to consider a short sale instead of allowing a foreclosure.  I freely admit there is nothing convenient about living through the short sale process.  However, the inconvenience of the short sale pales in comparison to the inconvenience of having a deficiency judgement handed down on you, possibly years after your foreclosure.


Here's a link to the entire Reuters' Article - Americans Face Post-Foreclosure Hell As Wages Garnished, Assets Seized


If you have questions about Southern New Hampshire/Northern Massachusetts real estate, in general, or short sales, in particular, you can reach met at 603-490-5344.

Comment balloon 7 commentsJoy Baker • December 02 2014 06:03PM


Joy, I do many short sales and people come to me after they have completed them and are so thankful to have the waiver of deficiency judgment.  I have obstinate clients who sometimes say I'll just let the bank have the house!  I have to yell at them almost and make them understand what the financial additional hell that awaits them...great to share.

Posted by Ginny Gorman, Homes for Sale in Southern RI and beyond (RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate) about 6 years ago

Great post Joy Baker. Lots of information for sellers to absorb and you're the agent they should call with any questions!

Posted by Nicole Doty - Gilbert Real Estate Expert, Broker/Owner of Zion Realty (Zion Realty) about 6 years ago

I think it is highly unfair that borrowers are not informed of the possibility that the bank could chase them down AFTER any of the major resources people turn to.  Check Making Home, check your State sponsored website for distressed borrowers...nothing.

Posted by Joy Baker, So NH RE & Short Sale Specialist (RE/MAX Insight) about 6 years ago

I know what you mean, Ginny.  Sometimes it seems that we spend a great deal of time trying to keep our short sale clients from shooting themselves in the foot!


Posted by Joy Baker, So NH RE & Short Sale Specialist (RE/MAX Insight) about 6 years ago

Thank you, Nicole!

Posted by Joy Baker, So NH RE & Short Sale Specialist (RE/MAX Insight) about 6 years ago

Good post, Joy. Short-sellers or those about to "give it to the bank" need to know the consequences of their choices well in advance so good for you for pointing out what could prevent a terrible mistake.

Posted by Steve Kantor, Best Agent Business - Virtual Assistance (BEST AGENT BUSINESS) about 6 years ago

Thank you Steve!


Posted by Joy Baker, So NH RE & Short Sale Specialist (RE/MAX Insight) almost 6 years ago