Can Your Lender Come Between You and Your Groceries? Fact or Fiction?

The day before Christmas I caught a short blurb on Fox Business News regarding the state of the mortgage market. An industry representative was adamantly demanding that people do something about their mortgage problems. She said, and I quote, “Don’t let you lender mess with your grocery money”. It was a short blip on the screen and it clearly caught my attention. Was this fear mongering on the part of a mortgage industry guest on Fox or was this lady whole heartedly trying to communicate solid advice to the viewers? I think this is an excellent topic to elaborate on.

If anyone without mortgage industry knowledge or familiarity with judgments and garnishments were to hear this on television they might immediately think that it is just another scare tactic on the part of some random guest of the mainstream media. However, this lady had a very good point to make and I wish she had been more than a short blip on the newswire. The primary topic related to all the delinquent or soon to be delinquent homeowners facing imminent foreclosure.

Here is what she was trying to explain but clearly did not have enough time on Fox to elaborate on her point. If you are a distressed homeowner in jeopardy of losing your home to foreclosure you need to attempt to do something about it so you can avoid a deficiency judgment that will follow from you lender. A deficiency judgment is allowed in many states and is no different from any other judgment. When your home is foreclosed upon by the lender, the lender will follow state law and present before the judge or magistrate the deficiency. When the amount is approved the court will grant the lender the right to a judgment that will be placed on your credit report.

The problem with any judgment that is deemed worth collecting is that the lender can garnish your wages and really make your life a living hell in the process. This is what the lady was referring to when she said “don’t let the lender come between you and your grocery money”. Once a judgment has been issued the lender can now take action to obtain a garnishment. A garnishment of wages is mandated by the state and your employer automatically must comply and divert your after tax money out of your pay check. This is an involuntary action and it could be your grocery money.

This is a fact and not fiction. This is also a scary thought so I am going to help you out with a little context to put you at ease. It can happen and it does happen but only if you let it. That is the beauty of the situation. Lenders are overwhelmed and you have the opportunity to negotiate a short sale or loan modification. The only people that are going to have to deal with a potential garnishment or other legal seizures of assets are those with assets to lose and those that just dumped their problem on their lender and never attempted a solution. Also, the garnishments don’t happen immediately in this type of environment. The lenders will obtain the judgments from the courts and try to collect them much later when the markets settle down much like they did in the years after the savings and loan crisis of the early 90’s.

What does this mean for you? Investigate if a real estate short sale is for you. Does the benefit merit the time and effort you need to invest to succeed? These are very important questions. I am promoting my own book when I say check it out at www.thenegotiatedsolution.com , but I don’t want you to think I am participating in the fear mongering. You are only at risk if your lender wants to pursue you. Many of you in an upside down housing situation have money to lose. How do I know? We have hundreds of clients and 85% of them have no skin in the game and want a way out but they have money. You would think the majority of people would be financially strapped and somewhat desperate. This is simply not the case. There are many people that participated in the real estate game that have good jobs and a lot to lose. You know who you are. Whether you have money now or expect to recover in the future I think it is best to settle with your lender or lenders and avoid the potential of any kind of judgment haunting you in the future. Protect your bounty while the getting is good is another way to put it.

Now, did I ever go after judgments when I was a lender? The answer is no. I am referring to my team and my bank. We chose to write the loss off against income and move on. However, we were a small operation compared to the goliaths that may hold your mortgage. We didn’t feel like dealing with the headaches and we were profitable. Today’s environment is different. Very few lenders are profitable and they want their money back. The best advice I can give you is to take the risk off the table. Don’t let anyone mess with your grocery money. Avoid the foreclosure mess and walk away from an abundance of residual unpaid mortgage debt with a Real Estate Short Sale. Blogging from the front line of the housing crisis!