For homeowners facing high monthly mortgage payments, selling your house and walking away from the mortgage may be the only option. However, even after selling your home, you may not be safe from mortgage collectors, who may still have the legal right to recover the unpaid balance on the mortgage despite the fact that the home is not longer in your name.
What is a Short Sale?
Borrowers who are unable to make their monthly mortgage payments sometimes have the option of selling their homes for less than the amount they owe on it, in order to at least recover some of the value. This is called a “short sale,” and has become more common since the mortgage crisis, causing mortgage lenders to take more aggressive action to recover the unpaid mortgage balances.
Many homeowners believe that once they “turn in the keys” on their mortgaged property, they also relinquish all obligations to pay the remaining mortgage. While often this is the case, as lenders realize that homeowners who reach this point have very little income or assets left, there has recently been an increase in the attempts by collection agencies to recoup these losses.
Negative Equity on the Rise
This problem is expected to continue in the next year, as over 10 million homeowners are believed to currently owe more on their homes than the homes are worth. If you have a mortgage and do not have any other option than a short sale or a foreclosure, be sure to talk to your lawyer or make sure that there is an agreement between you and your mortgage lender before simply walking away from your mortgage.
In a press release from the Consumer Credit Counseling Service (CCCS) of Greater Atlanta, Director and professor of law Frank Alexander advised that “no homeowner should ever simply ‘walk away’ or ‘turn in the keys’ without receiving a document that absolves them of all liability.” Take the necessary steps to get the documentation and protect yourself against a post-foreclosure lawsuit, so when you walk away you know that your unpaid mortgage balance will not follow you.