Deficiency Judgments After Short Sale Completed

When processing a short sale it is very important to know whether or not the bank may pursue the borrower for a deficiency judgment after a short sale is completed. If deficiency judgments are allowed in the state the property is located in it is crucial to aim for getting it waived. The best way to get a deficiency judgment waived in a short sale is to process it through a program that guarantees that the deficiency will be waived. If the borrower is eligible for the HAFA program and the transaction is approved the deficiency must be waived per HAFA guidelines. Also a program such as the Cooperative Short Sale or the Pre Foreclosure Sale Program the deficiency judgment likely will be waived as well.

When a file is going through a traditional short sale the waiver of deficiency can vary. It is dependent on investor and mortgage insurer guidelines along with the borrower’s financials scenario. At times traditional short sales will be approved with no waiver, but with the right set of tools and communication it may still be able to be waived. Other alternatives to attempt to get the deficiency waived would be to offer a cash contribution or to have the borrower offer to take a note on the deficiency. These notes are typically interest free and range between a time span of 1-10 years. When up against having a deficiency waived it is invaluable to exhaust all options for the struggling borrowers to prevent one from being placed on them after the short sale is completed.

You can view state limits on deficiency judgments here  http://www.foreclosurefish.com/blog/index.php?id=994

For assistance in facilitating a short sale and reaching the best possible outcome for all parties involved, please fill out the form below.

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