Frustration with lax lending practices that led to homeowners being placed in homes they could not afford by lending institution seeking to make a quick profit, or the inability of the legal system to process the multitude of foreclosures has led the Supreme Court of South Carolina to issue an injunction barring foreclosures until lenders make a good faith effort to evaluate if homeowners may actually qualify for loan modifications. In a recent WSJ article "State Court Puts Foreclosures on Hold" it seems that the South Carolina Justices are sending a clear message to lenders that they need to work with homeowners in the midst of a crisis the lenders helped create.
In other areas of the mortgage debacle some property owners are finding Short Sales are not achieving the desired result. In a typical short sale scenario a financially troubled homeowner negotiates with their lender to accept, in lieu of foreclosure, any amount the homeowner can reasonably attain from selling their house. In the typical short sale scenario, the bank avoids the cost and hassle of a foreclosure and the borrower walks away from his mortgage. However, the WSJ in "A Short Sale May Not Mean You’re Home Free" reports that banks are increasingly reluctant to play by the old rules and instead, are electing to make the homeowner sign a promissory note for the difference between the short sale proceeds and the amount owed on the loan. For some homeowners in areas hard hit by the decline in home values, the amount owed can be staggering. If you or someone you know is considering a short sale be sure to negotiate this point up front so as not to be surprised on closing when a lender drops a promissory note and indicates “sign or else”.
Posted by Clint Coons, asset protection attorney Seattle, WA