Banks burn borrowers post-foreclosure

If you're someone who is in foreclosure or teetering on the precipice, you need to read this Wall Street Journal article: House is Gone But the Debt Lives On

Why is it essential reading? Because it sheds light on the fact that banks are more actively pursuing borrowers post-foreclosure for the loss on the house. It's called a "deficiency judgement." I think there's a misconception out there that once you lose your house to foreclosure, that it's all over. But it's not.

This is why my mom - who is a Realtor and has been for 25+ years - strongly advised us to do everything in our power to sell the house in a short sale as opposed to letting it go to foreclosure. She wisely said something like this:

"At the point the bank takes the house back and auctions it off, there's no getting money out of you. Obviously. You have none. You've lost it all. But, you'll get back on your feet. And in a few years, you'll be doing all right. Maybe you'll even have some money in savings. That's when the bank shows up to press you for the deficiency. When you're well past the foreclosure. Once you have money again. You don't want that to happen. In that case, not only are you losing your house and your investment, you're also paying for it years down the road."

It was sage advice. And yet another reason (in the long list of reasons) why we didn't want to lose the house to foreclosure. We tried everything to sell it outright. When that didn't happen, we tried everything for a short sale. And fortunately, that worked.

The WSJ story says:

Foreclosed homes seldom fetch enough to cover the outstanding loan amount, both because buyers financed so much of the purchase price—up to 100% of it during the housing boom—and because today's foreclosures take place following a four-year decline in values.
"Now there are foreclosures that leave banks holding the bag on more than $100,000 in debt," says Michael Cramer, president and chief executive of Dyck O'Neal Inc., an Arlington, Texas, firm that invests in debt. "Before, it didn't make sense [for banks] to expend the resources to go after borrowers; now it doesn't make sense not to." 

I know. Not good news if you're facing foreclosure. But you need to know the consequences of foreclosure. It's not just a negative impact on your credit score. Knowledge is power. The "rules" are changing every day. So, keep reading. Keep talking to your bank. Keep looking for alternatives. And keep focusing on all the things that make you grateful. 

House is Gone but the Debt Lives On - Wall Street Journal

Drowning in Debt, Losing our house, Happier than Ever

Welcome to you. Welcome to us. Welcome, welcome, welcome.

Here we are. Our first post on our new blog.

We are starting this blog because we have come to realize that we're an anomaly. Or at least a minority. According to my mom who is right about most things, the percentage of people who do nothing when confronted with losing their homes is 70%. Now, I will find back up on that, but 70%. That's pretty high. So we're in the minority because we are actually talking to the banks, have our house on the market, reorganizing debt and making a plan to pay it off. That's a start and this blog will be all about that so I won't go into it here. But I do want to make the assumption that we're probably in even a smaller minority because in addition to confronting our debt and taking responsibility, we are also doing it with grace and power. We're not victims, we're not depressed, we're not angry, forlorn, devastated, etc. We are actually happy.

What is all of this but opportunity? Losing everything is an opportunity to start again with knowledge we didn't have before. It's an adventure. It's something to write about. It's a way to put priorities in perspective. It's a challenge that we're accepting.

Are there days where the challenge is overwhelming? Yes. But luckily we're usually not in the same place at the same time. When one is down, the other is there to bring things into perspective.

How's our credit? TERRIBLE. Worse than ever.
How's our marriage? FLOURISHING. Better than ever.
How is this possible?

Keep reading...