Do you need mortgage deficiency asset protection? Perhaps you do if real estate you own is or may go into in foreclosure. Deficiency judgements are on the rise. When the value of real estate drops below the loan amount, homeowners and real estate investors are in precarious legal situations. Additionally, there is a level of complexity that comes from varying state law on lender recourse. To begin with, first trust deeds and mortgage notes and second mortgages have different levels of security for the lender. Plus, the enforcement methods vary in different in jurisdictions. For example, some use the “lien theory” of mortgages. This type allow for deficiency judgments against the borrower(s). Conversely, other loans are nonrecourse, meaning if the lender forecloses , they can only take the property as collateral. So, your asset protection strategy depends upon your jurisdiction.
Protect Yourself Against Mortgage Deficiency
Are You At Risk? This depends on how collectible you are. For instance, if you have regular income or other assets the odds on collection action against you are high. This could lead to bankruptcy filing, however if that is not an option, your only resort is to seek settlement. Accordingly, this will result in attorney fees and legal costs. Negotiating with a creditor means that you will have to navigate exception procedures to protect your income and other assets – that is if you are not already protected.
The solution is to protect yourself with the proper asset protection strategy. You can place other real estate in properly structured LLCs. Be sure that experience professionals establish the LLCs. As you could guess, opposing counsel loves to poke holes in improperly structured entities. There are things that you need to do with the LLC that the layperson would not know. Asset protection is not a do-it-yourself exercise. We generally use land trust as the title holders of the property. Then the LLCs own the land trusts.
We place cash into separate LLCs, preferably international LLCs where the asset protection statutes are stronger. Then, we wrap all of the above into an asset protection trust. The trust has estate planning verbiage which transfers assets, safely and securely to your heirs upon your passing.
Problem with Mortgage Deficiency Judgments
If you are in foreclosure, there is usually little time to wait for your home to go up in value. Foreclosures generally happen fast and the values of homes depend on how many individuals are making cash offers at the time. This can vary from day-to-day or week-to-week. Judicial procedures of foreclosure allow for judgements in favor of the creditor in the amount of the loan principal deficiency, plus interest, plus legal fees – minus the amount of a foreclosure sale. Moreover, you may also have to pay taxes on the amount of the loan that the bank has written off.
How Deficiencies are Collected
- Garnishment of Wages
- Bank Account Levy
- Judgment Liens
- Property Seizure
- Suing Family Members who Received Transfers of Assets
If you are upside down on your loan, in foreclosure or facing it, we can guide you through your options. We can talk about how you can protect yourself against judgments and increase your negotiating power in a settlement. Use the numbers or inquiry on this form to get more information.