I heard recently from a reader who said the bank she had a mortgage with wanted her to continue to pay off part of the loan even after she sold her house for less than what she owed—a process known as a short sale.
Banks have always been able to pursue deficiency judgments against borrowers who didn’t pay everything back, but they didn’t do so aggressively so far in this housing slump.
Rick DeBruhl, the consumer affairs reporter at the NBC affiliate in Phoenix, sent us this report he did recently. The homeowner is being asked to pay $75,000 of the $200,000 difference between what he owes the bank and what his house is worth. Rick says he is hearing of more cases like this recently.
What’s interesting too about this case is that the bank, One West, is the entity formerly known as IndyMac. The private equity firms that bought IndyMac from the federal government agreed to continue the homeowner-friendly policies initiated by the FDIC after it took over IndyMac. Now that no longer appears to be the case.
Thanks to Rick DeBruhl for the tip and the clip!
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.