At a meeting of the fifty agents in my office this morning we were stunned to hear that owners of homes that are ‘short-saled’ or foreclosed upon in the Chico area are now susceptible to after-the-fact collections on their second or third mortgages.
Foreclosure has long been seen as the ‘final-word’ with regards to a borrower’s financial collapse… NOT SO ANYMORE! Now the holders of second and third mortgages can continue to attempt to collect on the unpaid loans long after there is no longer any house to secure them!
According to an article in the Sacramento Bee, as distributed by RISMEDIA “the reason this is happening is because lenders have been quietly selling second mortgages and home equity lines left unpaid after foreclosures and short sales. The buyers: collection agencies, which in some states have years to make a claim. If they win court judgments, these collectors could have years to pursue borrowers with repayment plans, and even garnish their wages, said Scott CoBen, a Sacramento bankruptcy attorney”.
“The only relief a consumer will have is entering into a debt negotiating plan or filing for bankruptcy,” said Sylvia Alayon, a vice president with the New York-based Consumer Mortgage Audit Center. The firm provides mortgage analysis to lenders, advocacy groups and attorneys”.
“The phenomenon suggests an ominous, looming echo of today’s real estate meltdown. As debt collectors surely seek at least partial repayment of millions of dollars in unpaid home loans, some say renewed financial stresses on tens of thousands of local consumers could dampen economic recovery”.
“I think there will be a lot of unhappy people when it hits,” said CoBen. “We saw this in the ’90s. This is not really new. Just when you think you’re back on your feet, you’re making money and the economy’s good, they hit you with this.”
“Alayon said most people are so stressed out and exhausted by trying to save their homes today that they are unaware they could face another hit later. And many who are losing homes don’t get the advice necessary to prevent future fallout, say nonprofit loan counselors”.
For the 214 homeowners currently listing their homes as short sales in Butte and Northern Yuba County area, and the 141 former homeowners whose previous dwellings are now listed for sale by the banks in our area this is just one more straw.
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