An unintended consequence of a change in procedural rules that now require lenders to better notify homeowners before taking possession of and selling their homes may be making it easier for lenders to go after borrowers, the Daily Record reported.
“[S]ome who work with foreclosures wonder whether the change may have also had the unintended result of making it easier for lenders to go after borrowers for the difference between the money owed on the original loan and the funds received from the foreclosure sale,” the article said.
“The remaining debt is referred to as the deficiency.”
While the jury is out on whether the direct-notice requirement for foreclosure has made it easier for lenders to serve former homeowners with delinquency notices and whether most homeowners lack the funds to pay the debt, one legal expert pointed out that not everyone who ends in foreclosure does so because of an inability to pay.
“Seniors are highly vulnerable” because they may not be judgment-proof,” said Kathleen Skullney, staff attorney in Maryland Legal Aid’s Foreclosure Legal Assistance Project. “They might have assets a lender could go after in a deficiency proceeding.”
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