Expert: Creditwrench - 10/27/2008

Question
Hi there.  I live in Oklahoma.  I have my home loan thru USDA Rural Development.  They have recently raised my mortgage (w/ escrow) from $479 to $825 b/c I was stupid and worked a bunch of OT to help me pay for some debts.  So now I am almost 120 days past due and receiving notices of foreclosure.  At this point, I'm just sick to death of it and willing to lose the home and even ruin my credit if I have to.  The main thing that worries me is having a deficiency judgement against me and having to pay a ton of $ for years on a house I no longer have, in ADDITION to ruining my credit.  Do you know the statistics on lenders (especially government ones) suing for deficiency after foreclosure and on whether or not they allow short sales or deed-in-lieu's and how to go about getting one of those approved?  ANY advice at all wld be greatly appreciated!  Thank you, Kris.

Answer
As you probably know, I am in Oklahoma too. OKC in fact. I wouldn't worry much about a problem with deficiency balances. It can be done but in dealing with hundreds of mortgage foreclosures here in Oklahoma I've never heard of a lender going after a deficiency balance on a foreclosed home. Yes, it can happen but it has to be done withing 90 days after the foreclosure. Maybe it has never happened in Oklahoma. I can only say I've never heard of it being done in Oklahoma. In fact, I've never heard of it happening anywhere so I doubt that you have much to worry about on that score. It happens regularly with automobile and other types of loans but not on home foreclosures.


Short sales and deed-in-lieu do happen but to my knowledge those are pretty rare too. Don't take my opinion on that as being all that accurate because I probably wouldn't hear about short sales or deed-in-lieu deals anyway so wouldn't be an accurate source of information on that.

Of course a foreclosure is really going to chew up your credit ratings but if you can't pay their $825 a month then you might not have much choice in the matter. On top of that the payments are likely to escalate even higher over time.

There are some ways that you may be able to force them into taking a deed-in-lieu situation and keep it out of your credit reports too but you would have to be willing to spend the next two or three years fighting over it. Of course you would be living in the home for free during that time and might even make some money doing it. All depends on how much time and effort you are willing to put into it.