Q&A: Will I owe foreclosure debt in Oklahoma on an FHA home loan that is in foreclosure?

Posted on Sep 8, 2012 in FHA Information

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Question by : Will I owe foreclosure debt in Oklahoma on an FHA home loan that is in foreclosure?
My home is in foreclosure. I have an FHA loan on which I paid monthly mortgage insurance payments when I was current on the loan. Will they come after me for foreclosure debt by garnishing my paycheck or taking my state or federal tax returns, find or will the FHA mortgage insurance prevent that?? I need any answers or suggestions about what to expect in the coming months.

Best answer:

Answer by kc
The FHA insurance you were paying was not to protect you from having to pay if you defaulted (in this case foreclosure). The FHA insurance helps protect the banks from loosing money if you defaulted. You are still responsible for anything owed after the house is sold. The mortage company will sell the debt to a 3rd party collection company. Yes, you will be hounded by debt collection agencies and they can get a judgment so that your wages could be garnished. They can get a garnishment on state and federal taxes.

You might want to contact a real estate attorney to help you. Sometimes you can negotiate with the lender and they will forgive the debt if you hand over your deed. The down side of getting the debt forgiven is that the IRS considers it income and it will be taxed as income, but it is better than paying for it with interest to a debt collection agency.

The bottom line is that everyone looses (you and the lender), but the debt collection company will be the only one who comes out on top.

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3 Comments

  1. depends if the state is a recourse or non recourse state

  2. Connie, Home insurance covers lots of different things. I’m not familiar with the Oklahoma laws and regulations, so I suggest you call a local home insurance agent. http://www.goodinternetdeals.com/Home-Insurance.html They will be able to help you.

  3. If the loan is in active FC then there should be a foreclosure attorney assigned to the account. You can call your servicer, get his/her number and ask them all the questions you have about this loan and the long term implications of foreclosure.

    I do not believe that they’re going to garnish your wages to collect the loss, however you will get a 1099 – January the year following the foreclosure. More than likely you’re going to have to claim the investors loss as your income and pay taxes on it. This is something you’re going to want/need to talk to the foreclosure attorney or your tax specialist about as laws differ from state to state. The debt could be sold to a 3rd party collection agency and yoou could have collections departments calling you to try to collect the balance due.

    Have you attempted to sell the property to get out from being under the debt? You could potentially do a Short Sale, but first you need to list the property for fair market value. If you do not sell it and 90 days pass you could potentially request a Deed in Lieu from the servicer/investor – giving the home back to the bank. Both a Short Sale and a Deed in Lieu would be better on your credit than a foreclosure however niether will stop the auction from taking place.

    Another option is a Loan Modificiation or a Partial Claim (FHA program). Financially you would have to qualify for both and both would let you keep the home, would bring your loan current.

    For all the options above you would need to call your servicer to start the process. If you want to try to sell the home you’ll need to get it on the market a.s.a.p., call your servicer for the fax number to send your hardship letter, bank statements, paystubs and listing agreement to.

    Good Luck