Answers
I was told by my real estate agent that if I did a short sale or foreclosure on my home in Arizona, that both the first mortgage and Home Equity Line of Credit (taken out 9 months after home purchase) would both be relinquished in a short sale or foreclosure. Because the house had dropped significantly in value and half the lots were vacant from owners doing the same thing, I decided to proceed with the short sale. It wasn't approved and went into foreclosure. Now the bank is pursuing judgment against me to garnish my wages. Unfortunately, I can't afford to retain an attorney. Is this a case I can win, even if I represent myself in a civil suit against this realtor? I also have email documentation asking him specifically how both loans would be treated. He responded with "Don't worry, I have it!" I also have a witness to him telling me this verbally. According to the anti-deficiency laws, the second loan is not forgiven because it's Non-Purchase Money, is this correct? Also, I'm wondering if I have a strong enough case to pursue this in civil court, representing myself.
The Arizona laws make a distinction between purchase-money loans and all others. The bank can go after you for the deficiency on the other loans.
Many AZ attorneys believe that the intention of the legislature was to protect a homeowner on his personal residence. That no court will uphold a deficiency on your personal residence. We don't yet know if this will be true or not.
So far, the banks have not been willing to pursue judgements because the borrowers (you) don't have any money. It is just a waste of time.
You have a case against the realty agent but not for all of your damages. You were responsible to protect yourself. The agent was responsible to get the house sold. You might win a small judgement.
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what happens if you foreclose and you have a home equity loan on ...
Quick answer … NO
The HELOC is subordinate to your first mortgage , Arizona is a state where they can’t come after you for the difference. Basically, the lender that did your HELOC will get screwed. the lender in 1st position just wants there money and may recoup from a sale. (Depending on how large your HELOC was)
But whatever the shortfall they WILL 1099 you for the amount they are out, that means that they report it to the IRS as income and guess what … you owe taxes.
News
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