Jump to Navigation
We can handle your closing anywhere in the state.
Subscribe to This Blog's Feed

Large portion of bank settlement used to complete short sales

One of the biggest news items of the year for distressed homeowners was the settlement reached with the nation's biggest mortgage lenders for abusive lending practices. Since that time, over $22 billion has been disbursed to South Carolina and the rest of the country to provide mortgage relief to those who need it.

Although there have been concerns as to how the money would be distributed, a recent report indicates that over half of the settlement money -- $13 billion -- has been used to clear mortgage debts during the short sale process. Funds have been tapped to clear the deficiency between what a person's home is worth and the larger balance they still owe on their mortgage.

Although many homeowners have benefitted from going through with short sales, some observers are worried about the proportion of funds going to reduce the principal -- or outstanding mortgage balances -- on homeowners' first and second mortgages. This would allow people to stay in their homes without selling them.

Regardless, sometimes going through with a short sale is the best way for homeowners to avoid foreclosure. Rather than going through the pain of having their home repossessed, homeowners are allowed time to sell their home at market rates and find a new, suitable residence. This is why it's so important to explore all available mortgage relief options when foreclosure may be on the horizon.

Working through the process of avoiding foreclosure can be complicated. For example, lenders may be able to seek a deficiency judgment after a short sale has been completed. This means that lenders go after borrowers to recoup money they lost on the mortgage when approving a short sale. As banks are criticized for using too much of the settlement money for short sales versus principal reductions, they could consider trying to reclaim their deficiencies.

Fortunately, deficiency judgments can be prevented with thoughtful negotiation during the short sale process. Homeowners can sign an agreement in which lenders waive their right to seek a deficiency judgment in the future. This way, homeowners can feel more secure in their financial situation after completing a short sale.

Source: San Francisco Gate, "5 big banks' mortgage relief progress," Kathleen Pender, Nov. 19, 2012

No Comments

Leave a comment
Comment Information
Tell Us About Your Transaction

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Visit Weeks & Irvine at One of Our Six Locations

North Charleston office 8086-B Rivers Avenue
North Charleston, SC 29406
Phone: 843-553-9800
Toll Free: 800-553-7449
Fax: 843-553-9804
Maps and Directions

Mt. Pleasant office
1100 Queensborough Blvd, Suite 102
Mt. Pleasant, SC 29464
Phone: 843-856-9800
Toll Free: 800-553-7449
Fax: 843-216-0930
Map and Directions

Mt. Pleasant North office
3040 Highway 17-A North, Suite B
Mt. Pleasant, SC 29466
Phone: 843-388-3250
Toll Free: 800-553-7449
Map and Directions

West Ashley office
873 Orleans Road, Suite 102 1/2
Charleston, SC 29407
Phone: 843-571-2996
Toll Free: 800-553-7449
Fax: 843-571-2998
Map and Directions

Summerville office
106 West 7th North St
Summerville, SC 29483
Phone: 843-875-7111
Toll Free: 800-553-7449
Fax: 843-875-7721
Map and Directions

Goose Creek office
567 Crowfield Blvd.
Goose Creek, SC 29445
Phone: 843-553-9100
Toll Free: 800-553-7449
Fax 843-553-9183
Map and Directions