Avoid the Post-Foreclosure Nightmare

Thousands of Americans who lost their homes in the housing crash, but have since begun to rebuild their finances, are suddenly facing a new foreclosure nightmare: debt collectors are chasing them down for the money they still owe by freezing their bank accounts, garnishing their wages, and seizing their assets.

Deficiency Judgments

Often, the proceeds of foreclosure sales are not enough to completely pay off the loan, plus penalties, legal bills, and other fees. Using a legal tool known as a “deficiency judgment,” lenders can come after borrowers for any amount not covered by the proceeds of the foreclosure sale.

Before the housing crisis, banks often refrained from seeking deficiency judgments because they were costly and invited bad publicity. But the housing crisis saddled lenders with more than $1 trillion of foreclosed loans, leading to unprecedented losses. One way lenders are trying to minimize those losses is by putting pressure on borrowers to pay post-foreclosure deficiencies.


Once a lender secures a deficiency judgment, it may have years to collect on the claim. In Maryland, for example, lenders have as long as 27 years to collect. Lenders can also charge post-judgment interest, averaging around 4.75% a year, on the deficiency amount, which can drive borrowers deeper into debt. Collection can be extremely unpleasant, as laws give lenders aggressive tools to go after borrowers, including freezing bank accounts, garnishing wages, and seizing assets.

Borrowers are usually astonished to find out they still owe thousands of dollars on homes they haven’t thought about for years. Many of those who went through foreclosure have since gotten new jobs, paid off old debts, and sometimes bought new homes. Now, years later, the nightmare of their foreclosure is returning to haunt them.

Avoid Foreclosure

In many cases, this nightmare can be avoided. When it comes to foreclosure, a common response is for borrowers to feel overwhelmed and powerless to prevent it. They become victims of their own inaction and unnecessarily accept the often devastating negative consequences of foreclosure. We’ve all seen and read the stories of individual hardships, heart-breaking family struggles, and nationwide economic recession that unnecessary foreclosures have caused.

Help is available! Do not accept foreclosure as the final result of your mortgage delinquency. There are resources available on a nationwide, state, and local level. You can try getting free help, or you can pay for more professional representation. The key is to be proactive, search out available resources, communicate with your bank, and do everything you can to avoid foreclosure. Lenders and government programs offer refinance options, loan modifications, temporary forbearances, and a number of other mortgage assistance options. If, despite your best efforts, keeping your home is no longer a possibility, you can still avoid foreclosure through a short sale or deed-in-lieu of foreclosure.

Avoiding foreclosure improves the lives of individuals, of families, and improves our nation as a whole. By avoiding foreclosure and resolving your mortgage delinquency, you can put foreclosure behind you for good, without worrying about a deficiency judgment years down the road. You can save your home and obtain a mortgage that is affordable and sustainable. You can immediately begin rebuilding your credit and establishing stress free personal finances. You can go on living your life and focus on the things that are truly important.