Deficiency Waiver

Our client's loan had turned from interest-only to a full payment when he lost his job. They needed out without owing the bank a deficiency.

The Situation

Our client's mortgage loan had a 10-year interest only feature. That meant when the 10 years was up, his payments would increase $1,000 per month to have the loan paid off in the remaining 20 years. He and his wife had just lost their jobs too. Despite spending much of their retirement accounts (not recommended!) in an effort to pay back their debts, they became overwhelmed. The bank filed foreclosure. They needed a resolution. At first, they wanted a deal to save their home. But then they took jobs in another state and decided to give up the home. But they needed to avoid owing the bank any money after the sale was complete. They needed a deficiency waiver.

Challenge

Initially, it was to get our clients a deal that made their payments affordable. After they found new jobs out-of-state, the goal was to get them out from under the property without a deficiency.

Solution

Before the mortgage company filed its foreclosure, it made some serious errors in processing our client's prior loss mitigation request. That created a cause of action against the servicer under RESPA. We filed a new lawsuit in federal court to address those violations. As a result of that lawsuit, the foreclosure lawsuit ended up being frozen. While the foreclosure lawsuit was on hold, we fought hard in federal court for our clients. In the end, the mortgage company came to the table and did a deal our clients were thrilled with.

Results

Our clients got the deficiency judgment they wanted to walk away from their home without further liability to the bank. Our work that froze the foreclosure allowed them two years to find new employment and move out-of-state without making a payment on the mortgage. To top it off, the bank paid them nearly $20,000 in damages (while not admitting wrongdoing).