What if we owe more than the value of our house that's in foreclosure?

My spouse and I own a home that’s in foreclosure and we owe more money than the house is worth. We’re divorcing, and I’m wondering if I’m going to be responsible for 50% of the difference between what the house sells for and what we owe, or if that all goes away due to the foreclosure?

By Thomas Petrelli
March 13, 2014

Thomas Petrelli, a family lawyer in Philadelphia, answers:

If the promissory note underlying the mortgage includes a recourse clause, the lender (mortgagee) can obtain a deficiency judgment against you and your spouse if the sale of the foreclosed home does not yield enough proceeds to cover the remaining mortgage balance and fees. If this is the case, both you and your spouse will be liable for the deficiency judgment if both your names were on the promissory note. You may not necessarily be responsible for 50% of the judgment, if you and your spouse agree to a different apportionment of the responsibility, or the court orders a different apportionment. However, some notes do not include recourse clauses. In that case, if the foreclosure sale does not cover the mortgage balance fees, the lender eats the difference.

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March 13, 2014
Categories:  Financial Issues|FAQs

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