subject: Foreclosure, How You Lose Your Home Matters [print this page] It's common to assume that if you walk away from your home, the bank can't come after you for more money, because the loan was attached to the house.
But that's not always true. In some states, lenders can obtain a deficiency judgment for the difference between what you owed and what they got from selling your house.
Florida is one of those states. "No homeowner should walk away," says Rashmi Airan-Pace, a Florida attorney who specializes in mortgage modifications and foreclosure defense. "Deficiency judgments are very damaging."
Airan-Pace points out that lenders, for example, can seek to garnish wages or place liens on other properties.
Other states, including California and Arizona, are nonrecourse states. Which mean that laws there prohibit such judgments. You still have to be careful, though; some lenders get borrowers to sign papers obligating them to pay deficiencies anyway.
Foreclosure can ruin your credit scores for up to 10 years. When it comes to the effect on your credit scores, having a few late bills is to foreclosure what having a leaky faucet is to burning down the house.
When a foreclosure is filed against a property owner, that person's credit will go down 100 points. At the foreclosure sale, it goes down another 100.
A short sale would do about one-quarter as much damage to your scores. And though you can start pulling up your credit scores substantially from a short sale or a spate of late payments within a couple of years, a foreclosure can affect your credit history for a decade. If you can save your home by working extra hours, staying on a strict budget or taking money out of savings, you should consider it.
