if property becomes REO, underlying debt/mortgage extinguish

tvl_80 · Joined: 25 Jan 2008 Posts: 1 1.30 Dollars($)

After mortgagor defaults, and if unsuccessful foreclosure auction and property becomes REO, is the underlying mortgage/debt extinguished? Or is the debt still owed and secured by the property? What if the bank sells the REO property, does it keep a deficiency against the original debtor (though now unsecured)? Thanks!!

lisascherzer · Joined: 04 Jan 2008 Posts: 749 0.10 Dollars($)

A deficiency judgement can arise if it is sold for less than what you owe on the mortgage in many states. I would check with a local attorney that could confirm the foreclosure laws in your area.

Caron

Hi Tvl,

If the bank sells off the property at a price lower than what you owe on it, there is a difference in the loan balance and sale price which will be obtained from you, the debtor.

Even if the property is unsecured, yet it had been taken away by the bank due to the debtor having defaulted and hence it becomes his responsibility to pay the deficiency. however, if your state follows an anti-deficiency laws, then you will not have to pay for the deficiency.

Good luck

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