Mortgage Issues? Beware!

| March 29, 2010 | 2 Comments

Walking Away Not An Answer

The Baltimore Sun’s  Eileen Ambrose  has just published an article about underwater mortgages and the ramifications of walking away from a mortgage. While it seems simple enough, the article points out that Maryland is a “recourse” state and when the home sells for less than the mortgage, lenders can still come after you.

The article states that experts have not seen a rash of lenders exercising this option, but did mention that if the debt is sold, a debt collector can commence actions–and they likely will.

There are many unscrupulous debt collectors across the nation and we even have a few here in our area. For those who are unaware of how debt collection works, there are a few steps:

  • Your mortgage holder deems the debt uncollectible and writes it off as “bad debt” (business expense)
  • Your mortgage holder sells it to a debt collector for pennies on the dollar
  • The debt collector then attempts to collect the debt for an amount greater than his cost, but less than the mortgage

For typical debts, the ramifications are not insurmountable. But for a mortgage, they just might be. Assume you have a $300,000 mortgage and your home is sold for $200,000. The mortgage company sells the debt ($100,000) for $20,000.

The debt collector needs to collect $20,000 recover his costs, but will employ whatever tactics are legal (or that he feels he can get away with using) to collect the entire $100,000 and perhaps interest and legal fees.

With foreclosures and abandonment still pretty prevalent as the economy struggles to gain some steam, it is suspected that these debt collectors will create a new small cottage industry specifically for mortgage debt. Be careful.

Reblog this post [with Zemanta]

Tags:

Category: NEWS, OPINION

About the Author ()

Eye On Annapolis is a community based site focusing strictly on Anne Arundel County. These staff postings are general news postings made by our team of bloggers throughout the day and are not attributed to any one particular staff person.