You may still owe money after a foreclosure or short sale

So your house was under water and you thought you could deal with your problem by having a short sale and moving on with your life. Maybe you got foreclosed on and you thought that the nightmare ended then. Think again. You may be on the hook for paying off part or all of the remaining mortgage, even years later. Foreclosure is not the end of the story Most states, like Florida where about half of the homes are underwater, allow mortgage holders to collect on the unpaid portion of the mortgage after a foreclosure. In Florida, the courts give mortgage holders up to five years to seek a favorable judgment, and up to 20 years to collect. It may be different in your state, Arizona, California, and about one in three of the remaining states prohibit collection efforts on a primary residence after foreclosure. The government may help you, but not that much The federal government started the Home Affordable Modification Program to help homeowners who have financing their mortgage at a lower rate, but it is pretty restrictive. Your first mortgage can't be more than 125% of the current market value of your home, your mortgage has to be guaranteed by Fannie Mae or Freddie Mac, and you have to have no late payments in the previous 12 months. If you are either seriously underwater by more than 25%, or if you are already in the foreclosure process, you're (sorry) out of luck. Who is most likely to get hit? Not surprisingly, banks and mortgage holders would prefer to go after people who have assets or income. Homeowners who can afford to make payments, but decide to walk away from an underwater mortgage, sometimes called a rational default or a strategic default, are at risk if they don't have any other serious financial issues and have otherwise good credit. Short sellers, who get lenders to forgive a portion of the debt in order to complete a sale, are also at risk because lenders will often leave their options open to come back and collect later. If you are involved in a short sale, make sure to review your agreements carefully, preferably with the help of a competent professional. Those who have been foreclosed upon may also be at risk. Because the details of each foreclosure are very different, if you have been foreclosed upon or at risk of having that happen, check your mortgage agreement details very carefully to get a realistic idea of what issues you may be facing down the road. SOURCE : Mortgage311.org