I got a sobering call from a former client this morning. They had been hit hard by this recession, including job loss, divorce, and ultimately foreclosure on their home. They had to leave Colorado Springs for work, and settled in the Denver area where the job market is larger. Happily, things are looking up, life was getting back to ‘good’, and the future looks bright. Not so happily, the bank that had refused several short sale offers and had ultimately foreclosed on them, has begun pursuing them for a deficiency judgement, 2 years after the foreclosure. Apparently the bank had been stalking their credit to see if things were better, and now that they were, the bank was going after them.
The client has a good lawyer, and high hopes that this will all eventually go away, but it underscores a couple of things.
- A foreclosure does not necessarily end collection efforts by the lender, unless a bankruptcy is also involved, not always an easy combination to stomach, and not always even possible under current bankruptcy laws.
- Future purchase ability can be adversely affected for a long time, even if things do turn around.
- Big Brother really is watching, and if a bank takes a hit, you can’t assume they are ignorant of any new circumstances you find yourself in.
- Banks can be pretty stupid and vindictive sometimes. Had they taken one of the short sale offers at the beginning, both the costs of the foreclosure, the magnitude of their loss, and the current legal expenditures could all have been avoided.
Hopefully this isn’t too scary, unless you are contemplating a ‘strategic default’. If you are, hopefully this will convince you otherwise, because sometimes banks don’t mess around, and it can ruin more than just your whole day.