What happens after foreclosure? Can the mortgage company sue you for money to try to recover their losses?

 

Sure. It's called a deficiency judgement. A court order stating that the borrower still owes money when the Security for a loan does not entirely satisfy a defaulted debt.

Example: Upon Default by the Mortgagor a lender Forecloses on the mortgage. The unpaid balance of the loan is $102,000. The property is sold at public Auction and brings $80,000. The lender then seeks a deficiency judgment against the mortgagor to recover the $22,000 shortage, plus foreclosure expenses.

Is this a very common practice? I have never heard much about banks sueing individuals.

How do you know if the bank will use this option?

Thanks.

It's not very common anymore. Banks are OVERWHELMED with the number of foreclosures. Plus some states have now outlawed deficiency judgments.

It will be interesting to see if banks don't fight back though. There are a lot of people (especially investors) that let the homes go into foreclosure because of business reasons - it is just worth a lot less than before. There will be a lot of second mortgages that will be simply wiped out - those notes holders may start looking for ways to recoup some of their losses.

I did some more research on the internet and it seems some banks are actually doing deficiency judgments. I read a few stories where they went after the former homeowner's wages.