does the bank go after their cash anyways? Or just wreck their credit and take the house?

I guess it depends. Right now, I bet they get a pass on going after them. With the 1000's of foreclosures the banks are swamped. Not to mention laying off tons of people making the backup even worse. Citi and Chase announced 50k+ layoffs EACH yesterday so think about that. The banks could get a deficiency judgment as far as I know, but I'm no lawyer so I'd bet that laws vary by state.

Joe

If their mortgage and state law allows them to pursue the borrower for deficiency balances remaining they could file judgment and garnish wages.

Is it common for second mortgage holders to file deficiency judgments and go after the borrower's assets? What about when the first and second mortgage lenders are the same?

Why only second mortgage holders. I know of a situation in Ky where the owner of the property wants the bank to foreclose but the bank wont foreclose cause the owners own other property and the bank wants them to sell the other assets to pay them. Even if the bank does not pursue there are plenty of businesses that buy bad debt and then attempt to collect. I bet the bank sells the bad debt for pennies on the dollar. I was in San Diego recently and met a guy who was in the same boat with equity in CA property and upside down on FL property. I told him that he needs to be aggresive about managing the foreclosure. If he wants to limit the damage and liability he should hire an attorney now to examine all the details of the transaction and challenge the foreclosure at every point unless the bank agrees to accept the proceeds of the subject sale as paid in full. Be aggressive now and try to limit damages in the future.

This is a really "Fun" Subject for me ! I was close to selling a Farm up here in Vermont, where the Sellers were already crying poor mouth (as so many of them do). Suddenly, close to Closing, along comes a Deficiency Judgement out of a Massachusetts Superior Court, regarding a Foreclosure down there that my Sellers wanted to simply forget about. (We call it "Selective Amnesia").

That stealthy D.J. comes along slowly and gets plopped down in our Vermont Land Records about 18 months after the Mass Foreclosure, and now my people don't have enough equity to pay off their existing Mortgage here plus the Deficiency Judgement . . . . but most importantly THEY DON'T HAVE MONEY TO PAY MY COMMISSION ! I hate when that happens. They wanted me to get them out of the Conveyance; but I had done my job, and spent a small fortune advertising this place up to that point.

Ultimately, they had to cash in an IRA prematurely to ante up whining all the while, in order to bring some CASH to the Closing. Both Vermont and Massachusetts are Strict Foreclosure States (or Commonwealths). Elsewhere, they may have gotten away Scot Free. They thought it worked like a RePo for a Car Loan . . . . it does not ! It was a good (and expensive) education for all of us.

I felt real bad for my Clients . . . . but a Contract is a Contract !

It's going to the auction block tomorrow.

Based on your replies, I think they're going to get a Deficiency Judgment as they should, frankly. I don't agree with taking out equity loans and partying with the money, banking the rent checks and stiffing the lenders.

It's one thing to get in a bad situation --- it's another to game it, which I think they wanted to do.