Q: I had two properties foreclosed on this year. Although we had short-sale offers on both properties, for some reason the banks would not accept the offers. One of them was my primary residence, which had a first loan of $417,000, and a second in the amount of $180,000. The second home was an investment property, for which the first loan was $290,000 and the second loan was $60,000.
I have some assets, including a commercial building that produces very little income due to the fact that there is a large vacancy within it. Because of the vacancy, my income is less than $10,000 a year.
Will the lender come after me for unpaid debt in regards to the aforementioned foreclosed properties? If so, how will it know whether I have assets or not? Can the lender put a lien on my commercial property?
What are the statutes of limitations for the lenders? Is there anything I can do to get out of this mess aside from declaring bankruptcy?
A: All of your questions are state-specific and depend on the various laws in your state.
For example, in general, the statute of limitations around the country is three years. That means that when three years pass after an event for which you could have been sued over, the courts will not allow such lawsuits to proceed.
The purpose of a statute of limitations is to make sure that if you have a valid claim, you should bring it promptly. Otherwise, witnesses forget facts or die; documents get stale, and it is unfair to file a lawsuit so long after the event took place.
However, state law differs, both with respect to the number of years as well as to the type of incident involved. For example, in many states you cannot file a libel suit after one year.
Additionally, if a document is under seal (with a notary seal or even just the letters LS ? for "legal seal"), many states allow such matters to be brought for a much longer period of time, even up to 12 or more years.
Additionally, state laws differ on whether a lender that has foreclosed can sue the borrower for a deficiency judgment, a situation that could happen if, for example, a borrower owed $250,000 on the mortgage but the lender received only $150,000 from the foreclosure sale, leaving a deficiency of $100,000.
In the District of Columbia where I practice law, a lender can sue for the deficiency.
However, in some 10 states such as Alaska, Arizona, California and Minnesota, laws have been enacted that specifically prohibit a lender from suing for the deficiency.
benny@inman.com
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