Home going into foreclosure?

Question

Can the lender go after my IRA?

Answer 1

No.

Answer 2

One of the great questions that homeowners have while battling foreclosure is what the bank may be able to take from them even after they have taken the house. Many foreclosure victims fear deficiency judgments, believing that they may lose a second home, car, or even their bank accounts and retirement funds. This is a reflection of the general lack of knowledge of how foreclosure works, since the possibility of the bank going after any of these assets is very small.

During the entire foreclosure process, only the house used as collateral can be taken by the bank. Since the homeowners pledged the property as collateral for the loan when they originally applied for the mortgage, the lender will sue for the forced sale of that home to pay off the loan. They can not sue for anything else to be sold to satisfy the loan because nothing else was pledged as collateral, and they can not pursue any deficiency judgment unless a deficiency is created by the county sheriff sale. If the homeowners find some other way to stop foreclosure before the auction, then the bank can not sue for a deficiency, even if the homeowners use a short sale, where the bank takes less than what is owed, or a deed in lieu of foreclosure, where the bank takes the property instead of any payment.

In terms of a deficiency judgment after foreclosure, the bank may be able to go after other assets, but any retirement funds the former homeowners have are generally protected. Especially if they invest their retirement savings in an IRA or through work in a 401(k), 403(b), or similar program, then the bank can not try to seize any of these savings. However, if their retirement funds are "invested" in a second home or a prize race horse, then the bank may be able to to go after those other assets. That is because specifically designated retirement accounts are protected from creditors, while assets simply invested in for the purpose of saving for retirement without the special designation are not protected.

More relevant than what the mortgage company may be able to take after the foreclosure, though, is the issue of banks going after anything at all. In most cases, the lender rarely pursues the deficiency judgment after the home has been sold at sheriff sale. Mortgage companies know that people in foreclosure do not have the money to pay the monthly mortgage payment, let alone pay the entire foreclosure judgment or a deficiency judgment after foreclosure. Thus, it is just not worth the lenders' time to keep suing homeowners with no expectation of ever collecting anything from the lawsuits.

The only institutions currently going after any homeowner's retirement funds are the banks and government, but not through the foreclosure process. However, they are inflating the money supply, manipulating the interest rates, and generally contributing to a slowing economy which makes retirement funds worth less right now. Unfortunately, this kind of theft can not be stopped by homeowners, but they can rest assured that the banks and government will be unable to go after their retirement funds directly by seizing them to pay off a deficiency judgment, even in the case of foreclosure.

Hope that helps.

ForeclosureFish