Can I walk away from my home?

I am disabled and can no longer afford to pay my mortgage. I have been without work for 3 years and have exhausted every nickel, including my retirement savings. The loan servicer refuses all of my attempts to resolve my “upside-down” mortgage problems. I have tried to get a loan modification and a short sale but they just keep playing games. I fear my only recourse is to walk away. What are the odds that I can do so without serious repercussions?

Asked on November 29, 2011 under Real Estate Law, Tennessee

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

If you walk away from a home that you own, you potentially face what is known as a "deficiency" judgment. A "deficiency" is created if your home sells at a foreclosure auction for less than what you still owed on the mortgage (plus fees/costs). Additionally, a foreclosure will severely affect your credit score.

One option is to try and rent out the home for close to what your mortgage is. Another option might be something known as a "deed in lieu of foreclosure". That means that you would turn over the house to the lender before they start foreclosure proceedings. If you get them to agree to this (possibly doubtful since they've not been very helpful to date), insist that in exchange for giving them the deed they waive any deficiency judgement against you. Many lenders are reluctant in today's economy to voluntarily take back a house but it's still worth a try.


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