How best to protect your other assets when there is a foreclosure?
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How best to protect your other assets when there is a foreclosure?
My mom signed a loan for a house for my sister and brother-in-law. My sister lost her job and can’t pay for the loan and it might be going into foreclosure. My mom also has a house that she lives in which is 3 payments away from being paid for and would like to know how to protect her home and herself from financial ruin and loosing her home.
Asked on August 4, 2011 Iowa
Answers:
FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
Your mother needs to consult an experienced real estate attorney about the loan that she signed for a house that your sister and brother in law purchased. The issue is to determine what type of loan was acquired forthe house. Meaning, is the loan on the home that your sister and brother in law obtain the loan for the property's purchase?
If so, then the loan is what is called a "purchase money" loan. The significance of a purchase money loan for a home intended to be occupied by the borrowers is that in many states there are anti-deficiency statutes on purchase money loans where if the home is foreclosed upon and sells for less than the amount owed on the loan, the lender cannot come after the borrowers for a deficiency judgment.
Potentially your state may have anti-deficiency statutes on purchase money loans. If so, and the home that is about to be foreclosed upon that your mother signed the loan on may be a "purchse money" loan.
Good luck.
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