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Lenders Pursue Borrowers Even After Bank Owned Land Sale

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By : John Cutts    99 or more times read
A residential foreclosure sale or a bank owned land sale is not an assurance that the money owed by a borrower to the lender will be fully covered. This is particularly true now that values of properties and land have declined to a point where the mortgage owed is worth more than the property itself.

The increase in the number of distressed properties in Michigan, including Southfield bank owned properties, has resulted in huge declines in property values. This led to lenders not getting enough to cover what is owed them by the foreclosed owner even after the property or land has been sold. In an attempt to get their money back, some lenders in the state are reportedly engineering foreclosure actions in such a way that they can pursue the borrower even after the property has been sold.

Prior to the massive decline in property values brought on by the oversupply of bank owned properties in Michigan, a foreclosure means the homeowner loses his home and that is that. Lenders who foreclose usually get what is owed to them by the former owner by selling the property.

However, declining values of houses and other types of real estate mean that, even after conducting a residential or a bank owned land sale, the lender will still not be able to recoup his losses. This led to more lenders pursuing borrowers after the foreclosed property has been sold to get them to pay for the balance of the loan that the sale failed to cover.

This amount that borrowers supposedly owe to their lenders even after the sale of bank owned house foreclosures is called mortgage deficiency. According to housing experts, the amount could escalate over the years as interests and fees are added to the balance each year that the borrower fails to pay it in full.

Michigan law does have a provision that makes pursuing borrowers legal even after a residential or a bank owned land sale has been completed. However, lenders often do not use it, and most just take the property and let borrowers walk away. But with property values declining, more lenders are reportedly pursuing mortgage deficiency claims in the region.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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