One risk of owning a home. (Photo: Flickr/BasicGov)
Q: If my house in Michigan is now worth $100K less than I owe and I walk away, what are my consequences? (I know the value because the bank had my home assessed for a possible refinance.)
A: When a property is foreclosed in Michigan, a judgment can be entered by the court for any amount of the loan that remains unpaid. This is called a deficiency judgment. The deficiency judgment can be used to execute on other property and wages of the borrower. Therefore you would have a judgment against you, and the creditor may use that judgment to attach or take other assets you may own.
Regarding a mortgage modification as a possible option, you should know there is no state or law requiring the lender to reduce the amount that you owe. That said, you can consider negotiating with the lender for a modification instead of attempting to refinance.
The first thing to be aware of is that a lender is not going to modify a fully performing loan. You will typically need to be 90 or more days behind before they will discuss modification. They will only modify to mitigate their own risk. As long as you are paying, they have no incentive to modify.
-- Answer provided by WebLaw, a lawyer on JustAnswer.
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