Real Estate question: If my mother stops paying the mortgage on a rental property she has...?
...(the debt is more than it's worth), that is if she just decides to 'walk away' from it and let the bank foreclose on it, can the bank go after other assets (paid off properties/homes...
...(the debt is more than it's worth), that is if she just decides to 'walk away' from it and let the bank foreclose on it, can the bank go after other assets (paid off properties/homes) of hers to pay off the balance?
 cainvest1 |
They can seek a judgment to collect what she owes in excess of the eventual foreclosure sale if she has assets. This will affect her credit. The difference between the loan and the foreclosure sale is also taxable income to her so she should seek professional tax advice before she digs a very deep hole... |
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the tax lady |
The bank didn't sell her a house, they loaned her money. The fact that it's underwater is not the bank's problem. Banks are generally NOT forgiving these loans until after they have taken steps to collect the money. Yes they can sue her for the difference. As far as taxes go, once the property is foreclosed on, she can claim the loss on her tax return. That will free up some money to pay on it. |
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 My Take on It  |
Yes, the bank will come after her because it was an investment property, not her primary residence. They will either try to collect the shortfall after auction, or they will send her a 1099 which will need to be added as income on her taxes which could open up a whole other can of worms when she owes the IRS. |
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