Can the mortgage company garnish wages after a forecloser?

Answer 1

== One of the more common fears among homeowners facing foreclosure is that the bank will suddenly start garnishing their wages in order to pay back the loan. With how far behind some homeowners fall, this fear can result in the anticipation of their not having enough money to pay the bills, keep the lights on, or feed their children. Especially if the income situation has deteriorated quite a bit, there may just not be enough money to pay the mortgage at this point.

However, the good news is that banks can not garnish a homeowner's wages during the foreclosure process. The very simple reason for this is that the real estate is collateral for the loan -- no other assets or future income source is pledged. If a car loan goes into default, the car is repossessed first; same with a mortgage in default: the bank can only take back the collateral that is pledged on the loan and there is no recourse to any other asset or income source.

Thus, the bank will have to take the property all the way through the foreclosure and have the court order it to be sold at a county sheriff sale. This auction is the legal mechanism by which the bank is allowed to attempt to recover the amount it is owed on the loan. If the sheriff sale pays off the mortgage in full, there is nothing further to collect.

If the property does not sell for enough to pay the loan off completely, some states allow mortgage companies to sue for a deficiency judgment after the foreclosure. Again, not all states allow this under the foreclosure laws, but it would give banks the right to garnish wages after the foreclosure, if they decide to sue for the judgment. But again, this comes only after the sheriff sale, and there would be no wage garnishment during the foreclosure process itself.

Banks rarely, if ever, sue former clients for deficiency judgments, though, because they know foreclosure victims do not have a lot of extra cash to pay down another judgment after losing their homes. It would take the bank too much time and money to sue again, when they did not collect very much on their original foreclosure lawsuit.

Lenders, of course, do nothing to dissuade homeowners from having the fear of wage garnishment. In fact, being sued after foreclosure, and the threat of losing their job, income, or other assets is often used by customer service representatives of mortgage companies to compel homeowners to keep making payments, even if they can not afford to do so. But foreclosure victims do not have to fear that the bank will come after their income during the foreclosure, and will not have to worry about the possibility even after losing the home. =