Thursday, October 8, 2009

A Full Credit Bid

I recently attended a continuing education class in Michigan and was taught some very interesting information about Foreclosure that goes against the common thought about having your house taken back by the bank. And, this applies to both Indiana and Michigan.

When your house is officially taken back by the bank is when it is sold at the Sheriff's auction. The bank does this by making a credit bid against your house. This "credit bid" is where things get interesting because of the belief out there about being sued for a deficiency judgement. The common belief, is that if you owed $100,000 and the bank takes your house back and sells it for $60,000, then the bank can sue you for a deficiency of $40,000. But that is not necessarily the true.

If the bank makes a "Full Credit Bid" on your home, then you owe nothing. A full credit bid is when you owe $100,000 and the bank makes a credit bid at, or above in most cases due to fees, the amount that is owed. This effectively negates the bank coming back on the homeowner for a deficiency judgement. Even if the house is then resold by the bank for $50,000 causing a $50,000 loss!

So, if you are in the process of having your house taken back by the bank, find out what the credit bid is on your house. This might relieve some anxiety about possible lawsuits.

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