Deed In Lieu Alabama

[hardouin]

I own a "investment" property in Alabama, not primary residence, have agreed to a DIL with bank.  Just received paperwork from them.  Part of it includes wording that they may seek a deficiency judgement for loan after sale.  I am searching and can't find whether Alabama allows this judgement or not in a DIL?  Bank negotiator claims that this rarely happens, but he is not on my side! I have found forums threads that claim a 1099 will be filed for the loss, but no deficiency judgement will be pursued.

Can you help with the Alabama law on this?

Thanks

[vaiveatoish]

Not an expert on Alabama statutes but according to my research yours is not an "Anti-Deficiency" state.  Even if it were, such statutes almost always only apply to primary residences.  Not investment properties.

The bank negotiator is correct that judgements have been fairly rare in the past.  We are seeing some trends however that some lenders are starting to pursue them a bit more.  For the most part it still only occurs if they feel the borrower has significant assets.  Remember that it is expensive to do a judgement(legal costs) and most lenders look at it as throwing good money after bad.

I would see if they would remove the language.  If not, you need to make the decision on how "lucky" you feel.  

Even with the increasing trend, it is still a small percentage.  And it primarily is being done by secondary liens that are getting left out in the cold with foreclosures.

If a 1099-C is filed, that is for forgiven debt.  It means that the bank has written off the loss and will not be pursuing a deficiency.  They can't write off a loss and still collect from you.  

If they decide to pursue, you will get notified as it is a legal action.

I wish I could give you assurances on this, but no one knows what a lender will do in the future.  But understand this.  If it goes to full foreclosure the loss the lender incurs will almost certainly be higher.  And that would be a greater incentive to go after you.

Make sense?

Good luck on this.

Steele