A Couple Interesting Questions From Readers
Here's a couple short questions and answers I dealt with during the past few days. First questioner states that he owns an investment property through his self-directed IRA. Payments are late and the bank started foreclosure. He knows that IRA assets are exempt from creditors. He asks if his IRA property ownership provides any foreclosure protection. I think not. The IRA has entered into a contractual agreement to pay back a loan and has voluntarily granted the lender a mortgage as security.
There is no statutory exemption against mortgages voluntarily entered into by the IRA to secure a money loan. If the debtor had another judgment from a third party, the IRA and the assets it owns would be exempt from the third party's judgment.
Another reader from New Jersey states that he owns a Florida condo subject to a first mortgage with a New Jersey lender. Payments are in arrears. The New Jersey bank has sued the owner in New Jersey based on the underlying mortgage note. The lender has not instituted a foreclosure action in Florida. He asked whether the lender can sue on the note rather than foreclosing and thereafter seeking a deficiency. I think the lender is properly electing the sue on the note in New Jersey.
Any mortgage lender may sue to collect an unpaid mortgage note in lieu of foreclosure.
The result would be a personal judgment against the borrower who would retain legal title to the property still subject to the mortgage. Perhaps, the lender believes it easier to sue where the debtor lives rather than go through foreclosure proceedings in Florida against a condo inasmuch as Florida condominiums have lost so much value. This lender is apparently a small, local New Jersey bank. The larger national banks almost always foreclose first mortgages before considering a suit for personal liability.
