With the down economy, many homeowners have faced foreclosure or were forced to do a short sale.
“A short sale occurs when a property is sold and the lender agrees to accept a discounted payoff, meaning the lender will release the lien that is secured to the property upon receipt of less money than is actually owed.” Source: Elizabeth Weintraub, About.com
But if former homeowners don’t ask the lender to release them from all obligations, they could still owe the lender money! There may be a deficiency judgement if there’s a difference between what the homeowner owed on the mortgage and what the bank could sell the house for at an auction. The lenders can go after former homeowners with these deficiency judgements, even years after the house was sold.
Read more at CNN Money.