Sold Out Junior Loans

Ready2Run

LoanSafe Member
Aug 11, 2010
611
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18
San Francisco Bay Area, CA
Can you please verify that the original post regarding "Sold Out Junior Loans" above is still true and correct in California? I know that originally this post started in 2011 and I just wanted to know if anything has changed since this was posted in 2011. I look forward to your reply and thank you so much for all of your help.
I can confirm that everything said up to and including B.2. is still true and correct. Beyond that I can not say.
 

Justice4us

LoanSafe Member
Nov 15, 2014
11
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Hello. Formerly BustedBrokeBeaten here (BBB). My old login doesn't work anymore so I've started a new account. Here's our update.

We are in WA State, house finally foreclosed in February of this year. Sold out 2nd is 32k with Nationstar. Nationstar seems clueless that the house foreclosed as we received a certified letter today stating "notice of preforeclosure options." "If you do not respond within 30 days a notice of default may be issued." ???? What the ^/$#@?

Anyone else experience this?
 

enigmaenigma

LoanSafe Member
Nov 12, 2014
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Sold Out Junior Loans
This thread has been started due to some confusion about the difference between a 2nd or 3rd or other junior loan, and a “sold-out junior” loan. This occasional confusion has been noted on the “Strategy for Settling Your 2nd” thread.

Here’s the difference between the two:

A) A 2nd (or 3rd, etc) is a secured junior loan on a property that has not been foreclosed, i.e. one to which the homeowner still has title. In almost every instance, there is a compelling reason to eventually settle with the 2nd lender. Why? To extinguish (re-convey) the 2nd lien that encumbers the property. In certain rare instances, that need to eventually extinguish the lien may not exist. What are those instances?

1) When the 2nd loan is so underwater that it will take many, many years for the property value to recover enough to put that 2nd clearly in the money. This long time horizon might be longer than the homeowner’s life expectancy.

2) The homeowner intends to live in the property for the rest of his/her life. A corollary to #1 above.

3) The homeowner doesn’t plan to ever sell or re-finance the property.

4) The property owner doesn’t have plans to leave the property to heirs.

5) The homeowner just doesn’t care about it.

B) A sold out junior loan, on the other hand, is a formerly secured junior loan, like a 2nd which was secured by a property that has already been foreclosed. A foreclosure by the 1st lender has wiped out the 2nd’s security, and that former 2nd is now an unsecured “sold out junior.”

1) If that sold out junior was a non-recourse loan (a “purchase money loan” in most states), then the sold out junior lender is legally barred from suing the borrower for any money due on the note. The debtor is protected and has no legal risk.

2) If, however, that sold out junior loan is a recourse loan, then the sold out junior is not legally barred from suing the debtor for money due on the note.

But, the good news is that, heretofore, such lawsuits have been very rare, by any lender in any state.

C) About Settling with a Sold Out Junior

Due to my last statement in B above, I advise borrowers never settle with a sold out junior lender. There are occasional rare exceptions. For instance, a borrower whose employment is conditioned on maintaining a security clearance, which might entail periodic credit reports and background investigations, may want to settle to avoid the risk of losing his/her job.

Occasionally a borrower may feel some moral compunction and want to do “the right thing.” Those borrowers are few and far between, particularly after they learn that their credit file will likely still have a derog reported, despite a settlement.

Finally, settling with a sold out junior lender is always less of a challenge than settling with a 2nd lender. Why? Because a sold out junior is an unsecured lender, and thus has no leverage, and is quite happy to ever see any more money on that note!

Here’s an example. Settling a loan is really buying it back from the lender. Since lenders can sell 2nds on the secondary market for no more than 2 – 5 percent of the loan balance, a borrower should expect to settle for between 5 and 10 percent on a secured 2nd, and even less for a sold out junior.
I can confirm that everything said up to and including B.2. is still true and correct. Beyond that I can not say.
Thank you so much for your quick reply. I'm in California and I have a sold out junior mortgage which is believed to be recourse lien. Approximate ly 6 months after foreclosure of the first, I received correspondence from Real Time Resolution offering to settle for 30%. That offer has lapsed. Should I wait for a lower offer or start the negotiation process? Negotiation with RTR or the lender? Better to negotiate by mail? Lastly, I don't want to provide my financials. Any help you can give me would be greatly appreciated, thanks again!
 

Ready2Run

LoanSafe Member
Aug 11, 2010
611
18
18
San Francisco Bay Area, CA
enigmaenigma - Really can't say. I know Tom's stance in the past was to not settle with SOJs, but I don't know if that's still the case. I would confirm if it's recourse or not since that's pretty easy, ie. was it purchase money? If not, it's recourse.

If it's recourse I think you have some hard decisions to make based on what's best for you. Personally I would not contact the lender, it just shows you are worried about it and you don't what to chance reminding them of something they might have forgotten about. Since your in the clear once the SOL runs out. If it comes to negotiations I would not give out financials unless they are sooooo bad that they can only help your cause, which is probably not the case. I think negotiation in writing is best since it's most controlled. Every time you talk to someone they are trying to extract information from you. It's just too easy to get emotional or just slip so writing is better, in my opinion.

I wish I could be more help but unfortunately I can only provide my opinions on what to do next. The true decision on what to do next will depend on your needs and desires.
 

Ready2Run

LoanSafe Member
Aug 11, 2010
611
18
18
San Francisco Bay Area, CA
Justice4us - It happens! :rolleyes:
These banks are so confused that they don't know their heads from their a**. When I first started my journey and applied for modifications. I had my 2nd (Chase) call me and ask "So is this modification request for a 1st or 2nd loan?" I can still remember my jaw dropping! Not only should they have already know this but it was written right on the top of the modification application that it was a 2nd loan! :mad:
 
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anywho

LoanSafe Member
Oct 13, 2008
18
0
1
I've been following this thread off and on since the beginning, while bidding my time for my SOJL to reach the six year SOL in my state, on what was a recourse HELOC for a home that was foreclosed on some five years and six months ago. I stopped making payments many months prior to that, but understand that the date when the house was sold on the court house steps and transferred is the controlling date here.

For the few years SLS (who bought the debt from a national lender) has been sending monthly statements to my PO Box. I've ignored the statements and just observed the late charges and interest being tacked on each and every month. This week something other than a statement came in the mail from SLS. It was a letter with a formal Settlement Offer in an amount that represents 20% of the original HELOC principal balance. They gave me until the end of the month to accept the offer. The second page included a disclaimer about ignoring their notice if the debt had already been discharged or subject to a bankruptcy automatic stay (section 362), followed by the a comment saying: "However, it may be a notice of possible enforcement of the lien against the collateral property, which has not been discharged in your bankruptcy."

My primary concern is whether this is just 'saber rattling' on their part and represents little more than a last ditch effort to get a rise out of me and negotiate for whatever they can manage to shake out of me prior to the expiration of the SOL on the written contract. I did read several pages back about SLS now suing people on SOJL in my area, but the poster mentioned it being on lesser amounts owed; with the idea being smaller amounts make it less probable that a person would consider a bankruptcy to escape their debt collection efforts.

My debt is north of $200k and I have not played the bankruptcy card; something I've been hoping to avoid. I do have a couple of relatively small judgments that are not showing (surprisingly enough) on my credit reports. I haven't had steady full time employment for the last three years and have no credit cards or loans (seven year old car is paid for), nor have I applied for any credit since the foreclosure. My hope, is that I would present a less-than-attractive risk for them to consider spending money chasing me with a lawsuit. Praying that logic is plays a part in their process.

Can anyone offer any thoughts or suggestions related to similar dealings with SLS? I've been told to get rid of my PO Box so their mail gets returned, but I'm reasoning that it would be better to know if they are moving forward with a lawsuit and defend myself, rather than letting them publish notice as service (legal in my state) and work on getting a default judgment. If I do get sued, can I fight it and stop them without taking a BK? Anyone have recent experience/knowledge regarding SLS and their inclination to sue on a SOJL? Any other advice would be much appreciated.

Thank you in advance for whatever guidance can be offered here.
 

ewrath

LoanSafe Member
Jan 14, 2010
22
0
1
Very curious as to how this is going... it has been stated many times that lawsuits are seldom seen so wondering if this is an aggressive threat to scare you into making some kind of payment? RCS has my account, as well, but just got a couple letters from them last year then nothing lately...

Wishing you the best in this troubling situation.
SOL (4 years from foreclosure date) has come and gone on my PNC HELOC, last held by RCS for collections. Unless there was an errant judgement passed (by improperly serving me) I believe this whole chapter is now behind me. I played the "no contact" waiting game, as recommended here, and looks like they moved on.

Thanks to Tom and everyone on this forum for their support!
 

KelKat

LoanSafe Member
Jan 14, 2015
2
0
1
50
I need some advice.
The Facts:
-I'm in Louisiana / Judicial Foreclosure State
- $350K 1st mortgage was modified in 2008 and no late payments since
-No payments on the $100K 2nd since 2008 - with little to no communication other than me sending a letter every year or so looking to settle.
-BK - Ch7 Discharged in 2008 - no reaffirmation on either mortgage
-Home is the worst in the nicest neighborhood... I know they think there's value due to the location but it needs a lot of work. Assessor value $315K Zestimate is at $500K but there's no way... I'm a real estate broker and know it's a total fixer that needs plenty of work to get it to the $500K amount.
-"Note Resolutions LLC" has contacted me to tell me they purchased the mortgage and would like to work with us. Asked for our "financials" I refuse to give them information because I'm not personally liable for the debt... asked about a settlement and they asked us to submit an offer.

I offered $4500 to settle. They came back at $65,000 and asked for financials again indicating that they need those to work with us. I'd say we're a little off in our negotiations. I responded that there is no equity in the property and to reconsider my offer since they would get nothing via foreclosure.

Questions:
-How much do you think they paid for the note? Is there a way to find out?
-Has anyone else settled with this company before?
-If you've settled with a similar company, how much did it take proportionate to your loan amount?
-Has anyone in this situation actually had the company start foreclosure proceedings?
-Any advice on how to get these folks and the 2nd lien out of my life forever?
-Is there any value in getting a trusted friend to offer to purchase the note/lien from them for a more reasonable amount?
 

jmnewcomb

LoanSafe Member
Oct 26, 2013
19
0
1
I'm back on this forum, I've been sifting through hundreds of messages, trying to come to a decision. Here's our current situation:

We let our house foreclose; Wells Fargo sold it on Oct. 2013 for $250K (we'd bought it in 2007 for $540, 1st mortgage was $440K, purchase money HELOC, also with WF was $40K). We got a letter from WF about the HELOC/SOJL in Sept 2014 asking for 50% of $44K, we ignored it.

The mortgages were entirely in my spouse's name, they don't show up on my credit report. We were planning to continue staying silent except I got an inheritance check, which I haven't deposited. We've seen 2 lawyers, one says to declare bankruptcy to wipe the slate clean. We have no other debt to speak of, but if we do, the inheritance and our cars are at risk. The other says to settle, as the tax consequences are less than the loss of the inheritance/cars. Our total income is 65K, so a low tax bracket.

But I see that, as of last summer, the advice on this forum was to never settle with a SOJL, especially since in WA State it should be non-recourse. Right now, our file is probably at the bottom of Well's Fargo's pile. If we try to settle, it may wake them up into taking more action.

Do I deposit the check into my business account (non-comingled) and trust that WF is so out to lunch they won't notice?
Do we call them up and offer $4,000 or some equally low ball offer?
I can't sit on this check for long, the estate is being settled soon.
Any feedback, suggestions, similar stories, are appreciated!
 

kidsandliz

LoanSafe Member
Mar 28, 2011
56
0
6
Need to know which state's statue of limitations is used for coming after me for a short sale deficiency - the one the house was in (ID) or the one I was living in when the house was sold short (and I still live here in MS).

Short sale Jan 2011. While the deficiency was not excused (agent lied to me and said it was so I agreed to the sale rather than let it go into foreclosure the next day -posted for auction, foreclosure would have only had 3 mo for a judgement against me), Dec 2011 I received a 1099 from the first mortgage (bought house with an 80/15 - this was the 80). The second is still occasionally harassing me about it, according to my credit record the amount I owe has dropped in half but I have not made a payment so not sure what is up with that. In the state the house is located (ID) in the statue of limitations to come after me is 5 years. In the state I am living in (MS) the statue of limitations for this kind of debt is 3 years. Which statue of limitations gets used - the state the house was in or the state I was living in when the house sold (and I still live here)?

Also does the statute of limitations count start from the first missed payment OR from when the house sold short. If is is the first missed payment then April 2015 my 5 years is up regardless of which state's rules we would use. If it is from the short sale then I still have 11 mo to go for the 5 years. If it is MS laws that will apply even though the house is in ID, then I am home free.

Thank you.

PS I tried to go after the agent who sold my house since he lied and told me the deficiency was going to be excused (I have 5 years to go after him) because he knew I would let it go into foreclosure otherwise, but I can't find a north Idaho attorney to help me and have wasted around $1500 (more like ripped off) by people who said they'd help, I paid them a retainer, then they said they couldn't help and said they were keeping the money. Anyone know of a northern ID attorney (Latah county in Idaho is where this took place, which is about 90 miles south of Spokane, WA at the WA and ID border)?
 

kidsandliz

LoanSafe Member
Mar 28, 2011
56
0
6
Justice4us - It happens! :rolleyes:
These banks are so confused that they don't know their heads from their a**. When I first started my journey and applied for modifications. I had my 2nd (Chase) call me and ask "So is this modification request for a 1st or 2nd loan?" I can still remember my jaw dropping! Not only should they have already know this but it was written right on the top of the modification application that it was a 2nd loan! :mad:
You are dealing with Chase… need I say more? I had the journey from hell with them. Twice. Once with a credit card and then the 80 of my 80/15 mortgage rolled downhill to them. All I can say is get every single little thing in writing with them, from anyone who is dealing with them and then be thankful you can't reach through the airwaves to strangle them while you are on the phone to them (presuming they will even admit to who it is you need to talk to that is, and that would be after aging 2 years on hold only to have them disconnect you so you have to call back). All that being said a year after the short sale I did get a 1099 - but I had been battling them about it all year and I guess finally convinced them they weren't going to get blood out of a stone. I was unemployed, with cancer and I finally told them go ahead and sue me. I'll just declare bankruptcy. I know they pulled my credit monthly because they'd harangue me about my credit card balance and how could I pay that and not my debt to them. Ummm I barely charged anything so don't know what they were yapping about.
 

Amazon

LoanSafe Member
May 31, 2012
7
1
1
I've been following this thread off and on since the beginning, while bidding my time for my SOJL to reach the six year SOL in my state, on what was a recourse HELOC for a home that was foreclosed on some five years and six months ago. I stopped making payments many months prior to that, but understand that the date when the house was sold on the court house steps and transferred is the controlling date here.

For the few years SLS (who bought the debt from a national lender) has been sending monthly statements to my PO Box. I've ignored the statements and just observed the late charges and interest being tacked on each and every month. This week something other than a statement came in the mail from SLS. It was a letter with a formal Settlement Offer in an amount that represents 20% of the original HELOC principal balance. They gave me until the end of the month to accept the offer. The second page included a disclaimer about ignoring their notice if the debt had already been discharged or subject to a bankruptcy automatic stay (section 362), followed by the a comment saying: "However, it may be a notice of possible enforcement of the lien against the collateral property, which has not been discharged in your bankruptcy."

My primary concern is whether this is just 'saber rattling' on their part and represents little more than a last ditch effort to get a rise out of me and negotiate for whatever they can manage to shake out of me prior to the expiration of the SOL on the written contract. I did read several pages back about SLS now suing people on SOJL in my area, but the poster mentioned it being on lesser amounts owed; with the idea being smaller amounts make it less probable that a person would consider a bankruptcy to escape their debt collection efforts.

My debt is north of $200k and I have not played the bankruptcy card; something I've been hoping to avoid. I do have a couple of relatively small judgments that are not showing (surprisingly enough) on my credit reports. I haven't had steady full time employment for the last three years and have no credit cards or loans (seven year old car is paid for), nor have I applied for any credit since the foreclosure. My hope, is that I would present a less-than-attractive risk for them to consider spending money chasing me with a lawsuit. Praying that logic is plays a part in their process.

Can anyone offer any thoughts or suggestions related to similar dealings with SLS? I've been told to get rid of my PO Box so their mail gets returned, but I'm reasoning that it would be better to know if they are moving forward with a lawsuit and defend myself, rather than letting them publish notice as service (legal in my state) and work on getting a default judgment. If I do get sued, can I fight it and stop them without taking a BK? Anyone have recent experience/knowledge regarding SLS and their inclination to sue on a SOJL? Any other advice would be much appreciated.

Thank you in advance for whatever guidance can be offered here.
been there, done some of that,
suggest you avoid BK,
suggest you disappear,
suggest that you never answer the door,
these SOJL's get sold over and over for pennies..
the buyer, usually a collection attorney firm won't likely invest in publishing the summons,
do not enter into any conversations with them,
watch the county superior (upper) court clerk web site and search for your name,
if they file suit, then move away (for real or on the record) from any address they know about,

look, I was there, the SOJL was sold several times and I NEVER made any contact with them, ever!
they finally dismissed the suit they filed and went away, several years ago.

FWIW, most SOJL's can not be successfully sued on and if sued you CAN defend yourself and you CAN prevail!

I did it, my admin assistant did it too, only she got served and had to fight them with my help and some knowledge that they had no wet ink instrument and if they don't have that they can't prevail in court and they know it..

the obama economy sucks and will continue to suck until the repubs get these evil dems out of power..
I know, repubs are not much better but dems will lie to your face knowing that you know they are lying and still they lie!
 

Amazon

LoanSafe Member
May 31, 2012
7
1
1
I'm back on this forum, I've been sifting through hundreds of messages, trying to come to a decision. Here's our current situation:

We let our house foreclose; Wells Fargo sold it on Oct. 2013 for $250K (we'd bought it in 2007 for $540, 1st mortgage was $440K, purchase money HELOC, also with WF was $40K). We got a letter from WF about the HELOC/SOJL in Sept 2014 asking for 50% of $44K, we ignored it.

The mortgages were entirely in my spouse's name, they don't show up on my credit report. We were planning to continue staying silent except I got an inheritance check, which I haven't deposited. We've seen 2 lawyers, one says to declare bankruptcy to wipe the slate clean. We have no other debt to speak of, but if we do, the inheritance and our cars are at risk. The other says to settle, as the tax consequences are less than the loss of the inheritance/cars. Our total income is 65K, so a low tax bracket.

But I see that, as of last summer, the advice on this forum was to never settle with a SOJL, especially since in WA State it should be non-recourse. Right now, our file is probably at the bottom of Well's Fargo's pile. If we try to settle, it may wake them up into taking more action.

Do I deposit the check into my business account (non-comingled) and trust that WF is so out to lunch they won't notice?
Do we call them up and offer $4,000 or some equally low ball offer?
I can't sit on this check for long, the estate is being settled soon.
Any feedback, suggestions, similar stories, are appreciated!
do not declare BK, the BK court will ask about assets and so forth going back 2 to 4 years and when they see that check they'll want it!
suggest you deposit the check in a new account, then transfer it to another account in the name of a new LLC (Nevada, Colorado, Wyoming etc where LLC's are 100% private).
do not talk to the bank, it'll only make them hope for a payoff from you.
you can easily make that cash disappear from view,
depending on the amount I would get cash and stow it in a safety deposit box.

been there with a SOJL and since my former business was in California doing collections I know how to disappear, which I did and my SOJL was sold several times to really dumb ass collection lawyers. the last collection firm finally ran out of enthusiasm to chase me, dismissed their suit and I have not heard anything for several years.

no two situations are the same, your mileage may vary, etc etc etc
 
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jmnewcomb

LoanSafe Member
Oct 26, 2013
19
0
1
I'm back on this forum, I've been sifting through hundreds of messages, trying to come to a decision. Here's our current situation:

We let our house foreclose; Wells Fargo sold it on Oct. 2013 for $250K (we'd bought it in 2007 for $540, 1st mortgage was $440K, purchase money HELOC, also with WF was $40K). We got a letter from WF about the HELOC/SOJL in Sept 2014 asking for 50% of $44K, we ignored it.

The mortgages were entirely in my spouse's name, they don't show up on my credit report. We were planning to continue staying silent except I got an inheritance check, which I haven't deposited. We've seen 2 lawyers, one says to declare bankruptcy to wipe the slate clean. We have no other debt to speak of, but if we do, the inheritance and our cars are at risk. The other says to settle, as the tax consequences are less than the loss of the inheritance/cars. Our total income is 65K, so a low tax bracket.

But I see that, as of last summer, the advice on this forum was to never settle with a SOJL, especially since in WA State it should be non-recourse. Right now, our file is probably at the bottom of Well's Fargo's pile. If we try to settle, it may wake them up into taking more action.

Do I deposit the check into my business account (non-comingled) and trust that WF is so out to lunch they won't notice?
Do we call them up and offer $4,000 or some equally low ball offer?
I can't sit on this check for long, the estate is being settled soon.
Any feedback, suggestions, similar stories, are appreciated!
So my husband called Wells Fargo this morning, told them we'd been talking to bankruptcy lawyers and wanted to settle; he was told his SOJL is in a 'different department' where they are deciding what action to take. The person on the phone said it might be forgiven. (They actually used that word). I didn't even know that was a possibility until reading the threads on this site.

We're to call her back in 2-3 weeks, although it may take up to 6 weeks for them to make a decision.

So, this is what I'm guessing - that looking at our credit report and activity (it shows we bring in less than $65K, qualifying for a ch 7) and no major income deposits, that they were going to write us off anyway.

It also means I should sit on this check for another couple months. I hope I can do that; the estate is wrapping things up right now.

All comments appreciated.
 

Galaxieman

LoanSafe Member
Jun 4, 2012
13
0
1
Hello,
I've followed this thread for a while in the past and thought I would offer up a question on my current situation:

Background:
Bought (2) rental properties in IL in 2005 and forclosed on both in OCT 2010. Primary loans CO. 2nds (~25k each) became SOJL and CA began contacting me with offers to settle. I have ignored all communication with them and haven't opened up any new credit lines since. IL is recourse state and SOL is 10yrs (ouch!). I've maintained a steady employment and maintained all of my other credit lines are in good standing (700 credit).

I bought a personal condo in IL in 2005 also and lived there until 2008 when my wife & I bought a foreclosed house when we got married. Tried selling the condo for 4yrs and finally short sold in 2012.

Now that our youngest is getting close to school age my wife & I are contemplating moving so that we can put him in better schools (ours are horrible!, #2 score), but we aren't sure how to approach the limitations above. If I look into a loan pre-approval, will that expose my information to the CA's?, been trying to stay under the radar since FC. I assume that I would need to resolve the SOJL prior to closing on the new place? What is the current experience with this? I mentioned my situation to a loan guy and he claimed that I might qualify for a FHA loan.
 

vantuckian

LoanSafe Member
Mar 22, 2012
97
2
8
Galaxieman,
If possible, have you wife apply for the mortgage alone/by herself, keeping you out of the application and mortgage. This of course requires that her income alone is enough to qualify for the mortgage payment, which mean borrowing less (higher down, smaller/cheaper house, etc).
 

KatieP

LoanSafe Member
Sep 11, 2012
28
1
1
Hello. I've been reading everything and I feel like I'm over my head in all of this. I'm having trouble understanding it. This is my situation:
We had 2 mortgages with BofA on our townhouse - $185,000 total.
Stopped paying both Jan 2013.
First mortgage foreclosed in May 2014.
Second mortgage has since been transferred to ClearSpring Loan Services and is now at $39,861.
I get multiple calls a day from then and multiple letters a month. They were offering a few settlement options - one being reduced payment of $10,000. I followed some advice (and I'm not sure if it was good or not) to offer $5000, no questions - paid in full. Clear Spring accepted immediately. After reading through the posts, I'm now thinking I offered too much?
Is anyone in the same situation? Anyone have advice? Should I pay the $5000? Or is that a completely stupid thing to do...?
 
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Ready2Run

LoanSafe Member
Aug 11, 2010
611
18
18
San Francisco Bay Area, CA
KatieP - I don't know the laws in Illinois but did find some info on Nolo.com. It says "If a junior lienholder has been sold-out in this manner, that junior lienholder can sue you personally on the promissory note. This means that if the equity in your home doesn’t cover second and third mortgages, you may face lawsuits from those lenders to collect the balance of the loans."
Here is a link to that page: http://www.nolo.com/legal-encyclopedia/deficiency-judgments-after-foreclosure-illinois.html

So it seems they might be able to get a judgment but again I don't know the laws there.