If you have defaulted on your Small Business Association loan and have been issued with a lien, you may risk losing your home. Although it is recommended to consult an experienced business debt relief attorney, our legal professionals at ZocLaw.com provide a few guidelines to determine whether your you are at risk of losing your home as a result of a SBA lien.
Whether or not you will lose your home by an SBA lien depends on the numbers.
It is likely that the lending bank, together with the SBA required you to voluntarily give them a “deed of trust” or a mortgage filing against your home if you are a small business owner that has received SBA guaranteed financing. Although the terminology and exact type of document filed varies amongst states, the intent and purpose is the same.
You may be one of the lucky few who do not have an SBA lien filed against your home.
The lender’s lien secures a position on your house for the purpose of ensuring repayment, in the event that the loan enters into default. Usually, the lender’s lien positions are subordinate to other encumbrances on your home, for instance your primary mortgage. To determine whether you are in trouble of losing your home, it is absolutely important to quantify the value of the SBA lender’s lien as soon as possible in order to establish the level of exposure your have.
If saving your home is priority, this calculation is the most important thing you may do if you find yourself in default on an SBA guaranteed loan, in which the lender has filed a lien on your home.
Below is the most definitive method to determine whether you home is in trouble of being taken away by your lender.
Find out the liquidated value of the home. Obtain an appraisal, however initially you can complete a quick valuation on zillow.com just to get an idea of the value. Work out current balance of mortgages/liens/ encumbrances that are filed ahead of the SBA lender’s lien.
Then subtract the answer to step 2 form the answer to step 1.
This simple calculation will give you a pretty good idea of the value of SBA lender’s lien position. Note that the only way that the SBA lender may forcibly obtain any value out of your house is through foreclosure and auction, and these processes require the SBA lender to pay off any primary mortgages ahead of them.
The same method will be utilized by the bank to determine whether or not their lien is worth pursuing in an aggressive manner or not. SBA protocol requires them to liquidate any of their collateral that is regarded as valuable, and therefore they have to work out its value through their due diligence, thus you should do the same.
What kind of number is considered to be valuable?
Banks will either take aggressive action or will actively seek to be compensated solely based on their SBA lien position, if their liens are worth $50,000 or more. Note that foreclosure proceedings in the majority of states are time-consuming and is a costly affair, as a result, banks are not enthusiastic in pursuing this route, unless they will recover sufficient money to recoup their legal expenses and apply a substantive amount to the principal balance.
SBA Loan Relief