Fantasia Barrino handed over the keys to her mansion in North Carolina to her lender after failing to sell it at a price conducive to her and the bank. In 2009, Fantasia’s home was reportedly in danger of being auctioned off to pay back a loan that she borrowed from Broward Energy Partners. The sale from the foreclosure was allegedly to pay back the loan, however, a deal was made and she kept her home.
Last year, Fantasia placed her home on the real estate market with an asking price of $800,000, a lot less than the $1.3 million she paid for it. TMZ now reports that, according to court documents, the former “American Idol” winner and actress allegedly transferred the deed of the home to the bank in February. She escapes the foreclosure process but still has to get rid of the home.
What Does This Mean?
Fantasia took the easy and smart way out. Though it is reported that she owns other properties, when someone is facing foreclosure of their main residential property, the process can take anywhere from nine months to well over two years to complete. Laws have to be specifically adhered to regarding notice to the homeowner, hearings for loan modifications, settlement conferences, court dates, etc. And if there are any discrepancies in the court filings, this process can take longer.
It is safe to assume that Fantasia did not receive an FHA loan due to her superstar status, therefore she may have had what is referred to as a “Recourse” loan. A recourse loan means that a bank can not only sue you for possession of the property to sell, but can also come after your money and other personal assets to collect on additional amounts owed once the property is sold and the bank has not received all of their money back. Fantasia appears to be mitigating (i.e. – lessening) her damages to the bank, which at the end of the day, may be the smartest thing. This is what is called “Deed in Lieu of Foreclosure”. It can save you and the bank unnecessary legal and bank fees.
How Does This Affect You?
If you are behind on your mortgage and/or another creditor is seeking to foreclose on your property due to uncollected damages (i.e. – condo association fees, other secured debt, etc.) do NOT ignore their letters and phone calls. Seek to modify your loan or work out an alternative payment schedule. If the bank is not willing to work with you to modify your loan or agree to a short sale, your best plan may be just to hand the keys back over to the bank.
Rashida Maples, Esq. is Founder and Managing Partner of J. Maples & Associates (www.jmaplesandassociates.com). She has practiced Entertainment, Real Estate and Small Business Law for 9 years, handling both transactional and litigation matters. Her clients include R&B Artists Bilal and Olivia, NFL Superstar Ray Lewis, Fashion Powerhouse Harlem’s Fashion Row and Hirschfeld Properties, LLC.
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