Judgment

A legal decision; when requiring debt repayment, a judgment may include a property lien that secures the creditor's claim by providing a collateral source.

Lenders typically require that all judgments that effect or potentially effect the title be paid prior to the closing of a mortgage loan.

Although there are lenders who will allow the judgements if they are subordanated to the second position.

Judgement is granted to a creditor who has proven in a civil court that a debtor is liable for damage. When the creditor cannot collect the judgment from the debtor, or when the judgment amount is not significant enough to warrant a collection process, the creditor usually files a lien on the debtor's property. Such judgement lien is present on the property title report when the debtor refinances or sells his property. The debtor must satisfy any liens on his property when he refinances the mortgage or sells the property. A judgement lien filed by a professional who performed work on the property (such as builder contractor) is often referred to as a "mechanic's lien".

Always consult your mortgage broker as to which actions should be taken in regards to the judgement.

Some judgments may show up as a "cloud" or lien on the title to a property owned by the judgment debtor, others may not. The procedure to have a judgment attached to the title will vary from state to state. For example, in California you must record an "abstract of judgment" in order for a judgment to attach as a lien to any real property owned by the debtor.

Most loan programs require any previous judements to be satisfied. You may be able to negotiate with the judgement holder for a reduced payoff in order to proceed with a mortgage loan.

To avoid wasted time and money, make sure that you have all of the paperwork for the judgment handy. If you have already paid off your judgment or if you plan to before closing, make sure you get a satisfaction letter. Many times the credit bereuas information regarding judgments on your credit report are not up to date. The lender will request proof that the judgment has been satisfied. If not they will request it be paid.

If the judgment showing on your credit is very old, check at the county records office to make sure that the judgment was renewed. In most states, the judgment expires if it is not renewed at 7 years and you can go back to court to have the lien cleared and then removed from your credit report. Keep in mind that those are two completely separate processes. Having the court declare the judgment void will not automatically remove it from your credit report.

» DISCLAIMER: The information contained in this article on 'Judgment' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.