Foreclosure University

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Jarad

We have a home in NY that we were unable to sell and will be going into foreclosure after trying to get the loan modified and bad renters.

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Question: We have a home in NY that we were unable to sell and will be going into foreclosure after trying to get the loan modified and bad renters. We currently live in PA and the PA house is paid for…will they come after me for the deficiency, put a tax lien on the PA residence or 1099 us? Thank you for your help.

Answer: -Typically they can’t come after your other assets because the loan was created based on the properties value which was collateral for the loan. So in the event you didn’t follow through with the terms, they could take the property. Now with that said, yes they can file a judgment against you which would affect your “assets” because you would have to pay that back or file bankruptcy. It’s more common that they would 1099 you for the amount they lost but you never know. They best way to counter a deficiency judgment is to do a short sale and get it accepted as full satisfaction for the loan. This means they give up their rights to go after the homeowner for a judgment. All they can do is issue a 1099. So I would definitely try to do a short sale because it also helps your credit.

I am in California. I missed my first payment Sept 1. I got a letter telling me to bring things current by Dec 16th. What happens now?

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Question: I am in California. I missed my first payment Sept 1. I got a letter telling me to bring things current by Dec 16th. What happens now? I am not sure when the period of redemption begins? Was I already in it? Or does it begin Dec 16 and go three months? People tell me different things and I am a single mom of four kids and need to plan. Thank-you. Nomi

Answer: -Nomi, the California redemption period is approximately 3 months and begins after you receive the notice of default. Typically you won’t receive a notice of default until you are at least 3 months behind on your mortgage, especially now, banks are slower issuing the notices of default because they don’t need any more inventory. So you’re about 6 to 8 months out from foreclosure, if it goes that far, so you do have several options as a homeowner. Unfortunately Obama’s HAMP program hasn’t turned out the way we had all hoped, however there are alternatives. Assuming you want to stay in your home, one option is a loan modification. This is something you can do yourself or you can hire an attorney to do it for you…just be careful in choosing the right attorney that really does care about your situation and will guarantee their work. Another option is to sell your home, if it has equity, and move into something smaller or less expensive until things pick up again. If your home does not have equity and a loan modification doesn’t work, you could try to do a short sale where a buyer offers the bank less than what is owed on the property. Whatever you do, don’t give up.

2 houses in Arizona, unable to modify our loan. If the house sell in short sale or if I give the house back to the bank can they come after our primary residence?

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Question: We don’t know what to do, we have 2 houses in Arizona, 1st house we took out a loan of $60k (leaving us a loan amount of $220k) and used those $60k to build our 2nd home which is now our primary residence we have been living in it for 1yr 4months and we were renting out the 1st house to help us pay the loan, but now we have been unable to get renters in and my husband got fired from work and has been unable to find a job, this month will be our first month not be able to make the mortgage payment, I called the bank and they told me that they were unable to modify our loan since we have 2 houses and 1 is not owner occupied. I spoke to anther department and asked them about a deed in lieu foreclosure, all they told me was that the house would need to be in short sale for 90 days before they could talk to me about that. So my question is if the house sell in short sale or if I give the house back to the bank deed in lieu foreclosure can they come after our primary residence to collect money and if they will can I change the deed of trust to owner primary home (which is free and clear of any loans) before the bank tries to get involved to someone elses name so the bank wont take away our primary residence away? Thank you.

Answer: -This is a very common question…can the bank come after my other assets if I do a short sale, deed in lieu foreclosure or it just goes to auction. The answer is “NO”. When you signed the paperwork with the bank it specifically states that the home would be sufficient collateral for the loan. The only way they could come after other assets is if you pledged them as additional collateral in order to get the loan. So you don’t have anything to worry about. What you do have to worry about is a deficiency judgment where the lender can sue you for the difference that was not collected. Although this procedure is not common at all, it does happen once in a while and is more common in mortgage states. It does not happen very often because homeowners will just file bankruptcy and wipe it out altogether, which means the bank loses even more money. So more often they will issue the homeowner a 1099 for the amount they lost, which could be a significant amount. That is why a short sale is a better alternative because it’s less damaging on your credit, you can eliminate the deficiency judgment altogether if done properly, and in many cases you don’t have to pay as much when they 1099 you.

An agreement of sale has been signed 6/27/09 by myself & the seller on their home that was a short sale. The seller is NOW working with their bank on a loan modification….IS THIS LEGAL?

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Question: An agreement of sale has been signed 6/27/09 by myself & the seller on their home that was a short sale at the time. I have jumped thru hoops with everything they wanted. NOW 2-1/2 months later while waiting for the seller’s bank’s approval on the offer , the seller is NOW working with their bank on a loan modification….IS THIS LEGAL? What about my rights since I have a signed Agreement of Sale. Please rush reply since I am really outraged!!. Thanks,

Answer: -Unfortunately that has always been the challenge working with homeowners in pre-foreclosure…you do a whole bunch of work helping the homeowner avoid foreclosure, work out a short sale deal with the bank and come to find out they’ve decided to back out and do something different. So basically you’ve wasted a bunch of time and money. Unfortunately there is not a lot you can do because you need the cooperation of the homeowner to get the short sale deal approved and pushed through. If they won’t cooperate with the bank, it’s difficult to get an acceptance. This is one of the biggest reasons why I always like to get the deed first. I may have to deed it back in order to get the short sale accepted but at least I have control of the property all the way through until closing.

As part of an estate I have a 2nd interest in a mortgage, the 1st mortgagee has now opted to foreclose.

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Question: As part of an estate I have a 2nd interest in a mortgage and the 1st mortgagee has now opted to foreclose. Will my interest be paid or do I only get paid if the property sells for more than the first mortgagee is owed?

Answer: -When the property goes to foreclosure, everyone is paid based on lien priority. If you are in 2nd position and the 1st is foreclosing, the opening bid will be the loan amount on the 1st plus a bunch of fees. The only way you’ll get paid is if someone bids more at the auction than the opening bid. Anything above the opening bid will go to whoever is next in priority.