Foreclosure University

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Foreclosure

Primary residence in Arizona, my secondary in Florida.

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Question: My primary residence is in Arizona, my secondary ( a rental ) is in Florida. I’m stuck in an interest only loan that has me paying on more than what the home is worth. If I should have to go with foreclosure on the 2nd home as a last resort can they take away my primary residence?

Answer: -It depends on what it says in your closing docs. Most lenders only worry about the property on hand and make sure it’s sufficient collateral to support the loan being made. So most people don’t have to worry. I would only worry if a judgment is filed against you after the foreclosure and you have several properties in your name.

Hawaii Foreclosures

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Question: My brother owns a residence in Hawaii that may go into foreclosure. He now lives on the mainland. If the bank in Hawaii gets a deficiency judgment, can it be enforced against him on the mainland? If the house forecloses, can anyone garnish his wages or take money from his bank account/401k? Someone told me Hawaii foreclosures does not allow this. I’m not sure if that’s true or not. Your help would be greatly appreciated.

Answer: – Typically when a home gets foreclosed upon, doesn’t matter if it’s on the mainland or a Hawaii foreclosure, 2 things will happen. Either A, the homeowner will get a 1099. This means that the bank has decided to write off the amount they lost and the homeowner will count that as income on his or her next taxes. The great part about a 1099 is that in many cases it can be negated. Most people in this situation qualify as being insolvent. So in most cases the 1099 can be wiped out. Talk to your accountant and he’ll be able to help the individual to see if they qualify.

The other option is a bit more harsh which is a deficiency judgment. Although they don’t like to go this route because it costs them even more money out of pocket and what happens more often than not is the homeowner will just file bankruptcy. One of the main reasons they pursue a deficiency judgment is if they believe the homeowner has money or assets. If the homeowner has money or assets, then the bank might be able to recover some of their losses either through wage garnishment, a settlement, or through bankruptcy.

One of the tricks to avoiding the deficiency judgment if the home in Hawaii forecloses would have been to try and do a short sale and ask for a complete satisfaction. This means they give up their rights to go after the homeowner for any losses. All they can do is 1099 them which is what you want. At this point, if the home has already foreclosed, then you’re at the mercy of the bank to determine what they will do next. And usually they have up to 3 or 4 years depending on your states laws to file that judgment.

Equity Line of Credit and Foreclosure

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Question: I live in California; if my home goes to forclosure and I have a an equity line of credit, will the line of credit, $150,000 also be wiped out? The line of credit is secured by the property.

Answer: Yes, if the line of credit is secured by the property in foreclosure. Most homeowners have a home equity line of credit that takes a 2nd lien position on their home. If the home is foreclosed on by the 1st lien holder and no one bids at the auction, the 2nd is wiped out, and the bank has the option of issuing a 1099 to the homeowner or filing a deficiency judgment against them. In most deed states, including California, it’s very uncommon for the lender to file a deficiency judgment. If you know what you are doing, there are things you can do to prevent a deficiency judgment altogether so it’s never an issue.

I have recently signed a contract on a foreclosed home.

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Question: I have recently signed a contract on a foreclosed home and even given a check for over the purchase price, however the listing agent is still showing the home as available and has not sent in my contract/offer to bank.We are confused by this and don’t know what to make of this.We have given her a copy of the cashiers check for full asking price with an additional 1,100.00 I have tried emailing her and left voice mail – no response. What should we do?

Answer: -Get another agent involved who represents you as the buyer. Let your agent, who is now working for you worry about getting this into the right hands for approval.

Idaho laws? How many days to file deficiency judgment and 1099? Can the lender do both, send a 1099 and file deficiency judgment?

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Question: Idaho laws? Balance at time of foreclosure 465K, opening and closing bid 247,500 sold back to lender. How many days to file deficiency judgment and 1099? Can the lender do both, send a 1099 and file deficiency judgment?

Answer: – Typically they will choose to either 1099 you or file a deficiency judgment. Not both. In terms of when that will happen, your guess is as good as mine. Usually it’s pretty quick. Sometimes it takes a little while. There are other factors that also influence when they will issue the 1099 or judgment. Like what lien position they are in. It makes a difference whether they are in 1st position or 2nd position. A lot of times, the 2nd lien holder will not file for a very long time, sometimes up to several years before you see anything. I’m assuming in this case you are referencing a 1st lien holder so my guess it that you will know something very quickly.

The most common outcome is a 1099 from the 1st lien holder. So really what you have to be aware of are the tax obligations. They will count that deficient amount as income to you. So make sure you have a good accountant who can usually counter that tax obligation by claiming insolvency. Usually that’s a far better option that bankruptcy or having to work out a payment plan to pay back the amount that is deficient.

Short sale and release of lien

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Question: Close to signing a short sale agreement between my first(Countrywide) and second(WAMU). this is a rental, Countrywide has settled, second will accept $7000 to release the lien, however they still want to come after me for the $93,ooo balance. Broker(advocate) was told that WAMU has already charge of the second as bad debt. Can WAMU sell the note to a collector that will still come after us for the full 93,000K. Been advise to try to settle with wamu at an agreed amount and make $100/MONTH PAYMENTS TO LIMIT LIABILITY. Any other questions to consider? If the house goes into foreclosure, Countrywide does a trustee sale are we finished with wamu too?

Answer: The best thing you can do is ask for a satisfaction of the loan. Ask them how much they need to “satisfy” the loan. Typically you’ll have to pay more for a satisfaction of loan, but they give up their right to come after you for the difference. If they’ve agreed to “release the lien” then yes, they can and usually will come after you for the difference. If the home goes to foreclosure, you can bet WAMU will file a deficiency judgment because it sounds like that is what they are planning to do anyway. So, no, you are most likely not finished with WAMU. The best thing you can do is try to get them to accept a satisfaction. Good Luck.