Foreclosure University

Your Online Real Estate Investing Resource

Settlement

Foreclosure in Oregon

by 2 Comments

Question:  We have a mortgage with 20% of the amount in a HELOC with both parts of mortgage through Wells Fargo (May 2007). The house value is continuing to decline below the value of the first mortgage. If we walk away, short sale or go through foreclosure in Oregon…can the bank try to collect on the HELOC? Since we live in Oregon, we’re not sure what the best option is.

Foreclosure in OregonAnswer:  – I’m sorry to hear about your foreclosure in Oregon. I hear this a lot right now as home values in some parts of the country continue to decline. Let me share with you some of the possibilities and consequences you might have as you go through this process. The good news is that you still have a lot of good options since your home hasn’t actually gone through foreclosure yet. Once the home is foreclosed on, there are not a lot of options, so time is key right now. [Read more…] about Foreclosure in Oregon

Difference Between a HELOC and Second Mortgage

by 3 Comments

Question:  I live in New Jersey and have a 1st mortgage with GMAC and a HELOC secured by the property. My home is underwater. At present the 1st is covered, the HELOC is not, and it’s about $191,000.

Difference between heloc and 2nd mortgageThe HELOC people have proposed reducing my interest rate from 6.25% to 4% which reduces my payment from about $1,017/mo to about $632/month. Seems like I should sign up, right?

Except I believe they want to convert the HELOC into a loan. So, the question is, does it matter for deficiency purposes whether I maintain the HELOC, or switch into a secured 2nd?

Please advise. [Read more…] about Difference Between a HELOC and Second Mortgage

Avoid Foreclosure With These Homeowner Options

by 4 Comments

Avoid Foreclosure – Here are Options of Homeowners

Avoid ForeclosureThere are a ton of homeowners right now struggling to make payments and hoping to avoid foreclosure because let’s face, things just aren’t the same as they were before the market took a dive.

People are working harder and longer for about half or a third of what they use to make. Retirement accounts look about as good as they did when you first started dumping into it. Any savings has been depleted.

And now to make things worse, even if you wanted to sell your home, most homeowners wouldn’t be able to because their home is not worth what they paid for it. Yes, nearly 25% of all homeowners are underwater or upside down, meaning they owe more than what their home is worth. [Read more…] about Avoid Foreclosure With These Homeowner Options

Home Equity Line of Credit Questions

by Leave a Comment

Question:  I am married live in New York we own 2 houses. I live in one house and my wife lives in the other house (long story). We bought house #1 for $600,000 5 years ago. We have $350,000 left on mortgage one and $175,000 on a home equity line of credit. The house today is worth around $350,000, we have two different mortgage companies on this house. American Home Mortgage owns the primary mortgage $350,000 and Chase Bank owns the home equity line of credit $175,000. I have a couple of questions;
1. What happens to the HELOC and first mortgage if we go into foreclosure?
2. Do I have to pay back my HELOC if my house is foreclosed on?
3. Can either bank come after my other residence or garnish my wages or sue me?
4. We are currently up to date with both mortgages, but we are paying the mortgage with our creidt card. what would I do to get out of this situation? Foreclose, talk to both banks, short sale, etc.

Answer:  – These are some great questions… And most in this situation would even consider a strategic default because you are so upside down. Let me share with you a few ideas.

1. If your home goes through the foreclosure process, the winning bidder will end up with the home. In many cases when there are no bids, the mortgage company in first position that initiates the foreclosure will take back the property and try to sell it on their own. The 2nd mortgage, in this case your HELOC, will be wiped out if they don’t protect their position by bidding on the property.

2. If the 2nd lien holder or heloc gets wiped out, they still have options which a lot of homeowners don’t understand. Their options are to do nothing, write the whole thing off by sending you a 1099, or they can sue you for the difference, which is called a deficiency judgment and require you to pay back the amount that was lost. A deficiency judgment was something that very rarely happened to homeowners, but more and more I am seeing it’s a more common procedure with banks and I’m guessing it’s because of the volume of foreclosures that are happening right now.

3. If the 2nd decides to file a judgment against you, you will either have to pay the loan in full, work out a payment plan, a settlement or file bankruptcy. And yes, if you do nothing they can garnish your wages so they will get paid. They can’t force you to sell your other properties or assets, but the judgment requires you to pay them back which means you’ve got to come up with the money somehow. So no, they can’t come after your other asset directly, unless they were also pledged as collateral for the loan, however in many cases you will be forced to sell assets to pay off the judgment. This is why most homeowners simply file bk.

4. There are ways to avoid the judgment. One would be to do a short sale that would satisfy the loan. The short sale process has been taking a very long time lately, but is a better option than doing nothing. Benefits would be that you walk away without a foreclosure on your record and the mortgage(s) being satisfied so worst case you get a 1099 for the difference. But even this can be negated with the current laws in place. The only problem with a short sale is that you have to move out. Sometimes this might be a good thing if you are over-extended as it is.

Another option is a loan modification, although these can be very frustrating and very rarely do they ever go through. You can call you lender, let them know your hardship and ability to pay to see if they will lower your payments. This is usually a temporary solution. In your specific case where you have negative equity, a note settlement would be a great option.

A note settlement is when you settle or eliminate the 2nd mortgage completely. By eliminating your 2nd mortgage or heloc, you’ll at least get rid of the negative equity and have a better chance of selling it or keeping it. This option allows you to stay in your home and it doesn’t affect your credit because you are paying the bank off in full. No judgments, no 1099, no more 2nd mortgage because you paid it off. It will cost you anywhere from 10% to 15% of the original note amount in order to pay if off so in this case $20K – $30K. Even if you don’t have the money saved up to pay this amount, there are note investor networks that will pay it off and basically become the 2nd lien holder and you would make payments to them. I guarantee the payment on a 30K note would be a lot less than the payments on a $175K note.

Here is more information on homeowner options as well. Good Luck, I hope this has helped.

Home Equity Line of Credit Payoff

by 1 Comment

Question:  I had the loan with my heloc opened on March 23, 2006 but, when I refinanced the house on September 7, 2006 the lender paid off my balance on my heloc to assume the 1st and 2nd position. My heloc is telling me that they are in 1st position and my Primary Wells Fargo claims they are not. E-trade, which is my heloc, first told me that if I gave them $2,047.00 they will postpone the auction and do payment arrangements since they know I have a hardship and I just received a forbearance from my Primary lender Wells Fargo. So when I called to make the payment on Monday the guy then said, oh you have to pay us $25,000 or the $190,000 balance. I said you quoted me $2,047.00. He said, well you have to pay the interest fee’s, late fee’s and the months the account went unpaid. I told him I don’t have that. Then he said, well we will foreclose on your house despite your forbearance because we are the Primary so the negotiation didn’t work with them at all. Now Thursday this week they are trying to sale it, so I don’t know what to do but just stick with my Primary and hope they figure this out, but it’s scary since they just took my first payment for my forbearance and they act like I shouldn’t worry, but I am. Plus my house is only worth $440,000 and my Loans on the 1st mortgage is $592,000, the 2nd is $146,000 and the home equity line is $190,000 so there’s no equity at all and if I do the Chapter 13, my Primary won’t modify me and I wont be able to get the low mortgage payment they put me on with the forbearance so it’s a risky situation. Oh well, I will see what happens. Is there anything else I can do?

Answer:  – Wow, you’ve got a lot of stuff going on… From what it sounds like here, you’ve got a first and second mortgage with Wells Fargo and a 3rd or HELOC with E-trade. Wells Fargo agreed to do a forbearance where they lowered your monthly payment. Your HELOC though is threatening to foreclose because you haven’t worked out anything with them and they are claiming they are in 1st position so they would like to foreclose so they get paid. If I was to bet, I would bet that Wells Fargo is indeed in first position still. Banks don’t just “give up” their positions, especially in this market. Lien priority is based on when things get recorded, except for federal and municipal liens, like IRS and tax liens.

If you want to know, just have your local title company pull a title report and it will tell you. The bank that you have your HELOC sounds like they are trying to settle with you which is usually what banks do in 2nd or in this case 3rd position. They know they are going to lose everything so they might as well get something. It looks like they are offering you a $25K payoff for your $190K debt. That’s not a bad home equity line of credit payoff, although because there is no equity even in the first, I would negotiate that down even more. You need to determine first of all if this house is worth saving based on your personal circumstances. If you settle with the 3rd, but end up losing the home anyway, in my opinion, it would have been better for you to start over in the first place.

We settle notes and we’ve helped a lot of homeowners like you, settle these 2nd and 3rd mortgages for literally pennies… however, even if we were to settle these notes, you’re still upside down on your first mortgage, which doesn’t give you a lot of options. Usually when we settle notes for people it gives them equity again so they can either sell their home if they get in a bind or because we’ve lowered the payments, they can stay in their home. If you do decide to settle with the 3rd or get a home equity line of credit payoff, make sure you get a satisfaction and not a release of lien because that could make your life even more hectic. Let us know if there is anything we can do to help.

Rental home foreclosed in California

by Leave a Comment

Question:  I have/had a rental home in California. The bank (Chase) held the 1st and 2nd on the home. They foreclosed on the home and have since sold/auctioned it off. However, they (via a debt collector) are continuing to contact me in an effort to get me to pay off the 2nd/equity line ($32,000). I do not have that kind money and am struggling to hang on to my primary residence. What can they do to me and what are my options?

Answer:  – Your best option is to work with them and try to reach some sort of agreement, pay plan, settlement or payoff. If you can’t work something out, most people will file bk. In many cases, if you let the bank know you are serious about filing bk, they will work something out with you. We’ve been very successful in settling 2nd mortgages before they go to auction but you can still do the same after the auction to avoid the deficiency judgment.