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Short Sales

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.

We currently have a loan for $244K and a second home equity line for $79K. Our condo is worth $150K. I can’t do a loan modification I tried.

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Question: We currently have a loan for $244K and a second home equity line for $79K. Our condo is worth $150K and we owe $320K, but we don’t know wether in California we are liable for that 2nd loan since it’s a home equity line? I don’t want to end up owing Bank of America $79K when I’m going to loose my property and ruin my credit. What should I do? I’m still current with payments but I’m struggling and I can’t do a loan modification I tried.

Answer: – I would keep trying to work with your bank on the loan modification. There are several attorney’s out there that “GUARANTEE” there work when modifying loans so you may want to check into that as well. It’s hard to believe sometimes, but they really do want you to stay, the challenge has always been jumping through all their hoops which an attorney can assist you with. Also you have a better chance since they know certain things to say that will increase your chances of a successful loan modification.

If a loan modification still doesn’t work, then you could try to do a short sale. Unfortunately with a short sale you would have to sell your home, but if you can’t make the mortgage, then you’re going to move anyway so might as well be a short sale then foreclosure on your credit. Regardless if you do a short sale or foreclosure, the bank still has the right to come after you for the deficient amount, but very rarely does this ever happen in California because of the laws there. And if you have an seasoned agent or investor working with you on the short sale, they can actually eliminate the possibility of a deficiency judgment altogether. So really all you have to be concerned with is a 1099 from the bank. They will write off the loan as a loss and 1099 you for the amount they lost. Whatever you do, don’t ever give up.

Purchased four homes. Two of the homes are in FL, and the other two are in SC. We may be forced to foreclose. How is a foreclosure going to affect our homes in SC?

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Question: My husband and I invested our life savings and purchased four homes. Two of the homes are in FL, and the other two are in SC. We live in one of the FL homes, and we may be forced to foreclose on the the second home in FL. How is a foreclosure going to affect our homes in SC? Is the bank going to put a lien on the home we live in or the other two in SC? Please I need help.

Answer: – More than likely nothing will happen to your homes in South Carolina if your home in Florida goes through foreclosure, unless you used your South Carolina homes as collateral to purchase your Florida home. Your biggest concern would be a deficiency judgment which would definitely affect you and possibly other real estate that you own. But again, more than likely they will 1099 you for the amount they lost and write it off. But there is always that chance, which is why it’s always better to try to do a short sale instead of just giving up and letting it go to foreclosure. At least with a short sale and a good agent or investor who knows what they are doing can help you avoid a possible deficiency judgment altogether.

My husband bought a condo a few years back. If we dont get a renter soon we will have to foreclose on the condo or short sale it.

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Question: My husband bought a condo (Interest only loan) a few years back before we got married. It is now worth less then half of its value, therefor we couldnt sell it, and was too small for us to live in it together. We ended up buying a second house together and was planning on renting out our condo. With our bad luck we have not been able to find a renter, so we have been paying on 2 mortgages. It is getting to the point where we can not afford both, and if we don’t get a renter soon we will have to foreclose on the condo or short sale it. My questions are as followed:
1. Will it affect my credit even though I didn’t purchase the condo or sign a contract. Only my husband did?
2. Can the bank go after us if we foreclose or short-sale? Can they take our current home?
3. Will we owe taxes on it and if so is there ways of reducing those or getting around them?
4. My parents co-signed on the new house, can this effect their credit, or can the bank go after them?
5. Lastly my husband has an HOA fee on the condo as well, can they come after us if we stop paying that? Can they garnish our wages.
Thank you for all of you help!!

Answer: –

1. It will only affect the credit of the person who’s name is on the loan, not the title. So in this case, your husband will be the only one who’s credit is affected if the property goes into foreclosure or short sale.

2. The bank can come after you (deficiency judgment) if you foreclosure or short sale…however they typically don’t. More than likely they will just 1099 you for the difference and count it as income. They can’t take your current home unless you pledged it as collateral in order to get the condo which you didn’t since you bought this home after the condo.

3. As for the taxes, yes you will most likely be given a 1099 for the loss which counts as income to you on your taxes. Depending on the situation, you may be able to use IRS form 982 which will counter act the 1099. You will need to discuss this with your accountant. As for property taxes, those will be taken care of either by the bank if they take back the home when it goes through foreclosure or even a short sale.

4. Because these are 2 separate transactions and homes, and was not used as collateral, they cannot do anything to your parents.

5. Yes, they could file a judgment against you as well…but more than likely they won’t.