Foreclosure University

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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.

Sale of Property

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Question: If a judgment has been passed and your sell date is February of 2009 can you still try to sell the property before the sell date? Or does the bank now officially own the property?

Answer: – Absolutely you can sell your home. You should have a statement from the lender showing you the full payoff amount. This will include all late fee, attorney fees, foreclosure fees, etc. As long as you payoff everything, you can sell. The only time you can’t sell is if you’re in bankruptcy.

Idaho Deficiency Judgments and Anti-Deficiency Laws

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Question: I know that Idaho allows Deficiency Judgments. I’ve heard that Idaho also has Anti-Deficiency laws and that they apply only to 1st mortgages on a primary residence. Is this true? What criteria needs to be met to be protected by the anti-deficiency law in Idaho?

Answer: – It’s so hard to say because every state is different. Typically states with anti-deficiency laws apply only to 1st mortgages, and it must be your primary residence. It may also depend on what type of loan you have. In Arizona, despite the anti-deficiency law, if it’s a VA loan, they can file a deficiency judgment. In most cases throughout the U.S., lenders very rarely file deficiency judgments on 1st mortgages, they just take back the collateral. Lenders in 2nd position are more likely to file deficiency judgments because they are the ones taking the biggest losses and they have no way to re-coop their losses because the first took the house. And even still, most of them will 1099 the homeowner. One of the best things you can do is have someone negotiate a short payoff or a short sale on your home and have the lender agree to a “satisfaction” which means the lender is giving up their right to go after the homeowner for the deficient amount. If they only agree to “release the lien” then they still have their right to file a deficiency judgment.

Hard Money Lenders

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Question: I have someone who is willing to give my husband and me a hard money loan but wants a $7500.00 deposit. Is this typical for this type of loan? We are just learning about this type of loan and we have no up front money to put out. That is why we were looking at this type of loan. We were very disappointed to hear this. Are there other hard money lenders that will not require any up front money? Billie

Answer: – Yes and No. Because of what’s happening in the economy today, more and more hard money lenders require “skin in the game”. Especially if you are new to the investing game and don’t have a relationship with the company yet. It’s getting harder and harder for individuals to qualify for loans. So yes, many hard money lenders require something. However, there are some still out there that will lend based on the property along with financial’s and credit. The challenge is finding them. One of the best things you can do is visit every title company in your area. Find the best escrow officer from each title company and see if they have referrals. Investors always find the good title companies with creative escrow officers because it makes our jobs easier. Many investors have money and are always looking for good deals. Talking with the right escrow officer will help you find the perfect hard money lender to help you. And a lot of the time, it’s all word of mouth or referral so you can’t find them in the yellow pages.

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.