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1099

In Florida. Purchased another home. Foreclosing on 1st home.

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Question:  In Florida. Lots of stuff going on and now the MI says today they need a take it or leave it answer with no negotiation by close of business Friday. Son no longer lives in house that has mortgage insurance on it that the lender has accepted a short sale contract on and forwarded to the MI. He has purchased another house and just stopped making payments on the other in September. The MI says that they want 42000 over ten years 0% interest starting 2/12 or they will foreclose. (Doesn’t the lender do that?) He has some cash but has a baby due at Christmas that requires 20000 out of pocket at least, assuming no emegencies, because of crappy insurance. He made less this year than last but more last year than in 2009. The short sale contract and the appraisal are 89000 and the mortgage is in the high 150s give or take a few thousand. Not sure what the least expensive thing is to do but 42k is a lot more than he will have in the bank after the baby comes and no one wants to pay an extra $350 a month for 10 years to compensate them for a mutually bad investment. I am thinking ask the lender to do a deed in lieu so there is no deficiency and then file a 982 I think it’s called to get around that. If they don’t take the deed in lieu, then file for bankruptcy to get out of the deficiency but since I have little experience with this I need some advice that may help resolve this better than my solutions.

Answer:  – The least expensive thing to do is file bankruptcy. It will cost him $1500 and he can start over from scratch. A lot of lenders, when you tell them you are going to file, will work with you to find a solution. A better option might be to get an attorney or good real estate agent / short sale negotiator to help you push the short sale through with a full satisfaction meaning they can’t ask for any money to be paid back. The loan would be paid in full. Your son would receive a 1099 which would be negated with form 982 as mentioned. Don’t let the bank push you around… unfortunately they deal with homeowners a lot differently than an attorney or 3rd party negotiator because they automatically assume the homeowner doesn’t know what they are doing.

My mortgage company, PNC, has accepted a shortsale offer on my house.

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Question:  My mortgage company, PNC, has accepted a short sale offer on my house. I owe approximately $149,000 and the accepted offer is for $115,000. Coinciding with my application for short sale, PNC moved forward with foreclosure. The court, in Pennsylvania, granted judgement in foreclosure for the owed mortgage balance plus legal fees. Based on what I have read, because I do not have a second mortgage, HELOC and have not refinanced I am at low risk of being sued for the deficient balance after short sale. My concern is that PNC will, however, pursue me for legal fees involved with the foreclosure even though the short sale was accepted post hoc. Can you provide any insight or advice?

Answer:  – Most of the time banks won’t come after you for just legal fees, if they come after you, they will file a judgment for the amount they lost because it costs them a great deal more to pursue someone for a deficiency. So unless they are confident you can pay, they typically will 1099 the homeowner instead. And if you’re like most homeowners, the debt relief act will counteract the 1099 or you could claim insolvency. Best to talk to you accountant if you have specific questions.

HELOC in Maricopa County

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Question: I foreclosed on a home in Maricopa county Arizona as of September 15th. I have a Heloc loan which i got with the purchase of the house. They are now saying i still owe them and that the Heloc is like a credit card and i will keep owing. What should i do?

Answer: -Well, you can try to settle the debt with them and pay them a fraction (5% -10%) of the original loan amount, you can do nothing and hope they issue you a 1099 in which you will have to pay taxes on that money you received, or they will file a deficiency judgment against you in which they can garnish wages and so forth until that amount is paid. If it goes that far, most people will file bankruptcy and either get it wiped out completely with a Chapter 7 or agree to pay the lender a certain amount (5% – 10%) over a period of time with a Chapter 13.

I had an investment property go into foreclosure 9/1/09 in Arizona, Maricopa county.

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Question: I had an investment property go into foreclosure 9/1/09 in Arizona, Maricopa county. The home has a first mortgage for 160k and purchase money HELOC for 20K. Neither loan was ever touched after the purchase. On Aug 17, 2009 Countrywide sent me a letter informing me the HELOC will have a new servicer Real Time Resolutions, INC.
On 9/5/09, I received what seems to be an attempt to collect from Real Time Resolutions, INC. it states I have, “30 days to dispute the validity of this debt or any portion thereof, this office will assume this debt is valid.” The payoff they are requesting is $ 21,193.74 which I am assuming is the HELOC plus fees.

Is this allowed or legal, can a new servicer attempt to collect on the Heloc since the home has already gone into foreclosure? Should I meet with a lawyer or am I okay ignoring these letters?

Please advise and thanks for your time,

Aaliyah, Gilroy CA

Answer: -This is normal protical and yes since your loan was “sold” to a new servicer, they can try to collect the debt. So they will send you certified letters in the mail every month telling you how much you owe and that it’s an attemt to collect the debt. You don’t need to respond unless you are disputing the action and I’m sure they will try to call you every week and threaten you to pay…or else. By sending these letters, it gives them the right to proceed with foreclosure if they want. However, we all know they won’t unless there is substancial equity in the property. More than likely they will just write it off as a loss and 1099 you for the difference.

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.

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.