Posts Tagged ‘Foreclosure’

Short Sale vs Foreclosure

March 8th, 2013 by Jarad

short sale vs foreclosureQuestion:  Help me understand the difference between a short sale vs foreclosure. I bought a condo in Tampa, Florida in September 2005. This was my first real estate purchase and my primary residence until I transferred to Maryland for my job in July 2008. I have a first mortgage for $150k and a HELOC for $25k. The property has been short sale approved and there is a buyer that is going to purchase it for the listed price of $60k. We are ready to close but I need to pay all the delinquent HOA fees, late fees and attorney fees that have mounted up. I can not afford to pay the $3000 in late HOA fees to close on the short sale. Now, I am facing foreclosure. I have asked the HOA to waive the late fees and attorney fees so I can do a short sale but they are refusing. Is it worth it to borrow the money from friends and family so I can do a short sale, or should I just let the condo go into foreclosure?

Thank you,


Answer:  -This is a common question that gets asked a lot about the difference between a short sale vs foreclosure. While both are damaging to your credit, a short sale is a much better option – and here’s why… […read more]

Home Equity Line of Credit Questions

April 4th, 2012 by Jarad

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.

HELOC and 2nd Home

March 26th, 2012 by Jarad

Question:  I have a home (rental) with a first mortgage with one bank and a line of equity with another (Chase). We have our personal home with just a first mortgage but also with Chase. If we default on the equity line of credit tied to the rental home can it effect our current home since its with the same bank?

Answer:  – No, unless you used your personal property as additional collateral for getting the HELOC on the rental property. Because they are completely separate properties they can’t do anything to force the sale on you just because to don’t pay on the one. What they can do if you foreclose on the rental is file a judgment against you so you’d have to re-pay that, but usually that doesn’t happen and there are ways to prevent that from happening. Normally they will 1099 you for the amount they lost and you’d have to pay taxes on it.

Collection Agency For Line of Credit

March 23rd, 2012 by Jarad

Question:  My primary home was foreclosed on in May of 2011. The two lines of credit have been reported by the lender to Equifax as written off back in October of 2008. Some collection agencies are calling me now asking to pay for these line of credit. I must say this, I never used any $ amount from these HELOCs. That was the original set up of the loan. Please let me know. Can they ask for anything now?

Answer:   Yeah this typical when you go through a foreclosure. A collection agency for your line of credit is assigned to handle your case. They will call you and try to work something out. Either a payment plan or work out a settlement. Whatever you do, don’t just ignore them and do nothing. Try to work with them.

Rental home foreclosed in California

March 21st, 2012 by Jarad

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.

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