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Foreclosure

I bought a condo in CA. Should I tell the tenants to move? Do I keep making the 80% payments when the payments increase? Should I keep my property manager? Is this considered “rent skimming”?

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Question: Here is the situation:
I bought a condo in CA and lived in it for 6 mo, moved out and rented it for the last 2 yrs to a couple who cover 80% of my mortgage.I claim it as income property on taxes. My “interest only” loan caps in 2 mo., then payments increase 2 1/2 times the amount I am paying. I cannot afford this. The bank wants me to do a short sale. The house is worth 75,000 less than the loan. I am not in default yet. Here are my questions: Should I tell the tenants to move, if so legally how many days notice? Do I keep making the 80% payments when the payments increase? Should I keep my property manager? He takes 8%. If I keep 2 mo. rent to refund the tenants their deposit is that considered “rent skimming”?
Concerned Landlord

Answer: – Even if you make 80% of the payment, they will initiate foreclosure unless the other 20% is a 2nd mortgage in which they could initiate foreclosure, but will most likely just write it off and 1099 you for the amount they lost. Depending on how many properties you have now and the tenants you have living in your property, you definately want to consider whether or not to use a property manager. Some tenents you never hear from, others are constantly bugging you in which case a property manager is worth every penny. As for rent skimming, here is what it says under California Civil Code 890…

890. (a)

(1) “Rent skimming” means using revenue received from the rental of a parcel of residential real property at any time during the first year period after acquiring that property without first applying the revenue or an equivalent amount to the payments due on all mortgages and deeds of trust encumbering that property.

(2) For purposes of this section, “rent skimming” also means receiving revenue from the rental of a parcel of residential real property where the person receiving that revenue, without the consent of the owner or owner’s agent, asserted possession or ownership of the residential property, whether under a false claim of title, by trespass, or any other unauthorized means, rented the property to another, and collected rents from the other person for the rental of the property. This paragraph does not apply to any tenant, subtenant, lessee, sublessee, or assignee, nor to any other hirer having a lawful occupancy interest in the residential dwelling.

(b) “Multiple acts of rent skimming” means knowingly and willfully rent skimming with respect to each of five or more parcels of residential real property acquired within any two-year period.

(c) “Person” means any natural person, any form of business organization, its officers and directors, and any natural person who authorizes rent skimming or who, being in a position of control, fails to prevent another from rent skimming.

You may want to see if you can resolve this with your tenant and let them know of the situation, at least that way they know what’s going on.

If the second lienholder has foreclosed on a primary residence and has not paid the senior lien holder (which is in good standing), can the 2nd lien holder evict the primary residence from their property?

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Question: If a 2nd lien holder forcloses, but the first is current, can the 2nd force the resident to leave the property if the first has not been paid off or even notified by the 2nd that they have forclosed?

Answer: -Yes, technically they can, because they own it now.

Primary residence in Arizona, my secondary in Florida.

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Question: My primary residence is in Arizona, my secondary ( a rental ) is in Florida. I’m stuck in an interest only loan that has me paying on more than what the home is worth. If I should have to go with foreclosure on the 2nd home as a last resort can they take away my primary residence?

Answer: -It depends on what it says in your closing docs. Most lenders only worry about the property on hand and make sure it’s sufficient collateral to support the loan being made. So most people don’t have to worry. I would only worry if a judgment is filed against you after the foreclosure and you have several properties in your name.

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.

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.