FORECLOSURE..Can Mortgage Lenders file liens against other assets after foreclosure?
I live in CA and have 3 properties. My principal home is on the verge of foreclosure 3 months behind. I have a 1st and 2nd . To my misfortune, I hired a Realtor who is apathetic and neglectful. I just lost a buyer due to Lenders not accepting Buyers offer offer ..equivalent to a 45K loss to the Lenders.The Buyer has walked away. I told my Realtor, who against my agreement undervalue and listed the home by less $75 of fair market value and now went back to MLS and increase price by $75K per Lender's request and BPO assessment: " Isn't the negotiation premise to negotiate from HIGH TO LOW? I am in disbelief and most disappointed with your negotiation abilities and marketing strategy"
I have accepted my loss of $100K down-payment. I am in disbelief at the Lenders refusal to accept a $45K loss. I am sickened by Realtors negligent and sloppy job. I feel hopeless and most depressed.
My questions are:
1) Does Lenders Refusal to accept current fair market value solid offer constitutes bad faith practice? If so, can this be an acceptable defense in foreclosure proceedings?
2) According to my Realtor, she claims that it is in my best interest to pursue a short sale VS. foreclosure. According to this Realtor, because I have 2 other properties the banks will simply file liens on these properties, my car, bank accounts, and my personal belongings. Is this true?
I look forward to your courteous reply.
Warm Regards,
Marie
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Comments
Hi Marie,
California is largely a non-recourse state - meaning they can't come after you for a judgement. Purchase money loans are always non-recourse. Refi's are non-recourse as long as the lender doesn't take you to court to foreclose (this is very rare, they usually file a notice of defaul which indicates "non-judicial" foreclosure in which case they have no-recourse after the sale).
One note of caution. If you have a 1st and a 2nd mortgage, and the first forecloses it will wipe out the 2nds security in the property - but not their right to seek a judgement against you in the future. Lots of folks think they are walking away scott free right now - but if the 2nd didn't foreclose don't be surprised if a debt collector comes calling at some point down the road. Better to stop paying the 2nd and force them to foreclose before getting behind on the 1st. Though they still may not, in which case you'll have to decide whether to let the first foreclose or keep making the payments. Either way the 2nd will remain a potential time bomb.
Sean,
Thank you for this valuable information. I have been unable to convince 1st Mort gage Lien Holder to accept any offer below their requested price. I have called the 2nd Mortgage Lien Holder to request their assistance and was informed that there was nothing they could do to force 1st Lien Holder to accept Short Sale offer.
How do I convince these 2 Lien Holders to accept short sale?
Please note that 2nd Lien Holder Loan was used as purchase money and has necer been re-financed.
By the way, I am not walking away as you comment : "Lots of folks think they are walking away scott free right now .." I put down $100K down-payment and have paid 3 years of int erst, property taxes, insurance, and maintenance....over 200K loss!
Given my circumstances with 1st Lien Holder refusing to agree to short sale , I am facing foreclosure . How can I avoid , prevent, or remedy 2nd Lien Holder's right to seek a judgment against me in the future? Should I file for bankruptcy or chapter 11?
Unfortunately, I am currently ill and on disability (long-term). I am so financially burden and pragmatically will not be able to repay a potential judgment of 2nd lien before I die.
Please advise,
Marie
HI Sean; In reply to your statement on a 1st foreclosing and the 2nd having no security in the property does not foreclose.
My question is if the 1st and 2nd were purchase money loans and the 1st and 2nd are both the same company (i.e. Ocwen 1st and Ocwen 2nd); the 1st uses a non-judicial foreclosure and the property was sold at public auction. The 2nd can still seek recourse?
See my message on 5/7 just below. In CA you should be ok.
Since the 2nd was a purchase money loan they should be barred from seeking a deficiency under California Code of Civil Procedure 580b. Note that I'm just an investor and not an attorney - I'd recommend checking with one before you make any decisions.
Marie -
Who are the lenders? Was the first Purchase Money, too? It appears the 1st would rather complete a short sale, esp with your situation - something doesnt seem right - How close is the offer to market value? Did the lender send an appraiser or Realtor out to complete a BPO?
BOB
Hi Bob,
The 1st and 2nd loan were purchase money. I obtained these loans through a Mortgage Broker simultaneously and also paid 100K Cash money from my own personal funds.
I agree with you that "something does not seem right ".
The offer difference to market value was about 100K 2 months ago! However, as property values continue to decline I believe the current difference is about 75K.
Yes, the Bank sent a Realtor for BPO ..and it was after this Realtor's assessment that the Bank decided, based upon this Realtor report, that the property is worth more money and have absolutely refused Short Sale offer.
I am at a lost on what I should do. I am unable to speak to Bank directly and my Realtor has been unsuccessful convincing 1st Lien Holder to agree to a short sale. It is a hopeless situation in which I have lost any type of input/ decision (s )making.
Your suggestions, opinions, and advice are greatly appreciate and welcome.
Marie
Hi Bob,
The 1st Lien Holder is GMAC and 2nd Indymac.
Both loans, 1st and 2nd were obtained simultaneously by my Mortgage Broker for purchasing funds. Neither loan have ever been re-financed. I paid 100K down-payment from my own funds.
I agree with you that "something doesn't seem right ". The difference between offer and market value is about 75K. The 1st Lien Holder, GMAC, sent an out of area Realtor who, upon opening the door to her, complained that she only gets $35.00 flat fee payment to conduct BPO. Furthermore, she advised me not to be too hopeful that GMAC and Indymac Bank would ever agree to a short sale. She emphatically stated that where there are 2 Lien Holders...Short Sales are accepted only 20% of the time.
I feel so stressed and hopeless with this situation in which I have no control for decision making and or at least input directly to Lender, GMAC.
I am unable to speak directly to GMAC..my messages, e-mails, and faxes have been ignored for the last 7 months!
My Realtor has been unsuccessful convincing GMAC to accept short offer.
Your opinions, comments, and advice are welcome and greatly appreciated.
Marie
Marie -
First, I would like to apologize for such a delayed response. I had not seen this post until now. If you would like to contact me directly, send an e-mail to bob@inspiragroup.com or call my office at (949) 600-5404.
The art of a short sale is that it needs to be "win-win" for all parties. Even with that it is sometimes challenging to get the short sales done. The banks are slammed and are very difficult to work with, however, they can and should be done. It requires constant pushing and persistance. We have been very successful in negotiating short sales. If the property is $75,000 below the market, then I can see the bank not wanting to take the property back. If their loss is less then it would cost to foreclose and resell they should take the short sale.
You say your Realtor is "apathetic and neglectful" is ... - "negligent and sloppy job" and priced your home low "against my agreement" - These are pretty serious items if they are all true. Have you spoken with the Broker? Unfortunalely, sometimes things need to be escalated - that is what we do on short sales. We keep pushing and pushing.
How much is your home worth in the market today? If you call or e-mail, I can possibly work with your Realtor and yourself to assist. We get paid 25% to negotiate the short sale. It seems she has nothing to loose - The bank should have let you know what it would take to do a short sale - Maybe they are right and a higher offer is needed and the Realtor would need to find another qualified buyuer. We typically list homes at a higher price then agressively drop the price until we get offers.
BOB
Me and my husband are divorced,my husband moved out and bought another house,whilst i was granted temporary exclusive use of the home--(The house still had both our names on the loan) now that i cant pay the mortgae,i have asked my husband to hlp out and he refuses--he says that he is not responsible--even though his name is still on the loan.
i have moved out into a smaller affordable house---now that we are almost 3 months behind on our payments--I am afaid as to what will happen please advise...
Anonymous.
Just waiting to see what happens probably isn't the best approach. Since the house is now vacant, I'd suggest calling the lender to see if they would be willing to take a "deed-in-lieu" of foreclosure. If they won't accept that, and depending on how far along the foreclosure is, you should pursue a short sale.
Also - everyone - if you are going to lose your home there is little reason (except possibly emotional) to leave your house. By staying you can save some money towards a rental, and when the bank does show up they will usually pay you to move and leave the house clean.
Hi I want to know what state are you in and what is the price skyltc@hotmail.com
Sean -
I agree that homeowners can stay in the home and benefit. However, I believe most homeowers move out because they do not know their rights.
Also, with the example above with Anonymous, they could complete a Short Sale. The Realtor would handle the sale and negotiation with the lender. This is a better solution then a Foreclosure and Deed-in-Lieu in my opinion. The credit will be less damaged and they can have the opportunity to purchase again in 2 years vs 4 yrs with Deed-in-lieu and 5 years with Foreclosure.
Have a great day.
BOB
Good points Bob, thanks!
I lived in California.
My 1st question: Both my 1st & 2nd are with the same lender. If that lender filed a default and foreclosed filing, how many days left do I have to move out? They filed the foreclosed on 8/6/08.
My 2nd question: Would that wipe out both loan or the 2nd heloc will hunt me in the future? I am planning to file a Bankruptcy, should/can I add the 2nd heloc on to the filing?
Thank you
1. If the default was filed on 8/6/08, you likely have around 5 months before you will have to move (average time from notice of default to auction being held is 145 days in CA - but you'll have a little time after the auction as well).
2. Assuming they filed the notice of default on your 1st mortgage then the 2nd mortgage will have its security interest in the property wiped out by the foreclosure, but they will still have every right to pursue you for the entire balance -- UNLESS it was a purchase money loan. Given that it is a HELOC you are likely out of luck. Note that this is why we recommend trying to do a short sale. Given your default was just filed you have plenty of time, and with both loans from the same lender you have a pretty good shot of having it approved. Assuming you have no other debt this would help you avoid bankruptcy, and would allow you to buy a home again in as little as two years based on current Freddie guidelines (and 2 years from now may be a very good time to buy as apposed to 2 years ago).
Hope that helps.
Thank you for the replied. One more question concerning #2.
2. When I purchased the home, I open 2nd heloc to qualified for 20% down. 80/10/10. Then, in several months, I paid it off. A year later, I use it to payoff the remodeling of the house. I tried several months to sell the house and failed. Now, the 2nd heloc is in default, I can't afford to pay it.
This is my 2nd house, would any of this affect my 1st house?
Thank you
Yes. The 2nd may have a claim against equity in your first house. I'd recommend talking with an experienced bankruptcy AND foreclosure attorney. Too many moving parts to give you reasonable advice over the web, and to be clear, I am not an attorney. Can you afford the first mortgage, insurance and taxes on the 2nd house? If so you might want to consider just stopping payment on the 2nd mortgage, forcing them to foreclose and give up their right to a deficiency judgement against you. They would then either have to pay the 1st or let it foreclose again eliminating their chance at a deficiency. Overall I'd still work my tail off to get a short sale done if I were you.
Well, I've default at the same time
- 2nd house - 1st mortgage & heloc
- 2nd house - property tax
I'm still ontime on my 1st house payments. Insurance on both house are still on time. I have empty out my 1st house heloc, and it is "closed" by lender because of house value has dropped. I'm just making monthly payments on it.
For short sales - do I need to pay off any other debts before qualify? ie...property tax?
Bankruptcy: I have others debts, too much to handle right now, my only choice is BK.
BK is never your only choice, but if you are overwhelmed by debt beyond the houses it may be worth considering. Even in that situation a short sale is still better than letting them foreclose, but probably not considerably. A short sale does not necessarily require that you pay anything, especiallly if your debts exceed your assets and it sounds like they do. You will need a great Realtor to handle short sales of this nature, make sure you find someone VERY experienced with short sales. Also might ask if they have experience with short sales in bankruptcy (it is possible - requires both the lenders and the courts approval). As per my earlier suggestion, it is also time to start shopping for a good attorney, well versed in both foreclosure and bankruptcy. The timing and order of things might make a difference.
Live in Northern Clifornia.
House for sale signs sprouting up like wild flowers. Friends walking away from these beautiful dream houses.
My situation: I bought ten years ago when the housing market was on the rise. Got a good deal stayed w/ a adjustible rate borrowing on the equity to fix up and consolidate debt. Now, as we are all faced the house is not worth the amount of the loan. no way to sell in this market and able to make the minimum interest only payment, but that is all. The five year loan will come to mature in 1 year. There is a cap on my loan of $475,000.00. I've put a call into my mortgage company, WAMU and have submitted an application to there care program to see if I am eligible but that can take up to 6 months to get a response as to if I qualify. Then another 6 to 12 mo to see what options I might qualify for.
My question is; I have a second home which I can afford and will is on a fixed rate. If I was to walk away from the first house can they, who ever they are, come after my second home making me sell it to get monies to pay toward the first. The second home not worth the cost of the first loan amount.
Second question: Any advice, any similar situations out there?
Stressing out in Cali,
Alex
Alex - Bob's answer below is great, and I agree with Bob - you should try to do a short sale before walking away. That said if you only have one loan on your first home, you can likely walk away with only a hit to your credit.
Alex -
1) You say "no way to sell in this market" - are you sure this is true? I believe a competent realtor who knows short sales can sell your home and get WAMU to agree to a short sale - I have 3 short sales with WAMU right now and they are one of the better companies to deal with. Let me refer you a Realtor in your area and I'll negotiate your short sale, if this is the right path for you and your family - So, I do challenge the statement above. We've sold home in areas where 75% of the homes are short sale or bank owned.
2) The Option Arm loans are the next wave of foreclosures and short sales. Most people dont get the impact of the max loan amount or 5 year term. Someone making a $2,000 minimum payment will be forced into $4,500 fully amortized payment when either of these events hits. You can easily calculate when the maximum loan amount will hit - take the max loan balance less the current loan balance and divide by the amount you are negative each month - that will tell you how many months you have before the max and the min and interest only payments will go away.
3) 6 months to get a decision on a note modification is crazy long - They should be 4-6 weeks not months in these decisions. Do you make enough money to cover the interest only payments. If so, would you want to stay in this home?
4) Dont ever "walk away" from your home - This is the worst for you and the bank - We can get a short sale done and leave you in a much better place.
A bank can pursue a deficiency judgement - sometimes, when negotiating a short sale we can get the bank to waive this right and the customer can move on without any further obligations.
I would like to know more of your specific situation - Feel free to contact me.
BOB
bob@inspiragroup.com
949-600-5404.
I have a foreclosure soon to take place on my first mortgage. What happens to the second mortgage if it is paid up to date?
Scottsdale home builder -
This depends on AZ laws and the type of loan you have. Are these construction loans or purchase money, primary residence? In CA, if primary residence and purchase money, then the loans are basically wiped out and no recourse to the homeowner. In virtually all other cases, in CA, there is potential recourse and tax conquences.
I would search on the web and get concrete information on your state laws and specifics on your situation.
Good luck.
BOB
Hi,
I live in california. I owe 2 houses. One is my primary, the 2nd house, i rent it out. The tenant is stopped paying the rent. I couldn't make the mortgage payment on my 2nd home for more than 4 months. I want to file a foreclosure onmy second, is it going to effect my 1st home. Can the lander take a lien on my 1st home?
Thank you,
First - you don't file foreclosure, your lender does. A lender always has the right to pursue a deficiency judgement with the exception of the original, or "purchase money" loan on your primary residence. That said, most lenders choose to use non-judicial foreclosure (or trustee sale), and by doing so give up the right to come after you (recourse). If you only have one loan on the second home then you have a reasonable chance of walking away without having to worry about the lender coming after you. There may still be tax consequences - to better understand that see your accountant.
I'm in a short sale of my primary residence in LA that was under major renovation. House is now down to studs, and has sat like that for 8 months. I have a realtor experienced with short sales and he has overall done a good job-we have been in escrow with a buyer since Oct. '09. Started sale in June '08 and got approval from the 2nd and Heloc (both B of A) in Nov. of an amount that was roughly 10% of amount owed and the remainder to be "charged off" as collectable debt. The first is Indy Mac and the realtor blames the slowness in communication on their restructuring, but I know he was largely out of town 3 weeks of December. I got in the loop with Indy Mac in January and they approved a sale amount which caused B of A's slice to go lower. Also, realtor allowed B of A aproval to expire in mid-Dec. of '08.
It has been a nightmare since then as B of A refused to re-approve anything without a new package going through full approval process. Broker initially was offering them 5K less and now after three disapprovals we are close to were we were with still no approval and my Indy Mac approval close to expiration as the weeks go by.
B of A logically should take the $ from sale as foreclosure is a big negative with the house under construction...but logic seems to be missing. They have filed a foreclosure on my credit report in February and turned the account over to a collection co. while still negotiating on the short sale. Collection co. has sent me a notice of foreclosure, but no sale date has been set and B of A confirms it's not on the calendar.
My questions-If a short sale is accomplished it appears in this case that the B of A second will still appear as foreclosed on my credit. Can they do that legally? They say any loan more then 120 days delinquent is listed as foreclosed in their books. Can B of A come after funds once a short sale is approved? Originally debt was to listed as "Charged off" to collectable on my first expired approval. Finally, how much additional damage is there to my credit by having the foreclosure listed on the B of A debt, and will they remove that if they approve a short sale? B of A cust service says it just stays there as it's accurate because of the 120 day late period.
THANKS!
Were both loans taken out when you purchased the property? Or were they taken after. Actually makes a huge difference and I'll wait to weigh in until I hear back. As a hint I'll say that BofA foreclosing could end up being great for you.
Hi-First with Indy Mac was done to fund the purchase with myself putting 20% down. Then did a HELOC a few years later which I converted to a fixed rate 100K second and borrowed the remaining 50K on the line of credit as I got into construction approximately 6 months after that.
B of A maintains that this debt is collectable from me regardless of the status of the house or whether the liens on the property are removed for a short sale. The current buyer will pretty much cash out the first and only leave B of A 10% payback...but the offer is very decent as the house is a major project at this point and requires an all cash deal. If B of A forecloses and pays off the first I doubt they will come up with an offer as good as the current buyer's...which means more loss all around as they will be negative. Funds are tight on my end at this point or I wouldn't be here. Trying to be informed about how various scenarios will impact my credit going forward and how open I will be to future recovery claims.
Thanks again!
If BofA forecloses they also give up the right to come after you for a deficiency judgement thanks to the one action rule. In that case you could walk scott free with the exception of a hit to your credit. The key is to make sure BofA forecloses before Indymac - even if you have to keep making Indymac payments.
I know funds are tight, but given that the outcome could change your indebtedness after the fact by $90k or more, you really should engage a competent attorney, that is knowledgeable on all the foreclosure laws, especially the one action rule. They can also help demonstrate to BofA you are very aware of your rights and may be able to get a short sale done WITHOUT recourse, or for a settlement that leaves you with only a fraction of the remaining debt outstanding. I agree that completing the short sale would be the best case for all involved, and a competent attorney is likely to help make that case more forcibly to BofA than you can do on your own.
I'm not an attorney, but here are your options as I see them....
1. Complete the short sale. Benefit to you is that under current FNM/FRE rules you can buy a home again in just 2 years (ie least credit hit), also demonstrates you worked to take care of the problem. Potential pitfall is that you could remain on the hook for an losses by BofA. Key here is that your liability for those losses can be negotiated. Unfortunately I hear that BofA is among the most unreasonable when it comes to negotiating a settlement on a second.
2. Let BofA foreclose. Thanks to the one action rule this will bar them for coming after you for a deficiency. Most 2nds aren't foreclosing for exactly this reason, but it sounds like in your case they are. Going down this route you'll end up with 2 foreclosures, and you have to make sure Indymac doesn't foreclosure first. If BofA delays their foreclosure this could stick you in a position of pouring good money after bad trying to keep Indymac from foreclosing.
3. Let Indymac foreclose. The key thing to understand here is that the BofA 2nd remains an open debt for you, even though they had their secured interest in the property wiped out. In the end if they work to collect you'll either need to pay (perhaps settle for less than full) or try to have it dismissed in bankruptcy. You ability to have it dismissed will depend on the rest of your financial picture.
But again, enough at stake here that you should consult and attorney.
Here's my question.
I have a house in southern california that was my primary residence until I moved to North Carolina in 06. It has one loan on it (ARM) for about $440k. I stopped paying on it months ago.
Since 06, the house has fallen in and out of escrow numerous times. Countrywide is processing the loan and the Bank of NY owns it (just found that out.).
Just found out today there is a short sale offer for $236k (It was on the market for $240k).
Don't know if the bank will take the short sale or not. My question is, can the bank come after me after a shortsale?
If they foreclose on me, can they came after other assests of mine?
Thanks!
If you only have the one loan, and they foreclose you likely won't have any liability for the deficiency between what you owe and what they recover. The reason is the one action rule, which basically says that if the lender chooses to foreclose, they can't also pursue other remedies. There are some exceptions (like fraud), so as always, it isn't a bad idea to have an attorney review the specifics of your case.
I Have a question.
I just lost my job, My home is upside down aprrox $150K. When I baught the home I did a 80/20. Wamu is the 1st and citi (I think) was the second .Aproximatly 1 year later a refinced the second with USAA to get a lower interest rate. I have a second home in Utah, We are still making those payments and plan to move there permanitly after we move.
1: is my second stil considered a purchase money loan or is it now considered a heloc?
2; Will any of the 2 lenders put a lien on my second home in Utah after the forcloser process?
If so, will filing bankruptsy remove it?
I reside in NJ, and have a second property in FL with a mortgage and a line of credit with the same bank (Chase) I stopped paying the mortgage 4 months ago, but am still paying the line of credit, the bank refused an offer for a short sale, and they claim we have enough assets to afford the mortgage payments. Can the bank go after my assets if I refuse to make any more payments? At this point I don't care if the property goes into foreclosure.
My husband and I reside in Southern CA. We bought our home at $750 k in 2005 w/ 1st loan of $620 k at 6.25% fix rate and 2nd variable loan of $100k. My W2 shown 140 k last year; my husband , self employee, makes 80 k/ year.
The Zillow.com shows the value of my home now is 430 k. We're rejetected for loan modification.
One of my friends, a CA licensed Realstate Broker, suggests let him listing at market price, then, my parents will buy back when current lender approve. If the lender will not, it will foreclose.
My question are:
1. What percentage of getting approval from lender for this case?
2. If the lender doesn't approve and forclose. Will they go after us ( pay check, saving account,etc.)
If both loans were received when you purchased the house (rather than for taking cash out or refinancing), the bank can't come after you for the deficiency. You should have an attorney and accountant verify the specifics of your deal before making any decisions, but my guess is that you will walk free and clear other than the credit hit.
no they cannot come have other assets. They can only get the property that is in foreclosure.
My client has a condo that she bought for her family. One by one, members of the family died. She can't afford to keep the condo, and current condo rules prohibit non-owner occupancy (since the rental quota is full). When she tried to rent it out temporarily, they slapped her with hefty fines and legal fees.
I listed the property as a short sale (two loans, both with Bank of America). BOA will agree to the short sale, but won't pay HOA fees and dues and fines. HOA produced document signed by owner a year ago agreeing to pay $9K to settle the fines/fees, out of escrow. But since this is going to be a short sale, the seller won't have any money to pay.
HOA attorney says the HOA can go after owner's personal assets including her checking and saving accounts, garnish her wages, and file a lien against her current home (not the condo).
Condo buyer willing to pay some, but not all of the condo HOA fees, but HOA won't agree to reduced fees.
Is bankruptcy the only way out?
My question is on recourse vs non-recourse loan. In 2006, I refinanced a 1st and 2nd mortgage on a primary residence with one loan (to consolidate into just a 1st mortgage). There was no cash out, not even for closing cost. The total loan amount remained exactly the same. It was an opportunity to consolidate the loans and get a fixed rate instead of a float. The lender for all the loans were/are with Wells Fargo. Does this still mean that my loan now is a recourse loan? Where does it usually state that in the promissory note?
I live in California. I am behind in my mortgage payments. The bank is calling me about some plans to help me. My wife has left me so really i can't afford anything, therefore unless the bank is willing to work with me, chances are I will be walking away. The house value is below the note or called upside down. There are two judgement liens (credit card companies) were placed against the house. I read there was a first position and second position and so forth. The question would be can anyone explain these positions and if the lender sells the property less than the note, can these credit companies that have filed the lien continue to seek these judgement after forclosure?. Another question would be if there is a chance for a modification of the loan, will the bank be willing to do that with liens against the house?
Joe -
Please contact me - too many questions to answer here - which banks? Don't walk away - there are other solutions - We can review a mod, however, there must be enough income to realistically cover the mortgage.
Bay Area Homeowner - that information is not in your note - however, you should consult an attorney - there is an arguement for and against this - If you want a CA atteorney specializing in Real Estate let me know.
Pacita - BK is last resort - there seems to be something that can be worked out with Buyer - have them reduce their offer to compensate for the additional outlay.
BOB, MBA, CDPE
bob@inspiragroup.com
Our home purchased in 2005 for employee relocation foreclosed in Aug. 2009 after 10 months of trying to get a modification and/or short selling the property. The home was purchased with 80/20 purchase money loans from same provider but two loans, 1st and 2nd. The first foreclosed but the 2nd is calling and I informed them we would not pay the debt because we were protected by anti-dificiency laws regarding purchae money loans in the state of california and that if they wanted to pursue legal action to contact me via written letter., The next day the bank where our checking account is held, the same as the 2nd lien holder debited our account for the 3 months we were behind....we had paid until our last modification was denied by the first and knew we were going in to foreclosure so the loan was only 3 months past due. Do I have any recourse?
I have really enjoyed reading the posts and found them to be very helpful. My question: I live in California. My husband and I own our own home. We jointly owned 4 homes with my sister and her husband two in Idaho, one in Missouri and one in California. My sister and her husband (now ex) filed for bankruptcy 3/09. I am assuming all the properties are foreclosed as I can really not get information on them. We are trying to get a loan mod on our own home and not having much luck. We stopped paying as that seems to be the only way to get a loan mod in 7/08. In 7/09 we were given a 3 month trial period with our lender WaMu and that ended in Sept. We are still making the payment and have heard nothing about a loan mod and they will not call us back. We even have an attorney. My question is can the lenders come after our assets and force us to file bankruptcy? We have heard nothing from the lenders so far and my sister filed 3/09. My bankruptcy attorney said they will come after us for sure how does he know that. Also any tips on how we can get out of this state of limbo with WaMu? Their customer service will not give us the numbers of the loan negotiators and customer service cannot tell you anything. Thanks so much.l
My sister lives in CA and owns a condo. She just moved out of it because she can't keep up with the payments and moved in with my mom. She has a 1st and a 2nd on the Ventura Condo. She also owns a home in WA state. If the bank forecloses on the 1st, can they go after her WA home?
Was not smart to move out. She remains liable for the property while she still owns it. Better to stay in the Condo until the foreclosure - the bank will likely even pay her to move out and leave the place clear (cash-4-keys).
If a lender foreclosed in CA they give up the right to pursue a judgement against the borrower. Issue in this case is that the 1st could foreclose, leaving the 2nd still free to pursue collection against her. Depends on a few things like whether or not the 2nd was a purchase money loan. She should certainly talk to an attorney and an accountant about the consequences in her particular situation before making a decision. There may also be other alternatives like short sale.
My boyfriend and I are considering purchasing a home together. He currently owns a condo with a first and second. If he stopped paying on the condo after we purchased a home together, would the banks be able to come after the house we purchased together? With both of our incomes combined, we make enough to cover the payments on the future house and the condo, but it seems stupid to throw money at the condo when we're not sure if it will ever be worth what he paid for it. We're in CA. Thanks.
My wife and I bought a house in california in 2003. It is currently 130,000 underwater. We can afford the payment now but I wrote my lender and explained that we will be retiring in 7 years the payment would eat 90% of our monthly pension. I asked for a modification now so that I may live in my house when I retire. They wrote back "denied" their are no hardships. I've thought about it for a year now and we've decided to let it go. My first question is: Do I look for a realtor that specializes is short sales and let them handle it or do I wait till after I receive a default notice in 3 Months? My 2nd question: I plan on staying here till they tell me to leave. With the extra money I'll have from not making the monthly mortgage payment. Is it safe to leave in my checking account without the lender (who is ddifferent from my bank) coming after it? I am really hoping they take me serious and modify my loan. Thank You
My sister and decided to purchased a home together. However, her credit was so bad that she could not be put on the mortgage. Still we agreed that all debt associated with the home would be split. This worked fined until she lost her job. For the last two years I have been paying it all . Even though it's getting tough I've been current with all my debt. I also have a condo (which is occupied by my niece her daughter and grand daughter), and it still has a mortgage on it, I do not qualify for a loan modification. In 6 months I will be mandated to retire with a deduction of income of course. The upkeep of the house getting to be a bit much. I would like to keep my credit rating somewhat in tact,I don't want to just walk away from my house, so I want to do a short sale. Would my condo and retirement account (401K) be considered when negotiating with the bank to accept a short sale? Will I be required to take money from my 401K with a penalty to pay the difference in the short sale if accepted?
It will largely depend on the bank/investor. Remember that a short sale is a negotiation and the lender is not going to "take" anything from you. Your hardship and financial situation will have an impact on their approval of the short sale. We highly suggest meeting with a Realtor that has special education in negotiating short sales so that they can look at your specific situation. There are other variables to consider as well (Is this a purchase money loan? Is there only one loan on the property?) You are asking all of the right questions you just need to meet with someone that can review your entire situation. Always get references!!
Susan from 2/9/2010 -
Couple of items - 1) when you purchase a new home with your boyfriend, lenders now have a "buy and bail" rule - which basically protects them against a situation like this. If there is not 25-30% equity in the current home, then they will use this house payment against you, as well as the new home and your expenses. If you qualify for both home, then this is not an issue. if you dont, then this is an issue.
2) regarding the banks rights to pursue a claim against your new home - That depends on the situation the current home is in - Ie was it purchase money and primary residence? If so, in CA that will be a non-recourse loan and the banks will not be able to come after him/you. However, as well documented in these forums, it is much better to complete a short sale then simply throw in the keys and be foreclosed upon.
If you want, send me the particulars of your situation and I'll give you feedback on what is the best solution for you and your family. When sending me information, please include whether there is 1 or 2 loans, if they were purchase money or refinance and briefly describe your situation.
Have a great day.
BOB, MBA, CDPE
bob@inspiragroup.com
Thanks for the info, Bob.
1. Not an issue. We were pre-approved with the condo mortgage as a monthly debt payment.
2. Both loans (Citi & Chase) were purchase money and the condo is currently his primary residence. If we end up buying another place, do things change since the condo would no longer be his primary residence?
Jesse from 2/20/2010 -
Jesse - Which bank(s) are you working with? Also, you should definately work with a Realtor who is experieced with short sales. Every Realtor will say they are, however, I would recommend only working with a Realtor who has personally completed at least 10 short sale and NOT when they say they work with a team or a short sale processor who get them done. I say that because many agents who are inexperienced with short sales are messing up the process and not gettting the results. Last I heard the success rate on short sales is about 20-30%, yet, we average over 90%. Short Sales take a huge amount of effort they need to be set up correctly - The banks need to get market value and too many agents put in low ball "investor" offers that don't get done. Why would a bank take $200,000 on a home that could sell for $350,000 - that happens 1 out of 1000, yet, these agents keep pushing and leave the homeowner in a foreclosure situation and a greater loss, etc.
Another item is I personally like to work with "early loss mitigation" - Our clients have had the best results with these situations - least damage to their credit and best solution overall.
Jesse - I recommend you get a professional review of your situation - We want to make sure all aspects are covered when you make you decision - Has the tax consequences been reviewed? is this a recourse or non-recourse situation?
Anyway, if you want additional information, feel free to send me an e-mail to bob@inspiragroup.com.
BOB, MBA, CDPE
bob@inspiragroup.com
Evelyn from 3/13/2010
Your situation needs a more detailed review then a simple response on this forum.
Regarding the home you purchased "with" your sister - The bank only is going to look at you since you are on the loan - there may or may not be ways to consider this purchase money, primary residence. If you are in CA, then this could lead to a non-recourse settlement, however, that is a minority position and I would have you contact a straight shooting real estate attorney that could figure out the best course of action.
If only one loan in CA, then the "one action rule" should protect you on the home you purchased with your sister. As stated many places on this forum, a short sale is a much better solution then a foreclosure.
You mentioned your concern about your credit - I have completed 2 short sales where the Seller remained current on their loan during the short sale process.
Give me a call at 949-387-0500 or send me an e-mail - I know we can sort this out for you and get you the best solution.
BOB, MBA, CDPE
bob@inspiragroup.com
Hi,
The 1st lien holder indymac has agreed to a shortsale but the 2nd wells fargo has not yet.
They want 401k statements and we are afraid they will want some of our retirement.
Should I send them these statements? and if so should I include a cover letter reiterating our hardship to begin with. 2 incomes down to one at about 40% of what we used to make. Also we are now having to assist my mom with money as she is not doing well.
Laslty, should I talk to Wells Fargo myself or have my real estate agent talk to them?
Your help would be apprecaited.
They only want to see any statements to determine if they are going to approve the short sale. You are asking them to write off a significant amount and they want to make sure that you aren't just looking for an easy way out of a bad investment. They cannot "take" anything from you or touch your 401k. You will want to make sure they have a copy of your hardship letter as well as the additional information regarding your dependents.
My fiance just bought a house. He owned a house (VA loan) with his exwife. In the divorce, she got the house. His name is still on the loan. If she forecloses or does a short sale on the house can VA come after him and place a lien on his new house? Would it help if he signed an interspousal transfer deed?
It doesn't matter if he transfers title of the property. The loan is still in his name and a short sale or a foreclosure would affect his credit. VA has some very different rules than other lenders regarding foreclosure and deficiencies. You would want to contact the VA or consult with a lender that is familiar with VA loans to answer your questions.
Hi, I have a Purchase money Mortgage in Hawaii, and the value of my home was 800K when we bought, putting 200K down. We now owe 480K and the house is only worth that at best, we still need to remodle it to even get it close to selling it for what it's worth. My question is, if I walk from the PMM, can they come after our other Real Estate owed if we just give them back the house? Or hurt are credit?
Hi Rick,
Each state has different foreclosure laws regarding lender recourse. You would want to consult with someone that knows the laws in Hawaii. Usually a licensed realtor that specializes in foreclosures or short sales can typically answer many of your questions. Regardless of the foreclosure laws your credit will be negatively impacted once you stop making the payments on the loan.
Rick F. -
I am in CA and a Purchase Money primary residence would be non-recourse (ie bank can not come after you for any shortfall). Also, in CA there is a "one action rule" which basically states a bank can only take one action against a homeowner and typically the foreclosure will wipe out any recourse for the foreclosing party (typically the first lender) -
It is best to speak with a local agent who specializes in short sales and knows the local laws. If you send me the city and state that your property is in, I will find you a top agent who can help. In most cases, foreclosure is the worst option for you and the bank and better solutions can be worked out.
BOB in CA, MBA, CDPE
949-387-0500
bob@inspiragroup.com
Our house is in foreclosure and Wells Fargo just put a lock box on the door. Do we still need to pay homeowner's insurance? Also, the paperwork states they will not come after us for any deficiency but can they come after us for the behind taxes or any other liens such as the unpaid water bill and unpaid association dues? Thank you.
Hmmm... sounds like it is no longer "in" foreclosure, but has been foreclosed on. If that is the case then you no longer own the home and therefore do not need insurance, and should stop all utilities.
I stopped making my mortgage payments in 02/2011, I am going foreclosure, I stopped making my HOA due, and homeowners insurance. I live in CA. and BOA has threatened to take out ins. on the property and charged to me. I moved out of my house in June and my question what can they do to me if I don't pay the HOA's or the insurance?
Hi,
I currently have a home with a 1st and a 2nd mortgage and a custom home lot (that is paid for)...if I were to shortsale or was foreclosed upon, could there be any recourse or liens placed on the lot or liquid assets? (or other assets-stocks?)
i have 4 underwater mortgages i can no longer pay,they are in va.i also have 3 paid off properties.offered the lenders them to help with any loss they may incure in a resale.offered also a deed in lieu.they are not open for the dil and offered to take one of the homes, make me another loan and keep all the loan proceeds to make the payments current and continue till monies were gone.(how nice another payment for me???)i opted to borrow necessary funds to bring all 3 current and have been till now.am experiencing hardship due to job losses and can no longer keep paying.what is my best course of action,short sale (which they said no to last time)foreclosure (which they dont hesitate doing)or bk which threatens to take everything i own except what i can afford (hardly anything)or is there something else i can try?also what should i expect,should i move out or stay until they take over and just what can they do to me and my other paid off assetts/properties.is it better to tryto talk and reason with them?it didnt go well last time,i dont expect its gotten better.i need help fast and a clear head as mine is tired.thanks
Hi Jak,
In your case you really need to seek some legal advice. In VA it appears that the the laws allow a lender to seek a deficiency judgement. This mean that even if you let the properties go to foreclosure the lender could potentially come after you for the losses. There are also other things to consider. Are these purchase money loans? Which property qualifies as your principle residence? You need to consult consult with either an attorney or a housing counselor to make sure you are not potentially making a decision that will cause even more problems.
A lender is not legally obligated to modify a loan. You can certainly try again while you are getting the legal advice so at least you are exhausting all avenues.
Hi,
We are currently in our third year of a mortgage that is in NC. My husband has his own business and is struggling, with that said we are struggling to makes all the ends meet and are looking to move back to CA to live with family for a little while. We are wondering what to do with our home. Should we speak with our loan company or realtor about this situation. We are sad about the situation but are trying to do are best to do the right thing in the situation at hand. If we are letting go of the house when should we cease payments, etc?? Thanks for any help or advice!
we live in CA and have refinanced and taken a second mortgage on our home through Countrywide so now Bof A has both loans which are current. We owe a total of 334K with the market value of around 160K. We are in out late 50's and will retire within 4 yrs and will not at that time be able to afford the house. Is it smart for us to keep paying and still loose it or to cut our losses and let BofA have the house?
I have 3 rental properties that are all under water. My husband and I have a mortgage on our primary residence with some equity and own are own business. Are primary residence is in the bay area, ca. My 1st rental property is in northern ca and taking the biggest hit, my other 2 properties are in chandler, az and sparks nv. I was thinking about foreclosing on all 3 but worried about the ramifications. Can the banks come after my primary house and business? Are business is a corporation. And should we pull are money out of the bank? Can they come after that too? Are business is slow and its very difficult paying the rental in northern california and we owe 730,000 and its worth about 390,000 thanks for all your help.
HI Nichole,
Dealing with an owner occupied foreclosure or short sale is one thing but when you are talking about investment properties it is a very different situation. You should definitely consult with an attorney that can look at your specific situation and advise you accordingly. You will also want to talk to a CPA or other tax professional about the potential tax consequences. There can be huge tax liabilities when there is a foreclosure on an investment property. This is a huge concern if you have every refied these properties and taken any cash out. Even if you lost money in the investment the cash out would still count at capital gains. I highly suggest doing your homework before you make a decision.
my sister is currently in foreclosure by GMAC. they filed a home loan modification back in 2009 but due to brother in law being in sales he took a huge hit and they defaulted on the modification. they have retained KEL 12/2010 as of today they found out that the bank the have their personal checking at closed the account. Could this be a result from GMAC, can they do that even though a lawyer has been retained with hopes of saving the home? Has anyone ever heard or been through something similar? The personal acct rep said it was a decision based on too many NSF'S and they are in a crisis but they do pay those 35 dollar NSF'S could they be correct?
I have not heard of a lender closing a checking account based on the non-payment of a mortgage. What they cannot do is seize any funds in the checking account although if your mortgage is held by the same lender that you have your accounts you may want to consider changing banks.
I refinanced my home in California in 2005 at a value of $242,000. Recently we learned from the county tax bureau that the house has been assessed at $93,000 for 2011-2012. We have only the first mortgage. We are strongly considering walking away from this mortgage. I read on this site (Submitted by Sean - 05/02/2008 - 6:44pm:).
"California is largely a non-recourse state - meaning they can't come after you for a judgement. .... Refi's are non-recourse as long as the lender doesn't take you to court to foreclose (this is very rare, they usually file a notice of default which indicates "non-judicial" foreclosure in which case they have no-recourse after the sale)."
In light of my circumstances, Sean's reply, and the current actions of mortgage lenders regarding foreclosures in California, do you consider it to be a reasonable risk to walk away from this mortgage?
I had to leave my house behind in 2008 when my mother became terminally ill. I had tenants. They moved out in 6 months and I had to find new tenants. At that time I was able to and qthey signed a 1 year lease. After 4 months they bailed on the lease and moved out. I no longer reside in north Carolina. Since my mother passed I stayed in the DC metro area wwhere my family is. The house started on the market at 150k and after a year of no offers we keep lowering it. It is now on market at 120k. I owe 115k on my first and have a 15k second I got 6 years ago to pay some legal fees. I have paid for this house on my own for 12 months while it sat vacant. I can no longer do it so I have stopped paying my first and second. I haven't had an offer so short sale isn't an option. My second is threatening to do charge off and say I will have to pay taxes on this. Is this true in north Carolina. I worked in mortgage 10 years ago but its all changed so much now. I know that wells can file deficiency judgment but now I am concerned about my second.
Hi Terri,
You should really talk to an agent about a short sale. This would not only mean negotiating with your lenders up front but is the most proactive thing that you can do. This also means dropping your price to attract buyers.
In terms of the taxes there are potential tax consequences on any debt forgiveness. If the property is owner occupied there ways to eliminate this tax liability. In your case you had to move because of a hardship. You should definitely consult with a CPA or an enrolled agent that can look at your specific situation and provide you with concrete advice.
Hello please answe my question I'll thank you in advance
Iam in Florida and I have 2proprites my primary home which I purchase in 2006 for 441k and I paid 100k down then I pull a heloc of 75 k . I have a secondary home the value of that home is 130k and my balance is 60k at the same time I have a helock of 122k which I used 100k towards down on my primary home both properties 1st by chase and 2nd by wells Fargo My business is not doing to good and iam tired of struggling by paying 2 helock and the mortgages iam a family men and father of three small kids my wife does not work she is a house wife. Please suggest me what should I do. Help me please. At this point iam current on all mortgages and heloc my second home is also empty for last five months. Please advice thank you. Aaaaa
Hi Aaa,
We highly suggest that you talk to a local agent in your area. You may want to to try to short sell the vacant property or at least try to rent it out. You may also want to explore your modification options. You can find a free HUD approved housing counselor by going to www.makinghomeaffordable.gov.
I live in Florida. I am currently in the process of a Chapter 7. I am 4 months behind in my mortgage payments and will most likely go into foreclosure or short sale. Florida is a deficiency judgement state. Can my mortgage company come after me for a deficiency even though I just had a Chapter 7? Thank You.
Hi Barbara,
If your home loan was included in your Chapter 7 BK then that debt MAY be discharged like any other debt. Always check with your BK attorney and make sure you get all of your questions answered. The following web site is a great resource for all of your questions regarding bankruptcy and foreclosure. http://www.nolo.com/legal-encyclopedia/bankruptcy-help-with-foreclosure-...
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My husband and I bought a house in 2005. In 2007, we bought a house in the same small town because it had more property. We live in this second home and rent the first out when possible. When it sits empty, it takes my entire paycheck to pay the loan, insurance and taxes. When it's rented, we are upside down nearly $600 each month. We have made every payment but it is dragging us down. The house is worth about 130k now and we owe 165k--we paid 270k for it. We have been working with PNC for over a year. They keep 'losing our packet' or saying we let them know we were no longer interested in modifying our loan. We are again jumping through hoops with PNC.
We have heard they are one of the better loan companies, but are waiting to see what they can do for us. Our interest is at 6.75 and we could manage to hold onto this house if we could just get the rate lowered a couple of percentage points. We are older and I don't see this house ever being worth what we owe on it, let alone what we paid for it. So, I see that we will basically be paying on a house forever that is an albatross around our necks! I don't know how we can ever pay the payments once I am not working. If we cannot get PNC to modify and have to short sale (not even sure we could get an offer from a buyer as every other home here is for sale, or sitting empty) could they come after the home we live in? If we cannot short sale, and we quit making payments and it goes into foreclosure, can they come after us for our current home or any other assets--specifically my husband's 401k, which is probably a 41k at this time, or attach my wages? Thanks for your time in this matter. We have struggled to do the right thing and pay in full but more and more, we are having to put purchases on credit cards. I see no end to this vicious cycle.
Forgot to add, we live in No California
Hi Caela,
If the house qualifies as your primary residence (you lived in it 2 of the last 5 years) then a short sale approval by the lender would be a full satisfaction release of the debt in CA. You would want to consult with a real estate agent in your area for additional short sale information.
In CA we also have the one action rule. If you just have the one loan and the bank forecloses then they have taken their one action and cannot pursue a deficiency. There COULD be potential tax consequences if this does not qualify as your primary residence or if the loan is a non-purchase money loan (you refinanced at some point). If you have a 2nd mortgage that could also be an issue.
We live in California and invested in a home in Florida in 2006. We put 20 percent down. The loan is interest only for the first 10 years. The house has been rented and all property taxes are up to date. Even though the house is rented, we still have to come up with insurance and property taxes out of our pocket. With 2 kids attending college, we have been tallking about letting the house go.
Can the bank go after my CA home and other assets even though the investment home is in FL?
Hi Carlos,
The laws in each state are different. In Florida the lender can seek a deficiency judgment following a foreclosure. Although lenders typically do not "go after" other properties and attach a lien they can pursue collection on the deficiency and report it on your credit report. You would be wise to consult with an attorney that is familiar with the laws in Florida as well as a CPA that can explain the potential tax consequences.
I would have been much better off here in Utah if I had foreclosed rather than do a short-sale. Our realtor was under the impression the short sale would make both the 1st and 2nd mortgages go away. Nearly 2 years after we closed, Green Tree (B of A) is calling us twice a day to try to collect all ($66,000) of the 2nd mortgage, even though $5,500 of it went toward the balance of the sale. But the $5500 difference is a moot point because I don't have either amount and will have to declare a BK just so I can retire in 3 years.
I have discovered if you live in a state where the lender can come after you for the balance left after a short-sale you are better off foreclosing....unless, of course, you have a poile of money in the bank...in which case you probably wouldn't have a problem
Hi Brent,
We are so sorry to hear about your situation. It is so very important to seek legal advice and meet with a tax professional before making any decision. You are absolutely correct that the laws are VERY different in each state. If it is any consolation a foreclosure on the 1st mortgage does typically wipe out any junior liens or loans but it does not necessarily prevent the 2nd from attempting to collect on that loan. In some cases it just becomes an unsecured credit line even after a foreclosure.
We own a home in Arizona that is underwater. It has become increasingly difficult to pay the mortgage. We have a 2nd home w/a much lower monthly payment that we want to make our primary residence. If we move into the second home & "walk away" from the first home, can the mortgage holder on the first home put a lien on the second home and/or come after any of our other assets?
I live in CA. We bought our home in 2004. No surprise, it is now underwater. We have outgrown the home and need to move. We are planning to buy a new home (using $ from retirement accts for down payment), then we will short sell (or attempt to) the original home. Re: the first, original home: We refinanced the original loans (there were 2) after a year. We consolidated these loans into one new loan. At the time, we also pulled a small bit of money out of the refi for home improvements. Here are my questions:
1. I understand CA is non-recourse state. We should not be held liable for the short sale difference. Would we owe any taxes or incure any penalties related to the money that we pulled out of the house at the refi?
2. If we do pull off getting into a new home before short selling the original home, would the new home be at risk as penalty for the loss on the first home? We would consider renting the original home rather than selling, but we don't think we can rent it for what the mortgage is, and would prefer to simply sell it.
I would appreciate any input!
thank you!
I have 4 investment properties in South Carolina: 1 is under water $100K and the other 3 have a 1st mortgage and LOC making them approxiamtely $150K each under water. My primary residence is not is SC and not under water, and I am not willing to sacrifice my home for investment propoerties. Here's my question, the mortgage notes are in my name and the investment properties are in an LLC. How does that foreclosure work? I have tried to sell the properties but haven't had any buyers. I have tried to keep up with the payments but don't have the funds to do it anymore. I tried the DIL but the lenders said no. I feel like my only option at this point is let them go. Your advise is apprecated.
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