A foreclosure question

depends on your state.

check to see if your state is a 'deficiency judgment' state.

if it is..then the remaining amount owed on the first mortgage...and 2nd mortgage will appear as a collection on your credit report. Also, they will try to serve you...to take you to court...and win a judgment against you

Wildstorm,

I am sorry to hear that you are facing foreclosure.

There is no correct answer to your question without further information. Was the 2nd loan used to purchase the home? What state is the property in?

I ask because in some states, purchase money is non-recourse, meaning the lender can not seek a deficiency judgment (meaning they can not come after you for the unpaid balance)

Generally, when the house is sold at auction, the money pays the first mortgage(and the foreclosure costs incurred by that lender) and the remainder can then go towards the second. In some cases, the house does not sell for a price sufficient to pay-off both. In that case, the lender can look to you for the difference.

hi wildstorm,

i am really sorry to hear your situation.

if the selling price of your house exceeds the amount that you owe in the first mortgage, then the remaining amount will be used to pay your second mortgage. if the selling price does not exceed, then the balance of the first mortgage and the second mortgage will appear as collection in your credit and the lender can place a lien on your other real properties.

if you have no property and you cannot pay the balance in anyway, the lender may forgive that amount and send irs a 1099 c form, because the forgiven amount will be considered as your income and you have to pay tax on it.

but you may need not to pay tax on it if you claim insolvency and prove it. that means, say you have $50,000 forgiven debt and you have $0 asset then you need not to pay any tax on that forgiven debt to the irs. but if you have asset of $20,000, then you have to pay tax on that $20,000 amount and if you have assets more than $50,000 amount, then you have to pay tax on the full $50,000.

hope this helps you.

thanks,
larry

Ok here's a rundown on this whole mess:

I own 1 acre of property with 2 houses on it. I inherited this property after my mom died in November of 2005. In mid summer 2006 I got the property appraised for $65k. I took out a 1st mortgage and 2nd mortgage last year totaling to around the appraised value so there is no equity whats so ever. I cannot use the 2nd house for collateral or anything because it doesn't have its own legal discription and its own parcel. That brings me to where I am today. Foreclosure auction is a week from this Friday which is why I was wondering what would happen with the 2nd mortgage. I currently do not have any assets, no money. I have a car but thats my only mode of transportation.

This foreclosure doesn't end my tragedy just yet. I also have credit card debt to contend with and I was thinking of filing for bankruptcy a month or 2 after all this crap is over and I somewhat get back on my feet. Basically in a messed up sort of way I want to start over with a clean slate that will haunt for the next 7 or 10 years. I was told that foreclosures stay on your credit report of 10 years and BK's stay on your report for only 7. Is this correct.

Now for the foreclosure auction thing. Do I need to bring anything with me to the foreclosure auction? Deed? Title?

Hi Wildstorm. I'm a mortgage broker and just went to a seminar on this whole topic. My suggestion -- immediately consult with a bankruptcy attorney. You ought to get a free consultation. This is a legal area and as they say, 'we don't know what we don't know." A competent BK attorney can give you valuable advice - and you don't want to wait until after a foreclosure. Good luck.

You need to call that lender and do a mortgage modificaiton.

"You need to call that lender and do a mortgage modificaiton."

Already did that. I have 2 options. I can either pay the $4500 to cover the past due and the fees associated with it or pay $900 a month to bring my account out of past due and current. I'm pretty much SOL.

Am I required to attend the foreclosure auction?

hi wildstorm,

i understand it's been tough for you. but this is the time when you need to be organized and try hard to fight out the situation.

i shall agree with rick and i feel that filing bankruptcy chapter 13 would be good enough to put an automatic stop to foreclosure. until and unless you are discharged from chapter 13, there won't be any foreclosure of your home. i say chapter 13 because it can help you to reply part of your total debt within 3-5 years and that's how you get out of the mess. it's something that implies you are trying to pay off your debts. but you need to qualify to file chapter 13. so, get in touch with a bankruptcy attorney asap. there's still a week left, so make it fast. and good luck!

My house foreclosed on Novemeber 30th of last year. There was a foreclosure sale but nobody showed up so the bank has my home. I have been given a 6 month redemption period to which if I can, payback the full amount of the mortgage. If I cannot then I would have to be out of the house by May 30th 2008. I was wondering could I still sell the property to payback the loan or do I not have the option of doing that because I do not own the home anymore?

Hi Wildstorm,

Since the bank has given you 6 months for redemption, you will not lose the home till the redemption period is over. So, yes, you can try for a sale to pay back the loan.

Take Care

Ok thats good. Now do I need to hire a realtor to do this or can I just post an ad in the paper?

Hi Wildstorm,

You can post an ad in the newspaper and while you get responses, look for a realtor but a good one because a bad realtor could make things worse.

Thanks.