Posted on: 28th Jan, 2009 12:26 pm
The situation:
The questions:
Thanks for your help. We don't want to screw the lenders, but things have just gotten so tight that we can't see any other way around the situation other than to give up the current property and go live (on our savings) on the other property that's already paid off.
- We own a home in WA with an 80% mortgage and 20% HELOC
- I am disabled and have been fighting for benefits since 2005
- My husband works, but his company has started lay-offs and he may either lose his job or be required to take a cut in pay soon
- Having a double-income home debt on a single-income salary has depleted the majority of our savings
- We have reduced our spending to the bare minimum and have no other outstanding debt (just the house)
- We are not in default yet, but it isn't that far in our future, especially if something happens to my husband's job
- We own property in another state that is paid in full
- We don't care if we lose this house (we'd just move to the other property)
- We don't care if our credit is damaged for 7 years because we won't need a home loan anytime soon
- If we "pull up stakes" and move to the other property, my husband would only make a small fraction of his current income if he could even find a job. It is possible that we would need to live off the meager remainders of our savings.
- Due to current market conditions and property values, the house is now upside down and private sale covering the debt is highly unlikely. About 50% of the homes in our neighborhood have been on the market for 6+ months at prices that would leave the owners at a loss... and still none of them are selling.
The questions:
- Do we have to wait until we default to attempt a Short Sale or Deed in Lieu? If we found a buyer who gave us a half-way decent offer (like the "ugly house" buyers), could we approach the lenders even before we default?
- Does WA allow lenders to sue for deficiencies?
- Are we required to deplete all our liquid assets and liquidate/forfeit all our other assets before "walking away" from our current home?
- If the second lender (HELOC) doesn't receive any compensation from SS or DINL and the debt goes into collections, must we liquidate/forfeit all our other assets to pay this debt (or as much of it as we can)?
- Can we just stop paying the mortgage and HELOC payments to "force" a default, even if we still have the money to pay or make partial payments (i.e. do we HAVE to give $$ to them, or can we use the last few paychecks to finance our move out of state?)
- If we do foreclose, or any other option, would this limit our ability to use our existing credit cards for emergencies (we don't want to live on credit, but it might be necessary).
Thanks for your help. We don't want to screw the lenders, but things have just gotten so tight that we can't see any other way around the situation other than to give up the current property and go live (on our savings) on the other property that's already paid off.
Hi Stumped!
Welcome to forums!
Yes, as far as short sale and deed in lieu is concerned, lenders accept it only when you have defaulted on your payments. On judicial foreclosure sales in Washington, the borrower can be sued by the lender for a deficiency. In that case, the borrower will have to pay the deficient amount to the lender.
If you walk away from the property, the lender will have the right to foreclose the property. Though the property is foreclosed by the first lender, the second lender will still have the right to collect the debts from you. He may place lien on your other property or can garnish wages. If you deliberately stop paying the debts, then I think you will have a hard time negotiating with the lender regarding a short sale or deed in lieu. I don't think a foreclosure will limit our ability to use your existing credit cards for emergency purpose.
Feel free to ask if you have further queries.
Sussane
Welcome to forums!
Yes, as far as short sale and deed in lieu is concerned, lenders accept it only when you have defaulted on your payments. On judicial foreclosure sales in Washington, the borrower can be sued by the lender for a deficiency. In that case, the borrower will have to pay the deficient amount to the lender.
If you walk away from the property, the lender will have the right to foreclose the property. Though the property is foreclosed by the first lender, the second lender will still have the right to collect the debts from you. He may place lien on your other property or can garnish wages. If you deliberately stop paying the debts, then I think you will have a hard time negotiating with the lender regarding a short sale or deed in lieu. I don't think a foreclosure will limit our ability to use your existing credit cards for emergency purpose.
Feel free to ask if you have further queries.
Sussane
since our mortgage is held deed of trust, would that make it more likely that the lender would go with non-judicial foreclosure? since our other property would become our new primary residence (its in ak btw), could it be protected from lien as a homestead? we probably wouldn't be able to pay the 2nd lender even if they put us in collections, so how long could they keep hounding us? is there a statute of limitations for collection of bad debt?
we don't want to intentionally stop paying, but if it comes down to having enough money to continue to live on, or paying the debt... well, continuing to live has to take priority. we just wonder if there is anything we can do to start negotiating out from under the loan before it comes to that point. we can't sell it in this market and can't refinance it because it's upside-down now that property values have plummeted.
we don't want to intentionally stop paying, but if it comes down to having enough money to continue to live on, or paying the debt... well, continuing to live has to take priority. we just wonder if there is anything we can do to start negotiating out from under the loan before it comes to that point. we can't sell it in this market and can't refinance it because it's upside-down now that property values have plummeted.
Hi guest,
For deed of trust, non judicial foreclosure is carried out by lenders. In such a type of foreclosure, the lender does not have the right to ask for deficiency payment, that is, the difference between Fair market value and what you owe.
The lender may not be able to place a lien on the property in AK because the doesn't have the right to seek deficiency payment; so what will he come after you for?
If the second loan goes into collections, it is better to come into some kind of negotiation with them and pay off the balance. You can try and settle the debt just like you do for any other unsecured loan.
The Statute of Limitation or SOL for debt in WA is 6 years for written contracts. But I would still suggest not to keep the debt in collections because for 6 year, the collection agency may harass you with their phone calls; they may even sue you. Also, I'd like to mention here, please do not use credit cards for your daily expenses. Do something, at least try for a part time job etc so that you don't have to touch the cards.
I know it's tough but have the confidence in you; tough times will not be forever. Things will definitely get better because after all you tried our best to pay off your dues.
good luck :)
For deed of trust, non judicial foreclosure is carried out by lenders. In such a type of foreclosure, the lender does not have the right to ask for deficiency payment, that is, the difference between Fair market value and what you owe.
The lender may not be able to place a lien on the property in AK because the doesn't have the right to seek deficiency payment; so what will he come after you for?
If the second loan goes into collections, it is better to come into some kind of negotiation with them and pay off the balance. You can try and settle the debt just like you do for any other unsecured loan.
The Statute of Limitation or SOL for debt in WA is 6 years for written contracts. But I would still suggest not to keep the debt in collections because for 6 year, the collection agency may harass you with their phone calls; they may even sue you. Also, I'd like to mention here, please do not use credit cards for your daily expenses. Do something, at least try for a part time job etc so that you don't have to touch the cards.
I know it's tough but have the confidence in you; tough times will not be forever. Things will definitely get better because after all you tried our best to pay off your dues.
good luck :)