Posted on: 22nd Jan, 2009 07:34 am
Hi, I've been reading these forums for awhile now but here' s my first post.
Let me first explain my situation....
I'm from the Bay Area in California. A few years ago, I was one of those ignorant people who signed bought a house thinking that I would be able to Refi in a few years when I made more money.
I put 5% down, and got two loans.
1) Interest Only ARM that matures in 2013 (Nationaly City Mortgage - Primary)
2) Conventional 30yr fix loan thats due in 15 years. (Green Tree Servicing - Secondary)
I have been barely able to pay off the loans (with a couple hundred of added principal since this last year).
Flash forward to today. I recently got married and my bought a house. I thought I would be able to help pay her mortgage as well, but its not looking too good. And her house is bigger, in a better school district, and is cheaper considering the current economy.
My house value also dropped around 150k, so there's no way I could refi and quite frankly I highly doubt that I'd be able to refi before 2013.
So, I was just thinking about 'walking away' from my situation. There's no way I can afford to pay both mortgages. And even if I could barely survive, when both loans matures I'd probably would have to foreclose anyway. So I guess its either foreclose now or foreclose later.
A short sale would be nice, but I hardly think the 2nd lender would agree to it. And since I have been paying extra money for the past year, I don't know if the short sale would be approved.
A deed in lieu or a foreclosure seems like the only option right now. Since, I would be living w/ my wife in her house I wouldn't need to think about applying for a loan for a new house in awhile.
I have no debt, my current credit score is over 800. I know it'll take a big hit. But if I do a deed in lieu or a foreclosure, I would just have to deal w/ bad credit for the next 7 years correct? Is there anything else I should worry about if I do end going through w/ my decision and throw my credit history down the drain?
What tax problems will I face?
Let me know if I'm getting my facts mixed up. I've been trying to do a lot of research about this but I'm no expert.
Any advice would be great.
Let me first explain my situation....
I'm from the Bay Area in California. A few years ago, I was one of those ignorant people who signed bought a house thinking that I would be able to Refi in a few years when I made more money.
I put 5% down, and got two loans.
1) Interest Only ARM that matures in 2013 (Nationaly City Mortgage - Primary)
2) Conventional 30yr fix loan thats due in 15 years. (Green Tree Servicing - Secondary)
I have been barely able to pay off the loans (with a couple hundred of added principal since this last year).
Flash forward to today. I recently got married and my bought a house. I thought I would be able to help pay her mortgage as well, but its not looking too good. And her house is bigger, in a better school district, and is cheaper considering the current economy.
My house value also dropped around 150k, so there's no way I could refi and quite frankly I highly doubt that I'd be able to refi before 2013.
So, I was just thinking about 'walking away' from my situation. There's no way I can afford to pay both mortgages. And even if I could barely survive, when both loans matures I'd probably would have to foreclose anyway. So I guess its either foreclose now or foreclose later.
A short sale would be nice, but I hardly think the 2nd lender would agree to it. And since I have been paying extra money for the past year, I don't know if the short sale would be approved.
A deed in lieu or a foreclosure seems like the only option right now. Since, I would be living w/ my wife in her house I wouldn't need to think about applying for a loan for a new house in awhile.
I have no debt, my current credit score is over 800. I know it'll take a big hit. But if I do a deed in lieu or a foreclosure, I would just have to deal w/ bad credit for the next 7 years correct? Is there anything else I should worry about if I do end going through w/ my decision and throw my credit history down the drain?
What tax problems will I face?
Let me know if I'm getting my facts mixed up. I've been trying to do a lot of research about this but I'm no expert.
Any advice would be great.
Hi 1pony!
Welcome to forums!
In California, the lender cannot sue you for the deficient amount resulting from the short sale or a foreclosure. But yes, the second lender may demand his dues from you. As far as deed in lieu is concerned, the deficient amount resulting from the sale of the property is forgiven by the lender. You cannot be even charged taxes on the forgiven amount because of the California mortgage forgiveness debt relief law.
As far as credit ramifications are concerned, in a short sale, your credit score will be lowered by 75-100 points and in case of a deed in lieu and foreclosure, your credit will be lowered by 250 points.
Feel free to ask if you have further queries.
Sussane
Welcome to forums!
In California, the lender cannot sue you for the deficient amount resulting from the short sale or a foreclosure. But yes, the second lender may demand his dues from you. As far as deed in lieu is concerned, the deficient amount resulting from the sale of the property is forgiven by the lender. You cannot be even charged taxes on the forgiven amount because of the California mortgage forgiveness debt relief law.
As far as credit ramifications are concerned, in a short sale, your credit score will be lowered by 75-100 points and in case of a deed in lieu and foreclosure, your credit will be lowered by 250 points.
Feel free to ask if you have further queries.
Sussane
Hi Sussane,
Is there anyway I can try to avoid getting the dues collect from me by the 2nd lender?
Is there anyway I can try to avoid getting the dues collect from me by the 2nd lender?
hi guest,
you can negotiate with the second lender so that he forgives or reduces your second mortgage. it will be totally the lender's discretion whether he will accept your request or not.
thanks
you can negotiate with the second lender so that he forgives or reduces your second mortgage. it will be totally the lender's discretion whether he will accept your request or not.
thanks
Thanks for the responses. So whatever 3 approaches I try, there is no guaranteed way of me just walking away from everything huh?
First of all, the lender(s) have to agree to a Deed in Lieu. That is their decision, not really yours. Secondly, the first lender would never agree to a deed in lieu, because of the existing second mortgage. So, the only party that could agree would be the second mortgage holder, and they probably wont. A Deed in Lieu is usually used in situations where there is only one mortgage, and the bank agrees to take the property without the expense of a foreclosure. In your situation, that is not really an option, although it wouldn't hurt to start negotiations with the second mortgage holder on what your options are. If the above post is correct, and you cannot be sued for a deficiency balance, or the amount left over after the bank forecloses and applied the proceeds to your balance, then you can walk away unscathed, except of course for the damage you will be doing to your credit. That seems like your best option, but I would want to be real sure that the information above about deficiency balance collection is correct. Once you walk away, the second mortgage may then and only then be willing to take a Deed in Lieu. But understand, they will then owe the same thing to the first mortgage holder that you do. That is how it works. If they become the new owner through a deed in lieu, they would sell the house, pay off the first mortgage, and hope there is something left over to pay on their mortgage. In my state, you would (or could) then be sued for what was left still to pay after all of the sales proceeds were applied. In my state, many people then file bankruptcy to eliminate that deficiency balance. But it sounds like from the post above, that is not true in your state which is a little surprising to me. But on the other hand, it is California.
I was one of the idiots that purchased a condo as an investment property right before the bottom fell out in Central Florida. I have a primary residence that I do not have a problem meeting the payment, but the condo is killing me. The mortgage is 212,000 interest only, at 6.5 %. Many of the units are in foreclosure and at greater than 10% do not pay their HOA monthly fees of $300.00. Can I short sale? How would that affect my credit? Can I legally get out of the deal since so many are in foreclosure and the property may be "unsellable?"
short sell could be one of the nice option so that it won't affect your credit but you need to find out a good deal for that.
keep in touch...........
:arrow: :arrow: :arrow:
keep in touch...........
:arrow: :arrow: :arrow:
I live in calif. and have an underwater condo in Colorado. What are the ramifications of having the condo go into foreclosurd?
Hi jerry!
Welcome to forums!
If your condo situated in Colorado goes into foreclosure and if there is a deficient balance resulting from the sale of the property, then you would be liable for paying off the deficient balance. If you're unable to do so, then the lender can place a lien on your other properties located in Colorado.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
If your condo situated in Colorado goes into foreclosure and if there is a deficient balance resulting from the sale of the property, then you would be liable for paying off the deficient balance. If you're unable to do so, then the lender can place a lien on your other properties located in Colorado.
Feel free to ask if you've further queries.
Sussane
Here is the California Code you need to reference when dealing with property in California. The 1st or 2nd lender CANNOT come after you if you walk away from the property, IF the two loans are the ORIGINAL and have never been modified by you.
Under California Code 580b, since you have not refinanced or modified your original loans, if you walk out on your loan, these would be regarded as "purchase money" loans and after foreclosure, the lenders would not be able to seek a deficiency judgement. This would be a "Nonrecourse" loan or action and the mortgage companies would eat all the loss and you would not be liable for any amount over the foreclosed sale amount, nor are there currently any Federal or State liabilites for the money forgiven on the loans.
Yes you would suffer from a credit score hit and be on your credit history for 5-7 years, but not a big deal since you already have the other house. And the way California is right now, so many people are in the same boat that foreclosures are not that big of an issue a few years down the road.
Under California Code 580b, since you have not refinanced or modified your original loans, if you walk out on your loan, these would be regarded as "purchase money" loans and after foreclosure, the lenders would not be able to seek a deficiency judgement. This would be a "Nonrecourse" loan or action and the mortgage companies would eat all the loss and you would not be liable for any amount over the foreclosed sale amount, nor are there currently any Federal or State liabilites for the money forgiven on the loans.
Yes you would suffer from a credit score hit and be on your credit history for 5-7 years, but not a big deal since you already have the other house. And the way California is right now, so many people are in the same boat that foreclosures are not that big of an issue a few years down the road.
Our first is hard money. Second is line of credit. In California first is a non recourse. Can the second come back on us later or garnish our retirement fund which is a 457K?
Hi bonnie!
Welcome to forums!
The second mortgage lender can come after you in order to recover the debts. However, they cannot garnish your retirement funds as it is exempt from garnishment.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
The second mortgage lender can come after you in order to recover the debts. However, they cannot garnish your retirement funds as it is exempt from garnishment.
Feel free to ask if you've further queries.
Sussane
I purchased a home in 2005, for $340K, I put almost $100k down on the property. I have a mortgage of $250k on the property. The property has been on the market for over a yr with no movement whatsoever. The property is only valued at approximately $190k!!! I am not currently behind, nor have I ever been. My interest rate is only 3%. I am in need of selling the property, due to a logistics issue and the fact that my husband will be undergoing a major surgery that will be taking him out of work for quite an extended period of time. Is it worth doing any of the options to get out from under the mortgage? Is it worth taking the hit on my credit? What tax ramifications are there in VA. How long will it affect my credit before a lender will consider me for a mortgage again? I am trying to do this responsibly. But that doesn't seem to be possible.
hi linda,
you should contact your lender and apply for a deed in lieu of foreclosure. if you can convince your lender about your financial hardship, then the lender will consider your situation and agree to your request.
thanks
you should contact your lender and apply for a deed in lieu of foreclosure. if you can convince your lender about your financial hardship, then the lender will consider your situation and agree to your request.
thanks