Trying to help a friend get mortgage assitance

I'm trying to help a friend who's become disabled get mortgage assistance. This friend has a young daughter and a big heart and helps a lot of people, and I wish I knew how to help her. Anyone know if something can be done now that she has had a heart attack and two strokes and can't work?

Stop Paying my Mortgage?

So, is there anyone out there with advice/experience with deciding to stop paying your mortgage in the hopes of modifying loan terms and/or reduce principal on an underwater property? People I've talked to say that the lenders won't help until you start missing payments. The property is my primary residence here in Berkeley. If anyone has any insight, I'd appreciate it. broke

This worked very well for me though I was extremely anxious in the beginning. Now I just wish I had done it sooner. It appears I will not owe taxes on the amount that was forgiven. I did suffer credit consequences - score is now in 600s, credit limits slashed on cards, checking account overdraft protection greatly reduced - but I feel better living on a cash basis anyways. My new landlord was very kind and I had no problem finding an apartment in Berkeley despite these events. Research some of the unbelievable practices that lenders indulged in during the bubble and you will not feel so guilty. There are many others who have opted to go this way, though people often are uncomfortable talking about it.

Good luck, do what is right for you and your family. Happier (by far) Renting

Restructuring a mortgage?

any way to get advice about a restructured loan? I have a friend who is upside down and can just barely make it. Are there loans for people who can pay but want to consolidate 2 loans over 6% for something they can breathe with?

Another Underwater Housing Worry - walk away?

although I know we are so lucky to have a home and one stable income (and one needing work) I am feeling increasingly anxious about the particulars of both the current and future housing market; our housing value is down 50-75%; neighbors on both sides of our house plus at least 2 more on the block have foreclosed and looks like they will be long-term empty; we can make the payments but have little else for vacation/ zero savings and cannot afford to make needed repairs on the house; we have a $400K mortgage in a horrendous school district (WCC) that once held some promise but is suffering even more so than other districts; beginning to feel unsafe and depressed on a half abandoned street.... advice about walking away greatly appreciated, I understand the ''moral obligation'' financial companies reason for ''staying'' but I find this hardly compelling in the face of bailouts at taxpayers expense which are not helping many people at all. Any advice; and hows and who to get help from if you have ''walked away'' welcome. underwater

The bottom-line is that we don't like the schools, we don't like the area, and we want to move. Well, this is our opportunity. A year ago we stopped paying our mortgage. A few months after that we contacted an attorney and talked to him about our options. He explained our choices (which are different for everyone based on their set of circumstances) and the best choice for us was to file for bankruptcy, which is what we did. We have saved money over the past year so that we can recoup some of our losses. Our realtor told us to stay in the home until a realtor knocks on your door and offers you ''cash for keys''. Once the home goes on the market, a realtor wants you out of the house. Generally, they will offer you money to move out. I bought a really cheesy e-book, but it gave some great suggestions on how to stay in your home longer. Here's the link: http://www.how-to-avoidforeclosure.info/. We received a ''notice of sale'' from the bank, but based on info in this e-book we were able to talk to our bank and cancel the notice of sale.

So that's our story. My suggestion for you would be to evaluate what is most important in your life and really take stock of what is truly valuable to you. Then look at your home as a business decision. Don't make it personal. I know that this is hard and emotional. It wasn't always easy for me either. However, my husband and I talked constantly about it and helped each other through it. We've become a great tag-team. I wish you much succes with this!!! Am There!

Given the past year or two of bailouts and bonuses, bad loan practices and loan sell-offs; it galls me that banks throw the word ''moral'' around with such abandon. There is nothing moral about it anymore - for anyone. Listen for yourself: http://www.npr.org/templates/story/story.php?storyId=122573604
act in your own economic self interest - they do

No less a financial institution than Morgan Stanley recently walked away from several properties they bought in SF at the height of the real estate bubble. It didn't make business sense for them to stay. They wrapped their decision in spin, ''an orderly transfer of property back to the lender,'' yada, yada, yada. The reality is they determined the cost of walking away was less than the cost of staying, so they walked. If financial institutions don't have to observe anything but what makes business sense for them, you don't have to consider anything else either.

That said, it is a complicated business decision you'd be making for yourselves (one with long-term ramifications), so you'll want good legal and financial advice before taking that step. But if it doesn't make financial sense for you to stay in your home, you're under no ''moral obligation'' to do so.

Good luck! - One Set of Rules For Business and Individuals

http://tinyurl.com/yk4g3sm

http://www.nytimes.com/2010/01/10/magazine/10FOB-wwln-t.html?scp=1&sq=walk%20away%20from%20your%20mortgage&st=cse

As a side I'd like to point out that there are huge tax ramifications with losing your mortgage interest deduction. So much so that renting at $2,000 is the equivalent of owning at $3,200. You'll have to talk to a tax person to get exact numbers, these are approx. But you get the idea. -owner occupied homeowning is a business too

In most cases I see, owners have spent 9 to 12 months after they make their last payment before the lender forcloses and forces them out. This will drop your credit score like a rock... into the 500s and will take a while to recover ...years.

The short sale route seems to make it possible to keep credit in the 600s and is more orderly and much less public than forclosure. the result is the same.. the BANK gets less than their loan.

There are a lot of less ethical options, some legal, some not. I have not seen any of my clients get a loan modification, though I strongly suggest you spend some time trying to get the BANK to do that, as it usually makes the client more willing to let the property go. Do the loan modification yourself, do not pay anyone to ''help'', especially in your first round of attempts. Henry

The program also suggested you check your State laws and specific mortage agreeemnt to become familiar with the terms, penalites, fees, etc. before making the decission to walk away from your mortagage.

Check the program at: http://www.npr.org/templates/story/story.php?storyId=122573604 Good luck!

I am not a financial advisor, so please seek counsel. But here are my two cents: Stop paying. What you're asking about is called "strategic default": voluntarily walking away from your debt because it is a good financial decision. I think you're doing some good and realistic critical thinking.

First, I'll address the moral obligation point you raised: Forget it. Your first obligation to yourself and society is to take care of yourself and your family. You can't afford your home on your current income with the current loan. You can make the payments but you can't afford the payments, because you cannot pay for maintenance, and you have no savings.

To underline your point about the banks and bailouts, maybe you saw this news item last month: Dec. 17 (Bloomberg) -- Morgan Stanley, the securities firm that spent more than $8 billion on commercial property in 2007, plans to relinquish five San Francisco office buildings to its lender two years after purchasing them from Blackstone Group LP near the top of the market. The bank has been negotiating an "orderly transfer" of the towers since earlier this year... So, I suggest that you "negotiate an orderly transfer" of your home back to your lender. This is from an abstract of a paper titled, "Underwater and Not Walking Away: Shame, Fear, and the Social Management of the Housing Crisis": Norms governing homeowner behavior stand in sharp contrast to norms governing lenders...This norm asymmetry leads to distributional inequalities in which individual homeowners shoulder a disproportionate burden from the housing collapse. (If you, or any BPN folk would like to see the article, I can email it to you.)

Ask yourself:

* What is the approximate value of your home and the balance of your loan?

* Do you want to stay in the house?

* If so, for how long?

#2: If you are under water on your loan by less than 20% (e.g., if you owed the lender $400,000 and the home is worth $320,000 or more) you might consider staying - if you could afford the payments. My opinion is that if you want to remain in the house long-term, you really need more income if you want a good quality of life, not to mention a safety net (savings) and, say, college educations for the kids. (I chose 20% arbitrarily; the figure is not a formal benchmark, but a subjective opinion.) Additionally, statistics show that areas already under water are continuing to decline, so judge your neighborhood accordingly.

Your post suggests that you don't want to stay there (or, possibly, you do, if the payments were lower). If you do want to stay, you could attempt a loan modification with your lender - more easily said than done: Very few loan mods have been successful, either directly with lenders or via government programs (e.g., HAMP). Lenders vary in their willingness and difficulty to deal with. In short, this is a cumbersome process, especially if you don't have a "hardship", are current on your loan, and your credit is good. But you can ask, and we can hope that banks will become more flexible.

So, what are the options?

* Ignore it all, with a strong possibility of involuntary foreclosure, down the road...stressful; on your record for 7 years; and makes your credit tumble.

* Bankruptcy: a subject unto itself - seek advice and explore the various forms.

* Sell. It will be a "short sale" meaning that the sale price will be less than the loan amount. It's in your financial interest to sell as soon as possible, so you don't dump more money into the mortgage interest payments. Or stop making the payments now, as I suggested above, with the goal to sell before the default process leading to foreclosure concludes. Short sales can take a long time.

#3: I can think of three ways to proceed here:

1. Apply via a government program such as HAMP or HAFA (coming soon). A long process with uncertain results...I wouldn't bother, but it is an option.

2. List your property in the traditional manner and hope it sells quickly.

3. Find an all-cash buyer *with the expertise to close quickly* (I know of them), which is the quickest kind of sale.

A couple short sale ramifications:

* Possibility of taxes on the phantom income - cancellation of debt income - which is the difference between the sale price and the balance of the loan. *However, at this time*, "the Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence" (irs.gov/individuals/article/0,,id=179414,00.html).

* Possibility of deficiency judgments against borrowers, from lenders, for the difference between the sale price and the amount of the loan. You will want to negotiate that the sale price includes payment in full, without pursuit of any deficiency judgment. If there is a 2nd or other loans on the house, those lien-holders can pursue payment, so that would need to be addressed.

This is not an easy decision, and it's a complicated subject with many moving parts and implications specific to individual situations, so please don't take my post as exhaustive. Be organized, persistent, get help, ask questions, and good luck! You have a lot of company. Jessica B

Loan modification and/or bankruptcy

I would love the BPN community's recommentation for a lawyer in the Walnut Creek/Concord area. As with many Bay Area homeowners, we are deeply underwater with our mortgage. We need to talk to a lawyer who could advice us about a loan modification who may also have a subspecialty in bankruptcy as this is a possibility. I don't know if this is possible, but any leads are appreciated. Help needed

I wouldn't go directly to a bankruptcy attorney (unless you've already decided to declare bankruptcy without an attorney's input) because bankruptcy is expensive, you lose control (and it stays on your record for 7 years), and you very possibly have more options short of declaring bankruptcy.

But I *would* consult a RE attorney and have him/her work with your lender in a foreclosure or short sale (and to note that in your documentation for the lender, e.g.,: ''Seller has retained a real estate attorney to facilitate the short sale process.'') *You will want to negotiate forgiveness from your lender of any deficiencies.* (Dennis can provide input on that, too, as well as reasonably-priced attorneys who specialize in short sales.)

If you owe more on your loan than your house is worth (''upside-down''), that leaves a loan mod, short sale or foreclosure as options.

Most loan modifications to date - whether via government programs or not - have not been successful. I've read that less than 4% have been successful, and of that 4%, 60% have ended up in short sales or foreclosures. If you can't afford your home, I wouldn't take the time and stress of attempting a loan mod.

But here is a resource for the government programs if you want to explore: - www.makinghomeaffordable.gov - for HARP (Home Affordable Refinance Program) and HAMP (Home Affordable Modification Program).

You have a lot of company: more than 20% of homeowners, nationwide, are upside-down, and the figure is much higher in CA. Be methodical, persistent and Good Luck! Jessica B

Walking away from my house

In 2002, I bought a 780 sq. foot house in Oakland. In 2008, my partner and I added a bedroom/bath. In order to pay for it, I took out 4 construction loans. The plan was to refinance into 1 loan. Market crashed, house is now underwater and Bank of America who has all the loans is refusing to help. While I can continue to pay the loans and stretch my budget, long term it doesn't seem possible. I am looking for people who have walked away as well as names of someone who can help me financially sort through my choices. Rachel

Had any success with load modification?

Has anyone had any success with mortgage modification? Our mortgage is with Wells Fargo, and they are really making us jump through hoops to even get on a list to be considered. I feel hopeless and frustrated, and almost don't want to bother with it, which I feel is what they want: for me to drop it. Any stories, good or bad, would be appreciated. If you were successful, how did you do it? How long did it take? Was it worth it? Thanks for your advice. Treading water

The high points from the seminar: Yes, you can get a modification, people are doing this. It is a drawn out process.

Short sales (selling your house for less than you owe) do not necessarily wipe out your debt.

There was a lot of talk about bankruptcy. They said Home Equity Lines of Credit (HELOCs) are generally wiped out in a bankruptcy. You need to talk to an attorney though.

Don't try to show that you make a little bit of money. Try to show that you make as much money as possible. It shows the bank than you have the means to pay in the future.

Talk to a HUD certified non-profit agency for free advice. Never pay someone to modify your loan...it is a scam. You can call (800)-830-4657 U.S. Department of Housing & Urban Development (HUD) Serves members of the general public Referral to agencies that provide free or low cost advice on mortgage foreclosure and assistance with negotiating with lenders. Call: -(800) 569-4287. Web: www.hud.gov

Homeownership Preservation Foundation HPF is a HUD certified nonprofit agency offering free foreclosure counseling nationwide. HPF is a member of HOPE NOW, a voluntary organization of the mortgage industry that may help homeowners at risk of foreclosure with either repayment plans (which do not reduce the amount you owe but give you more time to pay) or modifications (“workouts”), which do lower principal and interest to reduce the amount of money you owe. If you agree to a repayment plan or modification, make sure it is a long-term solution you will be able to afford over the remainder of your mortgage. National toll-free hotline at: (888) 995-HOPE. Information about HOPE NOW is at www.995hope.org. Diane

Renting after Short Sale or Foreclosure

I have just declared Ch 13 as my home that I bought for 535,000 depreciated to 180,000 and payments exceeded my ability to pay when I changed employment. I will have to move from my home in two months and am wondering how to handle my credit issues/bankruptcy with potential landlords. Any hopeful and positive advice would be appreciated. thanks.

Has anyone had any experience trying to rent here in the bay area after having a Short Sale or Foreclosure on your credit record? I would love to know if it is even possible to find a home in a decent neighborhood with decent schools with damaged credit. Thanks

My ex isn't paying the mortgage on our condo

I purchased a condo with my ex-boyfriend approximately 2 years ago and we are both listed as co-owners on the property and loan. He lives in the condo with his new girlfriend but the mortgage has not been payed in over 2 months. He refuses to work with me on any solution for sale or short sale. I was willing to walk away from it and let him keep it in order to provide safety for my Son and I but my credit is getting ruined at this point. The Bank will not remove my liability from the loan because the loan has not been current. Can anyone provide any advice on what my options might be? I am feeling like I am at his mercy and need help making the right decision on how to proceed. Thank you! Survivor

Bank says we don't qualify for a loan modification

I have begun talking with my mortgage holder about loan modification since my loan is now ''upside-down''. I got so far as to have them input my ''financials'' but was told we didn't currently look like a good bet for them to recommend modification because we need to have between $300 and 500 more in income per month. This seemed awfully close to me, and the rep said I can call back to update my financials at any time. When talking to her, though I had thought I was fully prepared with all the info I needed, it turned out I still had to make some estimates. I plan to call back and offer (after doing the research)actual numbers for everything that I had to estimate. I also neglected to mention our (albeit small) savings. I have two questions for the community, in case any of you have knowledge of this process. (I understand that BPN is not here for legal advice, just wanting to know your experiences or thoughts.) She asked for the amount we pay on credit cards each month - not for the balance, and not for the minimum amt due. We pay more than the min amt due each month. Would it help in this scenario to just make the minimum payments due instead? This would result in more cash in pocket each month. (Though of course we wouldn't be paying our credit cards down.) We also just received a big tax refund. I had planned to put most of it towards credit card debt. Should I instead put it into my savings account so that I can report a larger savings balance? I would have assumed they were going to take into account credit card balances but could it be that they don't? My goal: I would like the loan to better reflect the actual value of the house, so that we can reduce our monthly payments. We are making ends meet at this point but it's very tight due to a recent lay-off, and we have no room for emergencies. Thanks!

I wouldn't take any direct action with the lender until you are clear about your options. To get true help, I understand you have to get beyond the first line of phone answerers to the part of the company that has the power to help.

Be careful of any loan modification company who takes money up front to 'help' you. A company with integrity will analyze your situation and, only if you fit the criteria, take you on to truly help your situation.

I am testing the waters on this via my financial planner, Gordon Carlson and Associates (who will do the analysis for free because we are clients)http://www.gordoncarlson.com/

He has helped another company form who will actually do the work. As I understand it, they will only get paid if there is a successful result.

Their website is resultsadviors.com. Here's the contact person: Kim Cahill 949-528-6684 (Direct/Office) 949-528-2597 (Fax) kim@resultsadvisors.com

Sandy

By all means, minimize (or ignore?) expenses and maximize income to get within that range. Think of everything you can and ask this person where else you can lower expenses and raise income beyond all of your ideas. I'm not sure about savings and tax refunds, but I'd certainly try to find a way to convert that to income definitely. I'm not an expert but I hope that helps. Good luck. Anon

Pay $2500 for a loan modification?

I have friends, a young couple, who bought a house last year that is now valued less and they bought it with one of those interest only loans that is ballooning. They are distraught and I think they've fallen prey to an ''agency'' that has asked for $2500 to help them. It sounds fishy to me. However, when I tried to figure out who they could go to to see if they would qualify for the mortgage relief recently passed, I can't figure out who they go to. Their loan is with Wachovia and they were told that because they haven't been late yet, there is no help for them. Do they have to stop paying their mortgage in order to get help? This will happen soon anyway and they are thinking about just walking away. I would think they could talk to someone certified to do an FHA loan or call Barara Lee. Does anyone know or will getting into this program be so difficult no one will be able to take advantage of it? anon

Suze said to qualify for some of these mortgage relief programs, you DO need to be delinquent on your loan. Karen

Nervous about a short sale - what would you do?

Hello-

We purchased our home in 2006 at the height of the market. We paid 590 and today our home is worth 330. Our mortgage is high and has not yet adjusted -- that will happen in 7 years. Our neighborhood is riddled with foreclosures.

Neither my wife nor I work in the city where we live. Knowing that our house will not recover in 7 years and that we won't be able to afford the mortgage when it does reset, we are looking at our possibilities.

Does it make sense to do a short sale now or wait seven years and then do it? Either way, we cannot stay in this home forever. I looked at rentals in the city where we do work and we could easily get something for 1500 less than what we are paying now; a factor that is very appealing.

Our child starts school this fall so that is a consideration as well; we don't want to be constantly moving. Stability is important.

We've talked to three real estate agents who all suggested the short sale. But being responsible adults with excellent credit who have yet to default and that sunk more than 150k in this home, I am nervous about being branded with a scarlet letter. We both have our jobs and we are luckily in industries that appear quite safe at this point.

What would you do? Stay for 7 years and then short sale or do it now -- is there any option for us so we don't self-destruct our credit? under water and not yet drowning

Who knows what will happen in the next 4 years. Also you might have a conversation with your mortgage holder to see if they can convert you to a fixed mortgage at a good rate -- we have a neighbor who struck a good deal with his mortgage holder such that he could keep in his house. The last thing they want is more short sales or foreclosures. GOOD LUCK Tamar

1. Do you want to live in this house? It sounds like the answer is ''no'' - it is not convenient to work and it is costing you more than you need to pay to get a decent place to live.

Think about how many years you would need to stay in the house just to get your 150K back (which presumably would only happen after your house appreciates to 150K more than you have on the current mortgage). Then factor in the $1500 a month more that you are paying in the meantime. It may be really hard to ever get your money back. A lot of people are in your same boat.

If you have other really important reasons to stay in that area - close to family, really attached to neighborhood/school etc., then factor that in as well. But ask yourself if you could keep those benefits but find a cheaper place to live.

What if you put that $1500 a month you are saving into your retirement funds? Or to pay off your credit cards? How would being closer to work affect your quality of life.

Don't become a prisoner of this particular house or situation so that you compromise your long term financial or personal well-being.

2. If you decide it doesn't make sense to stay in the house, the question is how to you get out of it the best way possible. Get good legal advice - my understanding is that the effect of short sales on your credit can vary depending on state law and what the bank does. You might want to wait until Obama's bill goes through and see if that helps you at all. Acorn is an organization that has fought for consumers and homeowners for many years - they may be able to help you get good advice: http://acorn.org/. Don't depend solely on the real estate agents. And remember, if you are way overpaying for this house, and anything happens to your jobs, you might end up in foreclosure - which could be worse than any effect of a short sale

So sorry you (and many other Californians) are in this mess. Good luck!

1) Wait to see the effects of the new stimulus package. At least talk to your broker about how it might affect you. It seems to be mostly addressing toxic mortgages and people who really could never afford their home to begin with, but I was surprised that it also reinstated last year's jumbo conforming loan limits which had just been reset in January. It wasn't clear they'd be trying to help out people with mortgages over $700,000, but apparently they are!

2) Rents go up but your mortgage doesn't. Do you know if there are rent control limits in the area that you are thinking of renting? Because rents have recently taken a hit as well, and if they can go up again when the economy recovers, you may not be saving as much as you think you will when you take into account rent increases, lost equity, tax rebates, and the cost of selling and relocating your home. Do all the math first so you know what you're really getting/losing.

3) Did you discuss at least refinancing with the mortgage company? Especially if you mention to them that you are considering a short sale if you can't find another way to save money. Rates have gone down recently and you may have some leverage trying to get a better deal.

4) Is it really the price that's got you down or the lifestyle constraints? In other words, would you consider moving even if your home price had stayed the same? What attracted you to the house to begin with? Has that gone, or are you just feeling down about the price you could get if you sold it?

5) On the Mortgage Matters blog at bankrate.com, someone had posted about a similar situation. The blog writer responded that you should take into account that something you buy, whether it be a car or goods from the store, immediately gets devalued once you've bought them. In normal circumstances, a house does lose some value as soon as it's sold (just not in pristine selling condition any more and it costs something to even try to sell it again). We've just gotten used to house prices going up rapidly so that we could feel better about the big financial crunch/responsibility house ownership brings.

6) You could even write to the Mortgage Matters guy, Holden Lewis, for advice. He seems really level-headed and, unlike any mortgage broker or realtor, he has no vested interest in helping you cut a new deal whether or not it is for your personal benefit. R

You can also find out about refinancing your current loan; I'm not sure, but I think that this also could readjust your loan amount to your home's current value. anon

Short sale on our house?

Hi- I am not asking for advice per se, but am curious...has anyone here ever done a short sale? What sort of mark did it leave on your permanent record? Could you still rent/buy a home or even get a car? What happens down the road when you are able to buy again?

We are thinking of a short sale, not because we cannot afford our house (we are fortunate) we just want to be in a better school area for our daughter next year and don't want to wait years for the market to rebound. Our house has tanked 300,000 in value in 1.5 years and is heading south at the rate of 10k a month.

Has anyone else done a short sale? want out. now.

You will need to save for cars or use sub-prime lenders for vehicle loans. Expect to pay between 16% and 18% for a car loan if you borrow.

About being able to buy a house again – my colleagues and I go back and forth about this. If your loan is through a Credit Union and the Credit Union takes a loss, you will never be eligible to borrow from that Credit Union again. Not in 5 years, 10 years or ever. This is because of the bylaws. That said, I believe that banks will look at your credit in 3 – 5 years and say, oh, they got caught in the mortgage mess in 2008 and you will be able to borrow from a bank again. You will need a 20% down payment and expect to pay 9.00% on your first mortgage for a few years. For at least 10 years you will need to make a 20% down payment.

Also, you are responsible for the taxes on the amount the bank / Credit Union lost. Let’s say its $300,000. Your federal tax liability (28% bracket) is $84,000 and your state tax liability (10% bracket) is $30,000. You can avoid these taxes by filing bankruptcy. But forever more you will have to declare on a home mortgage form that you filed for bankruptcy. Be Careful with this Decision

Foreclosure experiences and advice needed

We are unable to keep up our mortgage and pay school tuition for our three children. We want to voluntarily give our house back to the bank. We need advice, experiences, and recommendations for someone to help us through the foreclosure process (most notable tax and credit ramifications). We've pretty much made up our minds, so please no advice on how the prevent a foreclosure. We really need honest and insightful experiences and advice. Of course we are signing this post anonymously, but are also willing to talk off post. Thank you in advance READY TO MOVE ON

I don't know much about all of this foreclosure stuff, but I would like to get out of renting. I am sorry to hear about your situation. May the winds of change bring you good fortune. Heather

What you are doing is called a deed in lieu of foreclosure. It is perfectly legal and saves the financial institution time and money. In essence you agree to sign the deed to the home over to them and to vacate promptly (at or before signing). The institution may want to do a walk through so they could see the home is left in a condition that they can sell.

The amount of the loss the financial institution takes is taxable to you. For example: you have a $650,000 mortgage, the home sells for $500,000 and they pay a 5.00% commission, title insurance fees, back property tax, etc. The financial institution nets after expenses $435,000. You have a tax liability for $215,000 additional income.

Now, as for your credit report the Deed in Lieu is preferable to a foreclosure. 7 years vs 10 years of negative history.

However, you will now want to get rid of your tax liability all or in part. You will need to file Chapter 7 bankruptcy for this. Congress has passed laws to absolve you of taxes on the majority of this loss, but to do so, you must file BK and the judge will have to review your assets.

The BK will be with you for 10 years.

Your FICO score will drop below 500 and remain there for at least a year, so you will want to rent a house or apartment BEFORE you sign the Deed in Lieu. Also, you will need to forever more state on requested loan form that you have filed for bankruptcy. I know our Credit Union has a policy of EVER giving unsecured loans or credit cards to members who have filed BK for anything other than medical reasons, so you just may have to be careful. Also, the judge in your bankruptcy case could require you to cancel all credit cards. Good Luck to You in the decade to come

How to Buy Foreclosures

I am interested in learning more about buying foreclosed properties. I have no idea where to begin, what to look for, or what is required. Does anyone have any experience with this? Ideally I would like to purchase the properties and either rent them out or fix them up and sell them. Thanks! k

Attorney specializing in Foreclosures

I am looking for a real estate attorney or firm that is experienced in matters of foreclosure and mortgage discounts. Someone located in Berkeley or Oakland would be preferable... Many thanks

Facing Foreclosure

Hello everyone, like a lot of people in the bay area we are debating on foreclosing one of our homes (we own two). Currently we have good credit 760+ and I know that will go down the drain. My question is this: We have a few credit cards with a 0 balance, will we be able to keep this or can the credit card companies cancel them? Also is there a difference in your credit i.e cards, car loans, personal loans vs Mortgage Loans? Any advice would greatly be appreciated Worried Mama

I assume that you feel you cannot sell your home for the value of your loan (otherwise, you would just sell it and call it a day). Many lenders will work with you on this and allow you to do a 'short sell' -- that is, you sell it and they accept the amount of the sale as payment for your loan. It hurts your credit, yes, but not nearly as much as foreclosure will. Ask a real estate professional that you trust about this -- they often negotiate with the lender on your behalf. Best of luck! anon

My knowledge is based on reading financial articles--I'm not an expert, so take that into consideration. However, it's my understanding that once you default on one creditor, the others (who monitor your credit score) can and often do revoke your credit, so you'd be risking it all. I don't know your financial situation, but it might be worthwhile to call the bank now and see if you can negotiate a reduced payment schedule (like interest only) for a while. Truthfully, I doubt a bank will want to deal with a foreclosed property in this market, so if you are committed to avoiding foreclosure, you may be able to persuade them to temporarily take less money. You could also consider selling the property at a low price--even in a bad market, you can usually sell property if it is priced low enough. Good Luck

As far as differences in different types of credit: They are all weighed the same in calculating your FICO score. One difference I can think of is that some creditors, such as some credit unions, do not report to all three credit bureaus so they don't impact all three of your FICO scores. Mortgage companies do report to all three. If you want to see who is reporting to what agency you can buy your Experian, TransUnion and Equifax credit reports from www.MyFICO.com without lowering your FICO score. You might already know that every time you get a free credit report you lower your FICO score so it is better to buy it from that website. Please feel free to email me with more questions. S. R

I strongly encourage you talk to an accountant and have him/her explain the tax ramifications that could result in your decision let it foreclose. Paying $100 - $200 now could save you $1,000s later. I work for a good one (credentials - CPA, JD) and would be happy to recommend him. PJ