Berkeley Parents Network: Foreclosure

Berkeley Parents Network

Foreclosure

Berkeley Parents Network > Reviews > Legal & Financial Services > Foreclosure

Short sale on our house?
Foreclosure experiences and advice needed
How to Buy Foreclosures
Attorney specializing in Foreclosures
Facing Foreclosure

Short sale on our house?

Oct 2008

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 must be kidding here! Really, short sales are for folks who MUST give up their homes due to financial inability to pay, not for folks like you who ''just want a better school''. The bank who holds your mortgage has to approve it and you have to be in danger of foreclosure. Either rent your home or plan to stay. Just be greatful you have options! Anon

I have had experience with several Short Sales as a Credit Union employee. Here is our take on the situation. Your credit will go down to the E category right away. If you want to rent a place do so while you have good credit.

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

August 2008

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

My friend Ildiko Pali is an expert on foreclosures (preventing or handling them in the best possible way). Although she's in SF, I highly recommend you check out her website: http://www.princeton-realestate.com The second button from the bottom on the left links to Bay Area Short Sale Services,an article written for realtors that will give you both good info and an appreciation of her expertise. I'm sure she can help you. Her phone number is 415.923.7628. Good luck! Terry

www.firststepequity.com I just joined their site because I am wanting to buy a home, but without a down payment. They hook up people like me who want to take over payments of a mortgage if the owner will quick claim the title over to me. Some people can offer more than that - they take over payments and also pay back the last months of delinquent mortgage in order to dig you out of your hole.

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

I work for a Credit Union and we have had a few members in your situation. I feel for you, and I know that many credit unions are being forced by regulators to merge because of the foreclosures. So I will not sign my name or give the name of my credit union - also no lectures.

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

May 2008

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

Google ''Buying foreclosures'', But be very, very wary. You've got to know the legal issues inside and out, have mucho capital and impeccable credit, and know a LOT about real estate! Good luck

Attorney specializing in Foreclosures

Jan 2008

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

I work with Miller Starr Regalia, known as California's preeminent property law firm. We are based in Walnut Creek and have attorneys experienced in matters relating to foreclosures. You can find out more information about Miller Starr at: www.msrlegal.com. Best of luck- Chad

Facing Foreclosure

Nov 2007

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

In some circumstances, there are options that can protect your credit, even if you lose the home. Depending on whether you have a little equity, and the location of the home, you can postpone the foreclosure and sell it, even in this tough market..sometimes using a short-sale. Talk to a knowledgeable broker or attorney quickly while you still have options. Tim

Why choose foreclosure? Foreclosure simply means you make the lender do all the work of selling your house and it will effect your credit far worse than doing a short sell.

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

don't do this! surely you can sell your home at a reduced price?

''like a lot of people in the bay area we are debating on foreclosing one of our homes (we own two)''... well, no, like a small percentage you have two homes; also *you* don't foreclose, your lender would foreclose *if* you don't pay your mortgage. Why don't you *sell* one of the two homes (even if at a loss), and presumably have more of a possibility of paying any resulting debt (e.g., if the home goes for less than the mortgage balance) than paying two mortgages, while living in the remaining house? I would think that just failing to pay one mortgage, and letting the chips fall where they may, would be the worst outcome... shouldn't you be consulting a credit expert, though? A House in the Hand Worth Two in the Bush

You should probably talk to a financial counselor or bankruptcy attorney, broke as you are, just to get a handle on the consequences of allowing foreclosure. Perhaps see if Nolo Press has any titles on the subject.

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

You should talk to someone in the real estate field or your lender about options. You can consider a Deed in Lieu of Foreclosure, which will keep the foreclosure off your credit. You should also ask your lender about options. I've heard of some lenders working with borrowers to ease the payments. Also, if you have some equity in the property, rather than letting it foreclose, you can put it on the market for a low price. Anon

Sorry about the difficult situation you are in. Have you considered other options such as "deed in lieu" of foreclosure (if the house is only worth the amount you owe) , or ''short sale'' (if you owe more than the house is worth right now)? As for your credit questions: The credit card companies will not benefit from closing your accounts in anyway as long as you keep them in good standing. They are more than happy to keep a good customer.

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

You can get a lot of information about how the adverse credit report from a foreclosure will affect your financing options by checking out the myFICO forums at http://ficoforums.myfico.com/. You'll find very relevant information there from folks who have ''been there, done that''.

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

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