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Foreclosure, Loan Modification, and Short Sales
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I have been working on getting a loan modification through the Hamp program with BofA. I work on a semester to semester contract basis so I don't have a set yearly salary. I don't qualify for refinancing since my condo's value in the market is lower than my loan. My interest is 6.5%. Anyway, I have had numerous conversations and have turned in every document they every asked for and they always needed one more and one more. It became pretty obvious that they were going in circles trying not to help me. I never missed a payment but I am getting to the point in which I might have to. The kind of advice I need is if you know or suggest any other avenues I may be able to pursue in order to get this loan modification done. I know that there are people out there who claim to get that for you but it's more often than not, a scam. Any ideas based on your experience? Please, don't advertise your own business; I'm interested in real personal experiences. Thanks for any ideas. anon
First, a couple of questions. In order to qualify for the HAMP program, your mortgage payment (first lien, taxes & insurance, NOT any 2nd loans) has to exceed 31% of your gross (before taxes) income. Is this the case for you? Also, is there some type of hardship that changed your situation (reduced income? increased expenses?). Owing more than your home is worth does not make you eligible for this program.
There are other loan modification and refinance programs, though, including the recent attorney general settlement. You may be eligible for either a loan modification or a refinance under the recent attorney general settlement. For a refinance, it depends on who your loan is serviced by. Here is some information on the settlement and what you may be eligible for: http://www.responsiblelending.org/mortgage-lending/tools-resources/mortgage-relief.html
I would recommend contacting Katie Porter's office. She is the California monitor
under the settlement. She is extremely responsive and helpful. The email is
CAMonitor@doj.ca.gov. Good luck.
Alternatively (but I would try the monitor first), you can try contacting a HUD-
approved housing counselor. They are free and are very familiar with these issues.
You can find one in your area here:
loan mod helper
Like many people out here we bought our house in Oakland in 2005. It has since lost nearly half of it's value...
We stupidly refinanced in 2009 to lower our mortgage payments, which gave us a recourse mortgage. The house is located in a so-so neighborhood, that has seen a raise in crime since. When we bought we didn't have kids and were thinking we would be able to sell later to buy in a neighborhood with better schools. We moved in with my elderly father-in-law last year who lives in Berkeley both to help him out and in order to have our 5 year old attend a good school and try to get back on our feet financially.
We have been renting out our Oakland home for a year for a little more than our mortgage, but loosing on the property tax and repairs, and frankly we are not enjoying being landlords. Plus with another kid on the way, we are going to have more expenses coming.
We have called Wells Fargo and we are not eligible for any government programs or refinance.We also don't have enough of a hardship probably to qualify for a loan modification. We would still owe between a 100 and 80k if the house sold at today's prices and don't want to use all of our savings to fill the gap. We don't want to live in this house anymore and were wondering where to start... Does anybody knows a competent person that provides counseling in this field? Or have you been in this situation and could give any input? Thank you in advance. underwater mama
Short sales are long and trying though, and are not for the feint of heart. There are many Realtors who specialize in short sale transactions, and the process has become more streamlined and less byzantine over the last few years. I am a Licensed Real Estate Broker, but I'd also ask your friends, search on BPN and Yelp if you like...find someone you trust---who will be forthright and tell you the truths about what a hard road it is. It will damage your credit though--so don't believe anyone who says it won't. Short sales are different from foreclosures--but they both will get you out from under. Good Luck. Corey
How hard is it to qualify to rent a house after a short sale or foreclosure? We are going through a strategic default (please no responses with judgements on this) on our previous primary residence. We have become accidental landlords because we are underwater on our mortgage by about $100k. We moved far away for our jobs. We rent for a huge loss every month. We were not in default and tried to short sale but were denied because we were ontime with pymts. We just missed our last payment and will reapply to shortsale in sept. if we are declined, we will go into foreclosure or try for a deed in leui. We are ontime with every other financial obligation. We make a very nice living and are responsible tenants. Am I going to find it impossible to qualify to rent if I need to move? How about credit cards? Are they going to take them away or deny new applications? Nervous defaulter
We're about to do a short sale of our home. We're trying to decide whether to rent while we still have our stellar credit or wait and bank the mortgage we would've been paying, and rent after the short sale (when our credit won't be so good). One of our top priorities is to rent in a neighborhood with good elementary schools. My question is, does anyone here have any experience with renting in a neighborhood with good schools after a short sale or foreclosure? Any wisdom you can share with us? I know there was a similar question back in 2009. I'd like to gauge what the current rental market is like. Thank you! Susie
So, I think you should get acquainted with the rental market now and see what houses and rents are like in the areas you want. First, make a Tenant Resume (search online for a form -- there are many) that describes your fiscal profile. Remember that a typical rule of thumb is landlords like to see that the rent is no more than 1/4 - 1/3 of your monthly household income. This is the rent range you want to aim for. If you have substantial savings, make a note of that, too. As you look at rentals, test the waters. If you are sufficiently well-off and can afford to uphold two homes until your short sale is concluded, then submit your application for any rental that looks attractive to you now. However, if that is not your situation, then it will benefit you to become acquainted with Property Managers and landlords now and let them know that you are acquainting yourself with the rental market, but you will not be ready to rent until later in the fall. This is important, because even though your credit score likely will have dropped at the conclusion of the short sale, the rental market is also likely to have quieted down in terms of demand. Keep the name and contact information of any property managers and landlords you meet, so if you run into them (or their company)a while later, you can remind them of your earlier acquaintance. The low credit score can be explained in a cover letter -- if everything else looks good, no late payments, good income -- then you are much more likely to be perceived as a wonderful tenant in (say) October, when hardly anyone is looking for housing. Getting to know the market and the people involved in the business will be very helpful to you as you make this change from owner to renter. As hectic as this time of year is in the rental market, easing into it now will help you gain an understanding of how you will need to present yourself as a prospective tenant. Becky
In 2006, I refinanced my home and took the money to buy a rental property in the neighborhood. Now, the rental property is about to be foreclosed, but the foreclosure keeps being delayed at what is called the trustee's discretion. I need this house to come out of my name so that I can proceed with a loan modification on my home. Although I received reasonable advice that I would never qualify for a loan mod if I had the debt of the two houses combined, I have not been able to find anyone to talk to who is in a similar position. If you are out there, can you let me know? If you have any ideas about this kind of situation, that would be great.
Hi - I'm interested in hearing about others' experience in monitoring or 'fixing' your credit after a short sale. I short sold my home about 6 months ago and have been monitoring our credit since. While my score is surprisingly decent (low 700s), I'm curious as to what else I can do (besides pay everything on time) in the next 2-3 years to 'build' my credit back up so that I can easily qualify for a mortgage again. Also, I've read here and there about ways to get the credit reporting agencies to reflect the loan as ''paid'' versus ''settled.'' Anyone have experience with this? Thanks in advance. Ex-homeowner
Three years later, our scores are back up to 700. We bought a car late last year, and qualified for 0% interest. We are currently looking to purchase our next home. We have qualified for an FHA mortgage at a very favorable interest rate. We did have to wait three years from the date of the short sale to clear FHA eligibility again, but now that that has passed, it seems like nothing happened.
We do want to get our scores back up to where they were, but in my experience there's nothing you can do to move your score at this point but wait. You need to put distance between you and that black mark on your credit. We have no debt besides our new car payment, although we do put all our monthly expenses on an American Express card, which we pay off every month. We have started paying that before the statement closes to see if that moves our score at all. Too early to tell on that, and I can't speak to trying to get credit agencies to list your short sale as paid instead of settled.
Considering what we've qualified for since getting our scores back to 700, you probably don't have a lot to worry about if your score is above that point. But, you cannot qualify for good mortgage rates until at least three years after the close of your short sale. Patience is a Virtue
I have two homes under water and although I make a good income this is draining me financially. I need a financial adviser who specializes in laying out all options for my situation, including walking away, impact on credit score, possibilities of renting or buying again, etc. What I don't need is investment advice or ''how to build a budget''. I'd like to work with a fee based adviser. Any recommendations would be much appreciated. Thank You! Underwater in two places
Hello, We are looking for an experienced savvy short sale realtor to sell our home in Maxwell Park. It would be a 'no default' short sale if that makes a difference. I'd love to have some solid recommendations for someone who is tenacious, knowledgeable and realistic. Thank you.
I've called HUD and finished the first step towards working with my bank to do a HAFA short sale. But this seems like a long and laborious process with uncertain results, and we've determined that leaving is the best thing for us. Sooner the better with unemployment, growing debt, school timing, etc. I'm wondering what kind of professional we should talk to to find out about the financial implications of stoping payment and then trying to negotiate a short sale. I'd also like to be able to draft a timeline of what to expect, and feel somewhat empowered in the decision. Do we talk to a real estate lawyer? A tax lawyer? Or would a real estate agent who deals in short sales be able to give us the tax and financial advice we need? don't want to jump into an abyss
I know my Parents Network friends cannot give legal advice, but how about
some first-hand stories to share? What made you choose one option over the
other (if you are in the same boat)? Our house is currently about $80,000
under water, and we are considering one of three options:
1. Short Sale
2. Simply walking away (the banks will not even return our phone calls, let alone work with us in any way)
3. Stay in the house and renovate a bit to make it the best place for us (redo the kitchen, add a bedroom, and so on)
We do not know what to do, given that both of our children will be entering college in the next few years, and we do not know what impact a short sale or walking away will have on any future college loans and such. Also, what is the damage to our credit in all of this?
If you do not have a first-hand story to share, then perhaps you have someone to whom you can refer us (a loan officer, a mortgage broker, a real estate friend...). Thanks! Under Water, but not drowned yet!
In the bubble, so many people forgot that their house is first and foremost, a place to live, not an investment. If you can make your monthly ''nut'' then forget about being underwater for now. I wouldn't take on any more debt to renovate the house, but if you can afford to spend a little here and there to make it comfortable, enjoy the house for as long as you need a place to live.
BTW, $80,000 underwater is a small amount compared to folks $200K to $300K underwater... Glub Glub
The only thing I can think of is that you're having trouble making the payments. But you didn't say so. And if that is the case, I can't figure out why one of your choices is to spend even more money to renovate. Why would you need to add a bedroom now if your kids are within a couple years of going to college? Not sure why you need to do any of these things now
Banks are very unlikely to reduce principal on loans. I have not actually heard of it. If it was the case, then everybody would do it. Banks may be willing to lower your interest rate if you qualify. To qualify, you either need equity in the home of about 20% of the value, or your mortgage and tax payments have to be some high percentage of your net (could be gross) income, like 50% - don't know all the details, it is a government program.
But, before you make any decision, what is the current fair market value of your home. I would make my decision on the percentage of value that my home has lost. If you home is currently worth 500,000 and you bought it for 580,000 then you lost about 14% percent in value. However if your home is worth 250,000 and you bought it for 330,000 then you lost 24% of your value. In the long term, it will be easier to recover some of the lost 14% then the lost 24%.
And you do need a place to live. If you like your home, and you can afford it. Then you should stay. In my opinions short sales and walking away are for only people that cannot afford their home, those that might have gotten taken advantage of with teaser interest rate, not for those that simply lost value in their home. Anonymous
''Option 2: If you walk away, you are still responsible for the property, and liable for anyone's injuries, until it's foreclosed by your bank. Afterwards, your primary mortgage will be finished but there will be a big hit on your credit, and home equity lenders and other 2nds may be able to pursue you for years.
Option 3 means you are spending money on a property you may end up losing, if you are having financial difficulty. However, if you aren't having financial difficulty paying the mortgage, you plan to live there for 10+ years and aren't bothered by owing more than it's worth, there is nothing wrong with this option. It will be a long time before property values return to 2007 levels again, though.
Option 1 will eliminate all mortgage and property debts completely and legally, and in most cases you may be able to make a new purchase two years after a short sale. In some cases you can simultaneously buy a new home while completing a short sale on an underwater property. - Heather
We were in a home in a questionable neighborhood that was about 35% underwater according to Zillow. It would not have regained its value for 10+ years. We decided to walk away and it was remarkably unstressful. We set the robo-calls from the bank to go straight to voicemail (only ONCE did an actual person call), lived in the house for a year and then moved out once it was up for auction. It ended up selling for $190k while we had paid $375k 6 years earlier. We took a hit on our credit (not sure how much), but are renting in a better neighborhood and bigger house for less money than our mortgage.
I don't see the moral argument for staying with a bad investment. Companies strategically foreclose all the time. James Surowiecki wrote a great article about this recently in the New Yorker. He questions why more people aren't walking away. We did talk to Jean Shrem about the legal ramifications and she was very helpful.
Without knowing more about the particulars I can't say exactly what you should do, but I wanted to offer a viewpoint that I didn't see expressed previously. Good luck! happy we walked
We're underwater on our condo and we want to move (looking for a better neighborhood, better schools, bigger place for growing family). We have good credit and can afford our payments, and so doing a short sale is probably not going to be possible? We're considering renting out our current place at a loss (market rate rent does not equal our payments), then either renting a place ourselves or possibly buying another place if the figures work. However, I've heard that it's tough to get a loan for a new house if your first place is underwater...It's a lot to navigate - taxes, loans, our budget, becoming a landlord, etc...Has anyone faced this situation and found a good solution? We're not sure where to start - should we talk to a mortgage broker or a financial planner? Has anyone been able to arrange a short sale when they have no problems making the payments? Just for background, we put 20% down in 2007, but according to an independent appraisal we've lost all that equity and more, very depressing. Thanks for any advice! don't know where to start
Can anyone recommend an efficient, nonshady mortgage negotiator to potentially get the bank to lower the principal amount owed? I'm underwater on my mortgage, trying to do a short sale (unsuccessful so far), and looking at options. THX! Stressed out to the max.
We are a family of 3, with the hopes of adding another little one to the mix. Like many people in the Bay area, our mortgage is worth more than our house ($130K more). Right now, we can pay our mortgage/interest at 6.22%/escrow on taxes/HOA fees. We have no debt, except our mortgage. While our current financial situation is okay (not ideal), how are we supposed to manage if we have another kid? The only thing I can think of is reducing our mortgage/interest payments. Is there a way we can qualify for a loan modification? Can you recommend advice or recommend a good loan modification consultant/lawyer/financial advisor, real estate person? Where do I start? My husband is ready to walk away from the house and mortgage, which I feel is NOT an option. Feeling trapped
Hi, Our home is grossly underwater (have lost about 35% value) so we decided earlier this year to stop paying our mortgage. In the past four months, we have tried to work with our lenders (have two loans) to get our loans modified without success. At this point, it makes the most financial sense to strategically default, which is mostly what we intended to do to begin with. We'll probably attempt a short sale, but are prepared to let the home foreclose. We'd be interested in hearing others' experience with either, and receiving any helpful tips or advice on how to protect ourselves financially and/or how to limit the damage to our credit (if that's even possible, we know it's been impacted quite a bit already). And, very curious as to how your credit was impacted by the short sale or foreclosure and how it's improved over time (if at all). Another Underwater Homeowner
We are seriously considering doing a short sale for our property in Oakland. Our situation might be tricky as we are currently renting it out. We need to know the tax implications of doing a short sale for what the IRS will consider to be an 'investment property' although the only reason we are renting it out is because we can't sell it in this miserable market, it certainly wasn't purchased as an investment (we live out of the area now)... do we talk to a CPA? A tax attorney? Both? Are there CPAs that specialize in RE tax? I'm confused as to who we should talk to. Would like clarification on that and referrals to either or both, if you have worked with someone competent and professional. - future shortie
The second part is, you will need a short sale specialist real estate agent or broker to actually do the short sale. By an amazing coincidence, that's what I happen to do for a living. Good news is, in a short sale, the bank pays all fees, commissions and taxes, except when they require a seller contribution to approve the sale. However, you can start a short sale and go all the way through until you have the bank's conditional approval letter, and if you don't like the bank's conditions, you can refuse the short sale and either keep the property and keep paying the mortgage, or let it go in foreclosure.
I'd like to get recommendations for a short sale specialist in the Bay Area. We are considering going that route with our property and would like to talk to an experienced, professional short sale specialist. Can be a broker, lawyer, doesn't matter but must have excellent references and lots of experience doing this in CA, in the Bay Area in particular. Thank you! - shortie
I'd like to get pointers about doing a short sale. We have rental property in Oakland, and are considering trying to do a short sale at the end of the tenant's lease. Where would I go to get good, up-to-date information about doing this? Same question for walking away which we are also considering -- should I consult with an attorney? Are there any web sites where one can get reliable info on this? - future shorter?
Hi BPNers, We live in Berkeley, have been renting a house we like for 1 year. It is being foreclosed. We are aware that as tenants we have certain rights and can't be evicted that easily. We would like to keep the house but what does it mean in terms of maintenance? It's an old house, the heater doesn't work properly, who's responsible for fixing it? If it's the bank can we reasonably expect that they will bother? Who do we pay our rent to? Will it increase? Currently we have an agreement with the (former) owner that we pay half of gas and electricity, he pays the remaining charges, will this remain as-is? Do we have to accept visitors if the house is put on the market? Would it make sense to contract a legal insurance and if so which one? Do any of you BPNers have similar experience you wish to share? In advance, we thank you very much for your help and advise. Berkeley family of 3
Basically the minute they foreclose the property it is no longer the former owner's, and you should pay him rent anymore. They realtor will tell you that. Official papers will show up. If you know which bank, you can try to contact them to get a headstart on the process and maybe work somethiing out to stay there. good luck. MothlingMama
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?
The bank foreclosed on the house we once lived in and then rented out for a brief period of time after moving out-of-state. The bank bought our property back for the amount of the loan. The house has dropped about $150K in value since we bought it. We do not know when they will put it back on the market. My question is: should we expect a 1099 A (?) from our lenders (we have a second mortgage on the home). We are in touch with an accountant who has experience with foreclosures. He says it can take years for a lenders to issue a 1099. His advice is to claim insolvency now to avoid dealing with taxes on the property later. We have substantial unsecured debt, and no savings and no assets other than a car that is paid for, so that may make a case for insolvency since our debts far exceed our assets. My spouse has some property that is being gifted to him by his parents, but he is years away from owning it and we don't think that will exceed our current debts. Has anyone out there been through the insolvency process after foreclosure? Do the lenders always issue a 1099? We're not sure what to expect. Please, no judgment. Obviously we are reeling from this experience and are feeling a great deal of guilt and turmoil. However, right now we just need practical advice from others who have gone through this. anon
If you meet the requirements, the forgiven amount would not be taxed by either the IRS or California. I'm surprised your accountant didn't mention this. As for claiming insolvency, I'm not sure if it's so much of a ''process'' as just filling out the appropriate IRS paperwork to prove you are insolvent when you file your taxes. former RE attorney
I have a 2nd home in Tahoe that is now worth significantly less than the mortgage (about 30-40% less). I haven't missed a payment, but we struggle every month to make payments and I'm so tired of not being able to put away any money for savings. Long story how I got into this mess - so no judgments please (divorce settlement is the short answer). Can anyone recommend an attorney or some professional to help me figure out what my options are and the credit implications, tax implications, and so on? My now-husband and I own the home we live in and while this one is also worth less than what we paid, we can manage this just fine. feeling stupid in my real estate life decisions
I'm sure this is a common refrain, but here goes... I lost my job last year. Before that time, I thought we were broke each time we paid the mortgage and caught up on our property taxes. Now that we've been living on unemployment and disability for 7 months, paid our mortgage until last month and owe nearly $10K in property taxes, I am getting a better picture of what it feels to be scared and unable to care for my family. We have a big house that we can easily share with another family or two individuals.. is it safe to rent out when we have children? Can anyone suggest how to find good tenants who will pay their rent on time? Or, shall we bag the whole thing and walk away from our home? I hate to admit this, but I'm scared that someone will hurt my kids or steal from us, so would rather lose the house. Lost in the Oakland Hills
1. Do you want to keep your home and live in it long term
2. If you rent out to two individuals (my bias, for a number of reasons, versus a family), can you afford to keep the house? Do a cash flow/budgeting exercise about that. (See what other places are renting for on Craigslist.) If the numbers work, this could be a great solution (you might end up with some great experiences and good friends).
2a. You'll have to judge what numbers make it affordable with the lifestyle you want to or can manage.
2b. Will you and/or your partner be looking for jobs again? How will you be generating income?
2c. What will you do if you leave? How much can you afford for rent?
Write all the numbers out - get help with that, if you need it - and see what comes up for you and your partner.
Now, *along* with renting out rooms, find out if you can get a loan modification. The government programs HAMP and HAFA do not help most people (and lenders don't have to participate, in any case) but loan mods are getting easier, *and you might be successful.*
Call your lender. And here are a couple of resources to get you started: loanscamalert.org makinghomeaffordable.gov
If you can't afford to stay, you don't have to resort to foreclosure; you can sell - do a short sale if your loan balance is more than the value of the home.
I work with a company that runs reports with the same analytics that the government programs use, so you can go into the process knowing if you will qualify or not - it can save you months of grief. jessica
2. I have always enjoyed having housemates. My children, now 11 and 14, have gotten much from knowing these other people. It is my preferred lifestyle.
3. Having other kids in the house could add a lot of tension. Consider college women.
Select your housemates carefully. Put an ad on Craigslist. Get personal references. Go with your gut feeling.
4. I think you will be pleasantly surprised how nice it is to have new friends in the house. Good luck!
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
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?
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:
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
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.)
* 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
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
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
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 (â€œworkoutsâ€), 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
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
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
I've spent countless hours trying to figure out if we should
short sale on our home or do a foreclosure. We live and rent
here in california but own a condo in AZ. I understand that if
we short sale on our home we will have to pay taxes - a huge
figure as we are selling it for 90K less than we bought it.
If we foreclose do we also pay taxes? I have asked SO many
people but everyone has a different story/interest. The
realtors prefer us to short sale as they get a profit in the
sale and they say we should definitely short sale. Others say
that we should foreclose as we don't have to pay taxes.
Who can answer my question?? My tax attorney is out of town and
I don't know who else could be of help. My countless hours on
the internet researching has me so confused as well.
And, we do not care about our credit at this rate. So that is
not a factor in consideration. Just the $15K or so that we will
have to cough up in taxes.
Advice much appreciated!
I'd recommend talking with a real estate attorney. They can cost upwards of $250/hour but you probably only need 15-30 minutes of time to get this straight. I use a guy who charges in 1/10th hour increments (at least he did for me on a larger job), so he's worth contacting. He's very knowledgeable and also kind and thoughtful (rare combo in the RE business!): Rick Addicks email@example.com (415) 883-0365
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) firstname.lastname@example.org
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
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
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
I never thought that we would ever be in this position, but here we are. These are the facts: our credit is very poor right now, because we've been late with our bills for the past year. My husband was out of work for most of last year (he started working again 6 weeks ago - yay!) and last year my job was eliminated while I was on maternity leave. We sat down and really confronted our finances and they're bad. Really bad. Currently, we need $2,100 more per month to pay all our bills. We cut all extravagant spending. The kids haven't had new shoes for the past year, we take hand-me-downs and live very frugal. Our mortgage is around $650,000 and a home identical to ours just sold for $297,000 one block over. Many homes in our area are in foreclosure and the development of our new neighborhood has been stopped. We live in a secluded area that was going to be the next hot place to be developed. None of that is happening and it doesn't look like it will happen in the next 10 years. The developer has gone into bankruptcy and has no plans to invest money here. We haven't been able to pay our property taxes for the past 1 1/2 yrs and owe about $18,000. We're looking at our options and are considering the following: we want to stop paying our mortgage and keep that money and save it for the next 6 months, or so, until our home is foreclosed on. We then want to move to a town nearby and rent a home for a few years. I realize that our credit will be shot, but it's already pretty darn bad as it is. A short sale isn't going to be a solution, because of the dramatic drop in value of our home. Has anyone gone through this? How bad was it to recover from a foreclosure? Were you able to rent and eventually buy again? Sad Homeowner
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
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
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
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
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
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