If I walk away from my home, can the lender come after me for the loan and/or garnish my wages, in the near future?
Submitted by tamara.durente.j92t on Tue, 05/06/2008 - 3:15pm.
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Hi Tamara - That depends a bit on which state you live in, whether or not deficiency judgements are allowed, and which loan is foreclosing. Perhaps you can give us some more details?
Sorry. I live in California, my first is with Chase and my second is with EMC. I believe it's a non-judicial foreclosure, and Chase (1st) is the one foreclosing.
Hi Tamara - Yes, if the 1st is foreclosing the 2nd can still try to collect at some point in the future. Whether or not this will happen on any widespread basis is yet to be seen. We have heard rumors of collection agencies buying up charged off 2nd's for pennies on the dollar for exactly this purpose - but have no idea if that is true.
Whenever possible you should try to do a shortsale. Next you should try to force the 2nd to foreclose before the 1st. You can do this by continuing to pay your 1st, while no longer paying your 2nd. You may be surprised to find that the 2nd does not foreclose, and at that point you'll have to decide whether to keep paying the 1st or let them foreclose.
Sean -
Good point on not paying the 2nd and just paying the first - great home retention strategy - The 2nd lender usually waits for the 1st to foreclose.
Tamara - where in CA is your property located? Has a NOD been filed? A short sale can be way better then walking away. I negotiate short sales for Sellers and always work to negotiate a final settlement.
BOB
Hi Bob~
We live in La Quinta, CA. and the NOD was effective 4/18/08 with a sale date of 8/8/08. We are desperate at this point, so all help is welcome.
Tammy
Tammy, we will buy your home under value and also we will allow you to stay in the property too. You can have other options to purchase or Lease Option even you have bad or no credit. For more info call The Home Savers at 1-877-263-4632.
Tammy -
My apologies for not replying sooner. I just saw your reply here. In most cases a short sale is better then a foreclosure. Contact me directly at bob@inspiragroup.com or 949-600-5404 and I will review your specific situation.
Banks dont want to foreclose. The short sale process is not short and requires constant pushing by the Realtor and/or person negotiating on your behalf. Also, the short sale needs to be "packaged" in a way that states your arguement and supports the value to the bank. Their needs to be a "win-win" and patience and persistance to have a successful short sale.
Call or e-mail me if you would like your situation reviewed. If you post here, please send me an e-mail so I know you have posted.
Thanks,
BOB
It is my understanding that a short sale is a sure way of having to pay the difference in the trustee sale and what is owed. Is it wise to advise someone to go for a short sale. In our case, we cannot afford to pay the difference on our property for it is unsidedown. Could be a lot. What is the chance of the house selling for what is now owed on it. The loan was given in 2005, before the big losses. I wonder about advising on short sales under these conditions. If there is a second, maybe that would be cheaper in the long run or payments can be lowered or whatever.
Wyoniar - the entire point of a "short" sale is that lender accepts less than what they are owed as payment in full. Your lender does not have to agree to do so, and may ask you for the difference, but that is not typical. Your goal should be to end up free and clear, with no further liability, and a bit less damage to your credit than a foreclosure.
Sean -
If Tamara's second was purchase money, then it will be non-recourse and the lender would not be able to come after her for any deficiency - Just wanted to confirm that you see this the same way. If it was refinance, then the bank could collect should they choose to.
Wyoniar - depending on where you live and how much you put as a down payment - chances are, from what you are describing, you owe more then the home is worth. If you can't continue to make the payments then a short sale is better then being foreclosed on. Acting quickly is in your best interest. We have worked with clients who completed the entire short sale in 90 days and are left with a 60 day mortgage late which is really minor considering how much the bank wrote off and how long it could have taken. I would review your options, hire someone who knows short sales - have the agent see if the bank would do a note modificaiton (while marketing the property for sale) - If you wanted me to review your situation, feel free to send me an e-mail to bob@inspiragroup.com or call 949-600-5404.
Have a great day.
BOB
Yes, In CA, purchase money is non-recourse. Lender can pursue judicial foreclosure which allows recourse on refi's, but this is highly unlikely. Judicial foreclosure is too time consuming and costly in CA, so nearly all foreclosures here are non-judicial (trustee sale) which are always non-recourse as well.
Wow - that is great for homeowners (ie non-judicial sale that wipes out any future obligation) -
How does it work when a lender sells the note to a bill collection company?
BOB
Remember only the loan that forecloses give us the right of recourse. So if a 1st forecloses, the 2nd has their security wiped out, but they have not given up their right to recourse. Those 2nds are what the bill collectors buy.
As a homeowner then you are better off trying to force the 2nd to foreclose first. Only problem is that many 2nds won't foreclose, leaving you in limbo of continuing to have to make the payments on the 1st to insure you don't end up with a 2nd that still has recourse.
This is one of the primary reasons I always recommend short sales, when properly negotiated they really are the best way to clean things up and move on.
My loans are a result of refinancing in the year of 2005; for relocating (retired to Idaho) and we use dour equity for the purchase of our present home here in Idaho. We had a lease option that looked good at the time, to close escrow April 2008. Unfortunately; the buyer lost her job as a new car salesperson, and now does not qualify as she should have. We gave her the option to purchase to give her more time on her job as I understood her lender to lower her interest rate; as oppose to her purchasing it in 2006. I had the home on the market (I was a broker owner in California for 32 years), her credit is perfect, but job and now income is her problem. At any rate, It does not look as good for us now, does it?
I deal with Country Wide on both the 1st and 2nd TD. All payments have been on time and prompt until July if my renter moves out as she plans. Then we are up a creek. Total on both loans are appx. $500,000.00. Appraisal at the time of the transaction was $535k We gave her the option on $510k.
Wyonia - how much is the home worth now? If way upside down and you will be completing a short sale, then you would be best off starting now before you are late on your payments. This way when the process is complete in 90-120 days, you will only have a 60-90 day mortgage late reported.
BOB
949-600-5404
bob@inspiragroup.com
The value has to be determined. I have a agent that use to work under me in El Cajon, She is going to try and get a CMA done. I think probably $459k-$475k. But, to tell the truth I do not know.
Wyonia
My husband and I were going to retire and purchared a home in Jackson Missippi while still living in California. Well things did not work out, he left me and moved back to his home state of New York. We were married there and both headed to California in 1998. After he leftt me in California, I filed for bankruptcy here in California in 2005. Apparently the property in Mississippi foreclosed in 2003, the bank filed a lawsuit against me in New York in 2005 even though I live in California, I just found out about it they said I owe the bank $30,000 because the house in Mississippi had a mortgage insurace protection (rider) and since the insurance paid for the loss, I have to pay them. Can they do this even if I did not live in New York which is a non-recourse state, and I live in California and the house is in Mississippi which both are non-recourse states. Please help they have taken $ thounds of dollars out of my savings account
Hello Worried,
We've just started to hear about these PMI recovery claims and I don't know much about them. I'd strongly encourage you to contact an attorney. Setting aside whether or not the PMI companies can collect, a couple of other issues come to mind - if you never lived in New York did their court even have the right to allow the suit and issue a judgement and it seems an attachment of your savings account? How did the case go forward without your being aware - were you properly noticed?
Again, I think you'll need an attorney to help you with this - just be careful to find someone good. Ideally find someone who has references online, or that blogs so that you get a feel for them first. Hopefully in the near future we'll have some in our Directory and participating here.
My house was sold at a "trustee sale" on August 15, 2007 and since then I have not heard anything from anyone. The house I am talking about is in Airizona. Today I received a letter from a company called First Amherst Financial Partners saying that they purchased my 2nd mortgage from Onyx Bank and that I owe 83, 815.00 and they want to
settle for 56,519.00. I never heard of this company before or during the sale. Am I responsible for this.
Hi Linda,
Can we get a couple of more details... Are you still living in the home? If not do you still have access and control of it? Also, when your house sold at trustee sale, was it the 1st or the 2nd that sold?
the house sold at auction last august and i believe it was brought my the lender holding the 1st mortgage. The 2nd mortgage was for "purchase money" to buy the house. Arizona is a nonrecourse state if the property is less then 2 and 1/2 acres and it is a single family home which covers my house. No I am not living in the house and since the the "trustee Sale" the house
has been purchased my someone. This company that brought the loan from Onyx seems to be a company that probably brought "bad debt"
and are now trying to get money from us.
Remember I'm not an attorney, but it seems to me that you should be in the clear under Arizona Revised Statutes 33-729. Tell them that they have no recourse under that statute and to go away. If they persist I'd contact a reputable local attorney. You can read the statute here: http://www.azleg.state.az.us/ars/33/00729.htm.
Thanks, Sean, that's how I also understand the law. I am working on a letter to send to them.
Hi i haven't seen anyboby post the price they paid for their house i guess mine was cheap i got it in 2005. We paid 230k now my same kind of house is going for 150k we have lost 80k in value and would like to keep our house but the payment is very high and hard to pay. Is there a way to keep our house, like a forgiving loan or something we can work out with the bank?
You should absolutely contact your bank regarding a loan modification. While it varies greatly by bank we are starting to hear of people getting loan modifications that reduce the principal balance of the loan to reflect the current market. Don't expect it to be easy, but certainly worth pursuing vigourously before considering foreclosure.
Sean -
There are lots of loan modification companies (seems like the subprime call centers have retooled to assist with loan mods) - most charge upfront fees and some have a partial refund policy if the mod doesnt take place.
My questions are:
1) do you feel someone should complete a loan mod if they owe way more then the property is worth? For example, I have a client who owes $630,000 purchase money in CA. The home is worth $380,000. If the mod simply lowered her payment then she's owe $250,000 more then the home is worth. I have seen some "partial" reductions of prinicple balances but nothing in the magnitude of the actual value. Any comments on if you feel someone should mod when they will be severly upside down?
2) do you feel someone should work with an agent concurrently on a short sale ? The logic being it will take 60 days to figure out the mod - most wont happen and I hear most mods end up in foreclosure (i dont have data on this, just have heard this).
3) with the near complete breakdown in the process flow of loss mitigation, how many homeowners have the knowledge and stamina to actually go full term and get the mod done?
BOB
Hi Bob, here is my two cents:
1. If they are ok with the new terms, like the house and don't want to move does it really matter if they are "upside down". It's not like they've given up the right to walk away and let the home go into foreclosure later, so why not mod if it meets there needs now regardless of the equity position.
2. I usually tell folks in foreclosure to pursue all options. That said I think they need to be honest with the agent. Short sales are hard work, and it wouldn't be fair to the agent to pull the listing to do a loan mod without at least keeping them in the loop.
3. I hear you, but if they don't try they certainly won't succeed. I'm a big believer that it is better to have tried and failed, then never have tried at all.
Best -Sean
I don't want to sound dumb but ""how does a loan modification work"". I still keep my house right? just the bank takes the loss from the market? and can they back charge me once the market is back up? Sorry i have been looking for answer and haven't found any. Thanks
Yes, a loan modification could be any of those things, and more. Generally it just means that you and the lender have agreed to new terms regarding the repayment of your loan. Could include changing the term of the loan from 30 to 40 years, making an adjustable mortgage fixed, forgiving some of the principal, or a combination.
Another option is a forbearance agreement which typically allows you to make up past due amounts over time on an agreed upon schedule.
These and a few other options are generally referred to as "workout" agreements. What the lender may or may not be willing to agree to depends on the lender and the particular situation. They key is to start the conversation and explore the alternatives.
I hope this does not sound to complex...I am going through a divorce - no attornies involved, can't afford it. I live in Las Vegas, NV I owe $375,000 on my 1st that is from Chase and I have a 2nd HELOC from Countrywide, which I owe $28,000. Here is the thing my name is on the loan and my soon to be ex- wife and my name is on the deed. I know that I am responsibile for the first since it is in my name. What happens to the second are we both responsible for that or does that forclose with the first. If we don't make the payments on the HELOC can CountryWide come after both of us. Also, what happens to our property tax, are we responsible for that, and if we have a yearly HOA fee can they go after us, and lastly, my home insurance policy and auto are all together, so if my insurance policy does not get paid, can AAA cancel my auto insurnace? Some one any one, please advise....
Thanks.
I have been hearing a lot about Short Sales that is something i'm interested in. From what i've gathered you sale your house at the current market value and if the bank agrees you walk away from the house not owning anything back. my question is, are you really free of your mortage? and sencondly what happends to your credit if you want to by a house some time after a short sale?
Yes, you have gathered correctly. Whether or not you are completely free of your mortgage depends on what state you are in, whether or not the loan was a "purchase money" loan, and what you negotiate with the lender. Currently it appears you may be able to buy another house as soon as 2 years after a short sale vs. 5 years for a completed foreclosure.
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