T Nation

Need Foreclosure Help

It seems like I am heading towards foreclosure of my house. I haven’t missed a payment or anything, but I can see it coming soon. My work has cut hours a lot and the gf and I are almost ready to split, so it looks like it is my only option. Even if I got a second job that paid extremely well (highly unlikely) it still won’t happen. Also, I’m not a big spender, so tips on “cutting back on spending” won’t help LOL!

My question is, what exactly happens? I know that I have a certain amount of months to get out of the house, but how much does the credit score go down? I know I can’t buy a house for years and that is perfectly fine by me. I realize what is important in my life and I can live life just renting.

Also, if I wanted to go to school in the future, would I be able to get student loans? Or does it all depend on what state I’m living in when it comes to foreclosure laws.

Lastly, when/if my house forecloses and since I owe $210k on it, it’ll probably only sell for $160k at the auction, will I have to repay the $50k??

Any legal help or anyone that has been in this situation that wants to chime in, I’d greatly appreciate it.

Why can’t you sell the house yourself? And why don’t you think you’ll get what you owe out of it?

Hi HouseofAtlas, sorry to hear of your situation.
i have no legal info/advice being in another country.
You didn’t mention, but have you considered approaching your bank, showing your good payment record, explaining your situation, and refinancing the loan - such as extending the loan timeframeto reduce the monthly payments?
If you have a loan with break fees, you could ask the bank could waive them or add them into the loan, so you have no upfront costs.
I hope you can use this,
rgds,
ShaunW

Um yeah… why can’t you sell the house?

Sorry to hear that dude. I’m assuming since you owe 60k more than your place is worth that you have eithier a negative amoratization loan or an interest only. Now I’m sure I don’t need to tell you why they suck. A couple of suggestions for you. Find a private investor willing to buy your place and rent it back to you. This allows you to save your credit and not have to deal with moving and the the neighbors gossiping. Another thing you can do is improve your house so it is worth more, finish the basement, remodel the kitchen, bath, or bedrooms, or do some landscaping work.

Another option is to hire a realtor and have him do what is called a short sale. Basicly the realtor goes to the bank and trys to negotiate for the bank to buy your house back for less than what you owe. Trying to convince the bank they can eithier have it for said lower price in order to avoid all the expenses they will incur going through the forclosure procces. This will also keep your credit intact.

If all else fails and forclosure is inevitable. It generally takes 6-8 months (at least in this state) before the sherrif comes and kicks you out. In this case your credit is going to be fucked anyways, so don’t pay at all. Live rent free for that time and save your money so you have a nice chunk to get back on your feet again.

good luck

It is my understanding that a short sale does not always remove the liability for the balance. The bank can always choose to go after you and hit you with a deficiency judgment. That can follow you around for the next 20 years and make it almost impossible to be eligible for a mortgage again unless its paid, not to mention the foreclosure on your credit report.

I think the foreclosure sticks to your credit report for 7 years? Talk to an attorney bro, and do some searching, its all available out there. Sorry to hear it tho. The negative am loans and option ARMs have been killing people. You may be able to refi into a better loan as well, but if your payment works out to be similar than why bother.

If you cant make the payment it really dosent matter if more of it is going to principal or not. The subprime mortgage industry has taken a huge hit because of the failure of these type of loans, if you indeed have one. I heard on NPR yesterday some banks are willing to work with the homeowner to help avoid this stuff, becasuse they always lose money when they have to forclose, especially on a loan in its first few years. Try calling your lender too?

Sorry to hear about your troubles.

I can’t give specific advice, just a warning - there are a lot of scumbags preying on folks in your situation. There was just a report on this, in Arizona people facing foreclosure get an average of 300 calls/letters/visits, from folks trying to “help” - ostensibly to help you, but often to help themselves at your expense.

Once banks start the foreclosure procedure it becomes public and within 1-2 days the letters/calls/visits start.

Two things to especially watch for that are commonly reported:
-Some folks will offer help for a fee, take your fee money, do nothing, and by the time you realize no help is forcoming, it’s too late. Sometimes the “helpers” end up bidding on your house.

-Some folks will pretend to set up financing to let you keep your house, but the papers you sign end up giving them your house, you keep paying what you think are mortgage payments but they’re really rent payments, and you can be kicked out at any time.

There are, of course, legit folks that can help, just be wary. The general rule of “don’t do business with folks that contact you, do your research and you contact someone” is worth considering. And make sure of what you sign (no blank pages, have a lawyer/etc. check the papers, etc.).

Good luck.

[quote]stumpy wrote:
Sorry to hear that dude. I’m assuming since you owe 60k more than your place is worth that you have eithier a negative amoratization loan or an interest only. Now I’m sure I don’t need to tell you why they suck. A couple of suggestions for you. Find a private investor willing to buy your place and rent it back to you. This allows you to save your credit and not have to deal with moving and the the neighbors gossiping. Another thing you can do is improve your house so it is worth more, finish the basement, remodel the kitchen, bath, or bedrooms, or do some landscaping work.

Another option is to hire a realtor and have him do what is called a short sale. Basicly the realtor goes to the bank and trys to negotiate for the bank to buy your house back for less than what you owe. Trying to convince the bank they can eithier have it for said lower price in order to avoid all the expenses they will incur going through the forclosure procces. This will also keep your credit intact.

If all else fails and forclosure is inevitable. It generally takes 6-8 months (at least in this state) before the sherrif comes and kicks you out. In this case your credit is going to be fucked anyways, so don’t pay at all. Live rent free for that time and save your money so you have a nice chunk to get back on your feet again.

good luck[/quote]

Don’t listen to this guy…

This isn’t legal advice, but don’t allow the house to go to foreclosure. You’re better off selling the house for a loss and then working out a deal with a bank to refinance the remaining $50k.

keep in mind that the $160K market value will likely be less at a bank auction, which means the bank has a vested interest in seeing you sell the property at market value. obviously that still leaves you with long term debt but at least it will be a more manageable payment than what you have now and it will preserve your credit rating.

HUD has a program where they help people through this process. You’re second option is to work out an arrangement where you transfer deed to the bank, essentially allowing the bank to claim the property without an actual foreclosure process, sort of like ``foreclosure-lite’’.

Keep in mind that a formal foreclosure implies that the homeowner failed in their obligations and the bank had no other recourse, it reflects horribly on your credit rating and brands you as a deadbeat in the eyes of creditors. Arranging a transfer of deed in advance won’t be weighed as heavily on your credit rating.

also avoid these ``counseling’’ programs and quickie purchase services, almost all of them are scams. Go through HUD they have a pretty widespread program in place to help people through this. Keep in mind that despite what many people think, banks hate to foreclose, so think hard about your options.

Your third option is to claim bankruptcy, which as scary as that sounds might do more to protect you than a straight foreclosure. You would probably still lose the house but believe it or not a bankruptcy can have less of a long-term effect on your credit report than a foreclosure. this isn’t legal advice, just my 2 cents.

[quote]Frank Castle wrote:
It is my understanding that a short sale does not always remove the liability for the balance. The bank can always choose to go after you and hit you with a deficiency judgment. That can follow you around for the next 20 years and make it almost impossible to be eligible for a mortgage again unless its paid, not to mention the foreclosure on your credit report.
[/quote]

You are correct with this statement. When you sign your note you promise to repay x amount of dollars. Typically the realtor does not know this or just doen’t tell you and in this market more and more banks aren’t willing to just write off their losses like they used to.

And when in the future you try to get credit and a bank sees a Foreclosure and a lets say 50k unpaid judgement the chances of you getting more credit (especially for a house) will not be very good.

[quote]robo1 wrote:
This isn’t legal advice, but don’t allow the house to go to foreclosure. You’re better off selling the house for a loss and then working out a deal with a bank to refinance the remaining $50k.

keep in mind that the $160K market value will likely be less at a bank auction, which means the bank has a vested interest in seeing you sell the property at market value. obviously that still leaves you with long term debt but at least it will be a more manageable payment than what you have now and it will preserve your credit rating.

HUD has a program where they help people through this process. You’re second option is to work out an arrangement where you transfer deed to the bank, essentially allowing the bank to claim the property without an actual foreclosure process, sort of like ``foreclosure-lite’’.

Keep in mind that a formal foreclosure implies that the homeowner failed in their obligations and the bank had no other recourse, it reflects horribly on your credit rating and brands you as a deadbeat in the eyes of creditors. Arranging a transfer of deed in advance won’t be weighed as heavily on your credit rating.

also avoid these ``counseling’’ programs and quickie purchase services, almost all of them are scams. Go through HUD they have a pretty widespread program in place to help people through this. Keep in mind that despite what many people think, banks hate to foreclose, so think hard about your options.

Your third option is to claim bankruptcy, which as scary as that sounds might do more to protect you than a straight foreclosure. You would probably still lose the house but believe it or not a bankruptcy can have less of a long-term effect on your credit report than a foreclosure. this isn’t legal advice, just my 2 cents.[/quote]

I agree with you on a few points. When you transfer deed “in Lieu of” the bank has to agree and not many are willing to agree anymore but you also give up your right of a redemption period.

I personally haven’t heard any success stories with the HUD program but maybe it does work…

The BK option would be a Chapter 13. If he was in foreclosure it would stop it and I agree that some creditors will look at that better even though the house was included in the BK. Some of them will count it as only 1 occurrence instead of a BK and a FC but not all look at it this way.

Keep in mind that even though you haven’t recieved the official Foreclosure letter that if you are 90+ days down on your payment that many banks will consider this a Foreclosure and count it against you even though you may not have lost the house to FC. Their thought is that if it is 90+ days down then it should be counted against them.

The original poster should call their lender, let them know what is going onand see if you can work something out, chances of a refi sound slim due to the fact that your Debt Ratio will be too high from the sounds of it.

[quote]robo1 wrote:
This isn’t legal advice, but don’t allow the house to go to foreclosure. You’re better off selling the house for a loss and then working out a deal with a bank to refinance the remaining $50k. [/quote]

I concur with this. The worst thing you can do is lose the house through foreclosure. Do everything you can to avoid that.

[quote]trailrash wrote:
stumpy wrote:
Sorry to hear that dude. I’m assuming since you owe 60k more than your place is worth that you have eithier a negative amoratization loan or an interest only. Now I’m sure I don’t need to tell you why they suck. A couple of suggestions for you. Find a private investor willing to buy your place and rent it back to you. This allows you to save your credit and not have to deal with moving and the the neighbors gossiping. Another thing you can do is improve your house so it is worth more, finish the basement, remodel the kitchen, bath, or bedrooms, or do some landscaping work.

Another option is to hire a realtor and have him do what is called a short sale. Basicly the realtor goes to the bank and trys to negotiate for the bank to buy your house back for less than what you owe. Trying to convince the bank they can eithier have it for said lower price in order to avoid all the expenses they will incur going through the forclosure procces. This will also keep your credit intact.

If all else fails and forclosure is inevitable. It generally takes 6-8 months (at least in this state) before the sherrif comes and kicks you out. In this case your credit is going to be fucked anyways, so don’t pay at all. Live rent free for that time and save your money so you have a nice chunk to get back on your feet again.

good luck

Don’t listen to this guy…

[/quote]

Why not.

[quote]stumpy wrote:
trailrash wrote:
stumpy wrote:
Sorry to hear that dude. I’m assuming since you owe 60k more than your place is worth that you have eithier a negative amoratization loan or an interest only. Now I’m sure I don’t need to tell you why they suck. A couple of suggestions for you. Find a private investor willing to buy your place and rent it back to you. This allows you to save your credit and not have to deal with moving and the the neighbors gossiping. Another thing you can do is improve your house so it is worth more, finish the basement, remodel the kitchen, bath, or bedrooms, or do some landscaping work.

Another option is to hire a realtor and have him do what is called a short sale. Basicly the realtor goes to the bank and trys to negotiate for the bank to buy your house back for less than what you owe. Trying to convince the bank they can eithier have it for said lower price in order to avoid all the expenses they will incur going through the forclosure procces. This will also keep your credit intact.

If all else fails and forclosure is inevitable. It generally takes 6-8 months (at least in this state) before the sherrif comes and kicks you out. In this case your credit is going to be fucked anyways, so don’t pay at all. Live rent free for that time and save your money so you have a nice chunk to get back on your feet again.

good luck

Don’t listen to this guy…

Why not.
[/quote]

Because you don’t know what you are talking about. First off your assumption that he had a neg am loan (which I concur is not a good loan) or a Interest Only loan (which is not a bad loan)was a bad assumption as to why his balance is 50k higher than what his home is worth.

How would an Interest only make his balance go up and do have any idea of how long he would have had to have made a minimum payment to have 50k in deferred interest? There could be a number of factors as to why he owes more than the home is worth.

And I have never once heard a success story when a private investor steps in and bails you out of a FC and I have been in the lending business for a number of years. Think about it. An investor buys your house that is going into foreclosure do you really think that your payment to them will be lower than what your current payment is? very doubtful.

A majority of these is see are are sold back to the person on a Land Contract at a high rate of interest. The investor typically knows that the buyer won’t be able to afford the home in hopes they can’t repay them so they can cash in on the equity that is left over.

Furthermore why would an investor buy a home that has no equity and is 50k in the hole if he really is that far in the hole? Even if the market value is equivalent to what he owes, the risk seems high for an investor.

[quote]Khronos wrote:
robo1 wrote:
This isn’t legal advice, but don’t allow the house to go to foreclosure. You’re better off selling the house for a loss and then working out a deal with a bank to refinance the remaining $50k.

I concur with this. The worst thing you can do is lose the house through foreclosure. Do everything you can to avoid that. [/quote]

The first house that my wife and I put an offer on was going through foreclosure. Of course we didn’t know that at the time. We found out AFTER the lady accepted our offer. Needless to say, we didn’t buy the house.

The lady had a friend who was a lawyer and he was advising her throughout the negotiations. When we had the house appraised, it was appraised at $4,000 less than our offer. So, we had to rewrite the offer for $4,000 less.

She didn’t accept the offer. She said she just couldn’t accept that for her house. And her lawyer friend told her not to take it. He said that going through foreclosure made more sense than to take a loss on the house. WTF?

So, she basically is living there rent free until they kick her out. She has stopped making her payments.

This all worked out for the better for us because a week later we found a bigger house anyways.

Good luck with whatever you decide but I would say try anything you can to stop the foreclosure. Talk to the bank, they will work with you. If you have never missed a payment before I’m sure they will do whatever they can to help you out.

[quote]dre wrote:

Good luck with whatever you decide but I would say try anything you can to stop the foreclosure. Talk to the bank, they will work with you. If you have never missed a payment before I’m sure they will do whatever they can to help you out.[/quote]

Finally some sane advice.

One more thing. Since you admit to being a big spender, quickly become a small spender. If your credit goes to hell, you will become a small spender, albeit the hard way.

[quote]trailrash wrote:
stumpy wrote:

Don’t listen to this guy…

Why not.

How would an Interest only make his balance go up and do have any idea of how long he would have had to have made a minimum payment to have 50k in deferred interest? There could be a number of factors as to why he owes more than the home is worth.

[/quote]

While an interest only loan won’t make his loan balance go up, what a lot of people are finding out is that the value of the home at the time they wrote their mortgage is no longer the value of the property.

In an inflationary housing market, an I/O mortgage can be a good thing. In a deflationary market, like a great deal of the country is in right now, you can be out a lot of money if you have to sell your house because you haven’t paid off any of the loan principal.

Take this simple example, you have $500k loan principal on a house you paid $550k for 3 years ago. Today, the resale value of the house is only $480k. Because you still owe a principal balance of $500k, you now have to cover the $20k out of pocket.

A lot of these once non-standard mortgages have become normal practices over the last 10 years in order to get people into homes that they really can’t afford. These types of mortgages really should be saved for special circumstances or where the home buyer has sufficient funds anyway but is using the loan to take advantage of tax laws or market movements.

A LOT of people are really getting pinched right now because of I/O loans and ARMs. The average home buyer is almost always better off taking a fixed rate mortgage over the long term. (Please note I said “average” homebuyer). My opinion is that if you can’t afford the payments on a 30-year fixed mortgage, you probably shouldn’t buy that house.

DB

There is one thing that is not clear to me from the OP’s post. Is the house appraised at $50K less than you owe, or was the low number what you expect the house to fetch at auction just in the event of foreclosure?

I do not see any circumstance where letting the home go into forclosure would be the best option.

Talk to your lender first. Many will be able to work out a plan for you rather then a foreclosure. It’s going to be happening more and more if real estate continues to deflate.

For some semi-descent advice from a group of gym rats we will need some more info.

  1. How much do you owe on the loan?

  2. What kind of loan is it? Fixed Rate, adjustable, Interest only, neg Am, etc…

  3. What was the original term of the loan? 15 years, 30 years…

  4. What is the estimated value of the home? you could try housevalues.com

  5. How much money do you have saved?

You want foreclosure to be the last option, your credit will be jacked for most of your life.