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.