Foreclosure and bankruptcy question (auctioned, foreclosed, negotiation, second mortgage)

[nellieschi]

I live in Missouri. I bought my house in 2005. I had an 80/20 loan. I refinanced my second in 2007 to pay off debt. I was forclosed on in March 2012 and haven't heard from first yet but second contacted me and I said they had talked to my realtor and found out house had sold in forclosure. I had contract for short sale but was forclosed on. Second said didn't get all paperwork for short sale. Second says I am still responsible for debt which is 40k. I spoke with a bankrupcy lawyer and he said they could come back on me. Is this true?

[Bill Keegan]

Originally Posted by nellieschi

I live in Missouri. I bought my house in 2005. I had an 80/20 loan. I refinanced my second in 2007 to pay off debt. I was forclosed on in March 2012 and haven't heard from first yet but second contacted me and I said they had talked to my realtor and found out house had sold in forclosure. I had contract for short sale but was forclosed on. Second said didn't get all paperwork for short sale. Second says I am still responsible for debt which is 40k. I spoke with a bankrupcy lawyer and he said they could come back on me. Is this true?

Why would you doubt the word of your bankruptcy lawyer and expect to get better information from random posters on an internet forum?

[eskercurve]

Originally Posted by Bill Keegan

Why would you doubt the word of your bankruptcy lawyer and expect to get better information from random posters on an internet forum?

I wouldn't jump the gun yet on that ...

I'm no lawyer, but let me ask the OP:

Did anyone give to you, IN WRITING, that you were foreclosed on or that you were under contract for a short sale? Do you have purchase and sale agreement for a short sale that was signed by a buyer? If so, I don't see how you could have been foreclosed on instead of in a short sale.

Find a second opinion and bring EVERYTHING in writing that you have.

Unfortunately, if nothing was in writing and everything you do have in writing says you were foreclosed on, then yes, you were foreclosed on. Word of mouth has no legal standing.

[Silverfall]

Originally Posted by nellieschi

I live in Missouri. I bought my house in 2005. I had an 80/20 loan. I refinanced my second in 2007 to pay off debt. I was forclosed on in March 2012 and haven't heard from first yet but second contacted me and I said they had talked to my realtor and found out house had sold in forclosure. I had contract for short sale but was forclosed on. Second said didn't get all paperwork for short sale. Second says I am still responsible for debt which is 40k. I spoke with a bankrupcy lawyer and he said they could come back on me. Is this true?

In Oregon this would be true because of the refinance, but it depends on your state laws. It is not at all unusual for a house to be auctioned off during the middle of a short sale negotiation. They are two different departments.

[Modification Specialist]

Originally Posted by nellieschi

I live in Missouri. I bought my house in 2005. I had an 80/20 loan. I refinanced my second in 2007 to pay off debt. I was forclosed on in March 2012 and haven't heard from first yet but second contacted me and I said they had talked to my realtor and found out house had sold in forclosure. I had contract for short sale but was forclosed on. Second said didn't get all paperwork for short sale. Second says I am still responsible for debt which is 40k. I spoke with a bankrupcy lawyer and he said they could come back on me. Is this true?

Banks are very predictable - let me explain..... If they are going make/recoop money that is the course they choose. If they are going to lose money, that is the way they avoid. They make there decision based on what is the most cost/income effective choice.

Your answer is yes; they can come after you with a deficiency judgement awarded in civil court. But chances of this happening are small. due to it will be too expensive for them the risk getting anything in return. Ultimately it depends who big your 2nd mortgage is/was.

Chances are you are going to received a 1099C, which is cancellation of debt. You may or may-not be able to write off in your taxes. See IRS.gov.

For the first mortgage to decide to foreclose on you, they do a NPV test to determine it is cheaper to foreclosure compared to if they lowered your interest rate to a payment you can afford. The first lender determined you did not have the income to continue your loan and foreclosed.

The second mortgage is going to do the same thing. They have no consideration for you. They are going to select the most profitable /least cost effective way out of the mess.


G.L......

[oswingrant]

Well if the 1st foreclosed, the 2nd knows that you will not pay of the loan, so they will try settle with you to try to get something out of you since the 1st lien is the lead lien. But more than likely nothing is going to come out of it except the 2nd will try to collect from you.