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A friend of mine who lives in Sacramento, CA is planning to buy a second home and foreclose his first home which is losing value right now. He also borrowed around 80k from the equity (Equity Line of Credit) of his first house 2 years ago. Now the home's value dropped and he owes more than the home is worth. He also has an Option ARM mortgage and he is expecting his mortgage payment to balloon drastically in 2 months time.
He plans to buy a 2nd home then immediately stop making payments on his first home and just abandon it. What will be the drawbacks of this?
When the bank is reviewing the account for foreclosure they will also review his credit report. Should they see that he has another property the mortgage holder of the Foreclosed property may decide to enforce the judgment of foreclosure and when the original property sells for less that is owed at the sheriff sale they may decide to put a lien on the new property for the balance owed.
Judgments can be renewed in certain states for 10+ year.
In addition to what Karla is saying, his credit will be trashed and he's subject to taxes. He does not qualify for the forgiveness because he took equity out.
He purchased his first home without his wife's name being on it and purchased the second home under his wife's name and without his.
First of all, I am a mortgage broker in Florida. I am an honest broker and have very good relationships with my lenders. I also have a credit background and feel there is a moral issue here. If people had not been so greedy and I told many clients I could not help them....our country would not be like this today! (real estate wise).
The lenders in this case did not use precaution as they should have.
Location: Georgia, on the Florida line, right above Tallahassee
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Purchase a Second Home before Losing the First to Foreclosure - UnArchived Articles (broken link)
It is possible.
Is it wrong? Depends on your point of view. Is it wrong for Florida insurance agencies to stop insuring homes? Depends on your point of view. Is it wrong to charge fat people for 2 seats? Depends on your point of view. Is it wrong to give up a pet who is eating you out of house and home? Depends on your point of view. Is it wrong to eat whale meat? What if it was all you had to eat was whale meat?
I could do this all day.
Since we are not debating morals and are answering a query..the answers are pretty well laid out in the article above. Also, bad debts are sold - much like loans - to debt recovery agencies...and they will review that person's credit history at least yearly, and if they see a recoverable debt...they can disturb your friend's life for many years.
Good luck to your friend...It won't be easy - whatever choice they make
This is pathetic. It doesn't sound like your friend is a very honest and moral person. Your friend sounds like someone who does not take responsibility seriously and doesn't hold himself accountable for his actions based on this. i would also think he will have an extremely hard time getting any kind of credit in his name after he forecloses on his first house. If I was his wife I would be furious at him and NOT do this and would be extremely worried if he were to ever leave especially with the house in just her name.
On a separate note why do i have this strange feeling more and more people are going to do this. Taking no responsibility for there own actions and instead just dumping their homes so someone else can pick up the pieces for them. This should somehow be illegal and those who are caught should pay BIG PENALTIES.
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More Information about his case
Buying a 2nd home...
