U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Real Estate > Mortgages
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 08-21-2008, 09:06 PM
 
Location: Fort Myers, FL
1,286 posts, read 2,594,674 times
Reputation: 249

Advertisements

Quote:
Originally Posted by whatshouldido View Post
I do have some questions about the lender requiring me to payoff auto and credit cards in order to take cash out. Heck, it almost sounds fraudulent. Why mess around with a 20K cash out when you can go for 100K? 3K for closing costs for a HELOC is rediculous, I think. But like I said, I was in a jam and took out the money just like everyone else did in 2005. Anybody know if the lender requiring me to take a loan for 100K when all I wanted was 20K is kosher or not?

It is no uncommon for lenders to require debts to be paid off when taking cash-out. I don't understand that if you wanted 20k why you had to take 100k out. 30k cash-out, require you to pay off credit cards and cover closing should have been sufficient.

I hate to say it, but perhaps your broker/banker was just trying to get a higher loan amount to make more money.


Also, a little more research uncovered information about Nevada judgements and my particular situation:
The lender can go after my current home, if it is not my homestead. Does anyone know how this breaks down if the state I currently live in does not have homestead laws?

Homestead is a FEDERAL LAW, but states do have there own laws adding to them. you have to file for a homestead at your county court house and then it starts the NEXT fiscal tax year.

The lender can attach a lien to other real property I own. Does anyone know if a quitclaim deed to a trust fund or spouse prevents this? No, my wife is not part of the subject property.

yes they can attach a lien. quitclaim deed EXECUTED at the court does transfer title.

you are not looking for a trust fund, you are looking for a irrevocable or revocable trust
. you should talk to an attorney or CPA or financial adviser about what is best for you. there are pros and cons to both. i personally have a revocable trust that all my assets belong too.

one thing to note though, doing this, the lender can call the loan if you change the title and they find out. which means you would have to pay em. though i have never heard of a problem and have had several clients over the years wait a few weeks after closing to execute the title into the family living trusts.

The lender can garnish 25% of my disposable income. Does this still apply if I'm the Head of Household?
I am not to familiar with the garnishments. i would recommend that you speak to an attorney about this. especially since these are probably very specific states laws regarding this.

a divorce attorney is probably well versed in garnishment laws.
Reply With Quote Quick reply to this message

 
Old 08-21-2008, 09:16 PM
 
Location: meridian, idaho
215 posts, read 684,097 times
Reputation: 111
I am a real estate agent in Idaho and have seen lots of short sales here (as many people have I'm sure) There is another option you can look at which is called "deed in lieu of foreclosure" which means
"the borrower hands over the property to the lender with the lender's consent "in lieu of" waiting for foreclosure. The obligation falls on the lender to sell the house; as in a short sale, the lender typically agrees to forgive the amount by which the mortgage balance exceeds the house's current value." I'm also going to give you some housing counseling places you can contact that can help you with your situation:
COUNSELING RESOURCES FOR STRUGGLING HOMEOWNERS


Neighborhood Assistance Corp. of America
naca.com
1-888-302-6222
ACORN
acorn.org
1-866-672-2676
Homeownership Preservation Foundation
995hope.org
1-888-995-4673
HomeFree-USA
homefreeusa.org
1-866-696-2329

Also you can be taxed after you complete a short sale, and you need to be aware of this, when you complete a property transaction (which a short sale is still considered) you can be taxed by the IRS for capitol gains and on the unpaid portion of the loan, as the IRS can consider this as income and tax you anywhere from 15-30%, many people are not aware that the IRS consider any portion of a forigiven debt as income and will tax it accordingly. There are some exceptions to this rule which I have enclosed:
4 Exceptions to the Rule

The IRS does recognize four situations in which cancellation of debt will not result in tax liability for the seller. A seller may avoid tax liability:
  • <LI type=disc>When the borrower receives a bankruptcy discharge and the deficiency was included in the bankruptcy <LI type=disc>When the borrower is insolvent at the time of the cancellation of the debt. Insolvency would occur when a borrower’s liabilities exceed assets. Note that seller would have to prove this insolvency to the IRS when filing a tax return. <LI type=disc>When the debt was secured by a nonrecourse loan. Under a nonrecourse loan, the lender does not have the legal right to collect a deficiency judgment from any assets of the debtor not pledged to secure the loan. While most home mortgages are do not fall into this category, purchase money loans on a person’s residence are nonrecourse in some states.
  • When the tax liability from the cancellation of debt on an investment property can be offset against other business liabilities and expenses. This exception does not apply to properties occupied as a residence by the mortgagor.

    In many short sales, a seller would be able to qualify under the first two of these exemptions, especially since it was almost certainly necessary to show financial hardship in order to convince the lender to agree to a short sale. However, it is the seller’s responsibility to notify the IRS why the amount in the 1099-C should not be counted as ordinary income. Otherwise, the IRS will consider the forgiven debt as income and penalize the seller for unpaid taxes.

    Hope this helps!
Reply With Quote Quick reply to this message
 
Old 08-21-2008, 09:22 PM
 
Location: Pennsylvania, USA
5,217 posts, read 4,111,845 times
Reputation: 908
[quote=kristinl5;4950610]I am a real estate agent in Idaho and have seen lots of short sales here (as many people have I'm sure) There is another option you can look at which is called "deed in lieu of foreclosure" which means
"the borrower hands over the property to the lender with the lender's consent "in lieu of" waiting for foreclosure. The obligation falls on the lender to sell the house; as in a short sale, the lender typically agrees to forgive the amount by which the mortgage balance exceeds the house's current value." I'm also going to give you some housing counseling places you can contact that can help you with your situation:

The problem with a deed in lieu is that it really is no better than a foreclosure on your credit record. YOu're basically foreclosing on the home making it easier for the bank. If you're going to foreclose and take that hit on your credit, your better of living in the house without paying the mortgage for as long as possible and save your money while you're there.

Short Sale, however, is "settled in less than full " on your credit report and does not affect your score as severely as deed in lieu and /or foreclosure
COUNSELING RESOURCES FOR STRUGGLING HOMEOWNERS


Neighborhood Assistance Corp. of America
naca.com

Bush pased a bill this year called hte Mortgage Debt Forgiveness Relief Act basically stating that income tax on the difference forgiven by the bank will also be forgiven from having to pay income tax on. This applies to a first mortgage in short sale/foreclosure. This applies toyears 2007-2009 and is such an important piece of information when deciding what to tell. It's also one less thing you have to worry about. Many posters keep bringing it up as a consequence... for mor information you can visit the IRS.gov website or simply google it for tons of articles . It applies to first mortgages on residences .. I don't know if it would apply to HELOC or second mortgages.

Good luck
Reply With Quote Quick reply to this message
 
Old 08-21-2008, 09:39 PM
 
Location: Fort Myers, FL
1,286 posts, read 2,594,674 times
Reputation: 249
a first mortgage is simply a reference to the order in which liens are attached to the property. a 2nd is a 2nd. if a heloc is the only debt on a property, it is the 1st mortgage.
Reply With Quote Quick reply to this message
 
Old 08-21-2008, 10:33 PM
 
Location: meridian, idaho
215 posts, read 684,097 times
Reputation: 111
The mortgage debt forgiveness act will not apply here as this home does not fall under the criteria needed:
  • Only applies to mortgage debt forgiven January 1, 2007, and before January 1, 2010
  • Only applies to the mortgage used to buy the home
  • Only applies when the home loses value or the owner's financial condition qualifies
  • The home must be the principal residence, not a second home or rental property
There is a second mortgage taken out, not covered under the act.
You are not living in the home as a primary residence...you will fall under capitol gains

I like the idea of renting out your home and ride it out...rent out to cover your mortgage...but I recommend using a property management company as you are not local and there is a lot of upkeep and watching the property to make sure the tenants maintain it...you'll also have to look at HOA guidelines (if this is applicable) lots of them don't like to have a lot of rentals in their communities and will put in bylaws and caps on rentals.

Last edited by kristinl5; 08-21-2008 at 10:39 PM.. Reason: didn't finish thoughs
Reply With Quote Quick reply to this message
 
Old 08-22-2008, 11:05 AM
 
43 posts, read 189,822 times
Reputation: 32
Kristinl5, the OP's statements:
The debt will be forgiven in that timeframe, if it is forgiven.
Will apply to money used to purchase the home, correct.
The home has lost significant value.
The home was purchased as a primary residence.
Reply With Quote Quick reply to this message
 
Old 08-26-2008, 08:28 PM
 
Location: NationWide
3 posts, read 7,935 times
Reputation: 15
Have you gone to the lender yet with all your documentation? If you have not yet then stop for a second. It is imperative that you do not contact your lender untill all of your ducks are in a row. I would also recommend that you do not personally contact your lender. There are people like myself who specialize in negotiating with lenders. I have a team of people who do it all day long. In fact if you want help with your negotiations we have a 90% success rate once an offer is on the table.

mod cut: advertising removed

Last edited by scirocco22; 08-28-2008 at 11:55 AM..
Reply With Quote Quick reply to this message
 
Old 02-03-2009, 12:02 PM
 
3 posts, read 22,526 times
Reputation: 13
Smile What ever happened whatshouldido?

Hey I read your post, whatever happened? How did it work out and what would you not do again when going through this? What could you have done to make it better?
Thanks!
Good Luck!!!


Quote:
Originally Posted by whatshouldido View Post
Beena, as usual, you look to belittle the poster. Seems you have something personal againt people who are forced to walk away from their mortgages.

Anyway, my 100K cash out broke down like this:
50K to pay off original purchase money second mortgage. 30K to pay off car and credit cards. Yes, lender require I pay them off in order to get cash out. 3K closing cost. That left me with 17K actual cash out. I only wanted to take out 20K to get through a tough spot, but it ended up being 100K! So, I received a total 50K non purchase from the lender. I've spent 24K just on the second mortgage alone in the last two years. In my book, they've gotten alot of it back already. I just don't have anymore to give them. The 20K to pay off the car helped, but the car is now worth about 9K, given that it is a Ford Excursion that I couldn't sell if I wanted to right now. If the lender wants the truck they can have it if they call things even.
I do have some questions about the lender requiring me to payoff auto and credit cards in order to take cash out. Heck, it almost sounds fraudulent. Why mess around with a 20K cash out when you can go for 100K? 3K for closing costs for a HELOC is rediculous, I think. But like I said, I was in a jam and took out the money just like everyone else did in 2005. Anybody know if the lender requiring me to take a loan for 100K when all I wanted was 20K is kosher or not?

Also, a little more research uncovered information about Nevada judgements and my particular situation:
The lender can go after my current home, if it is not my homestead. Does anyone know how this breaks down if the state I currently live in does not have homestead laws?
The lender can attach a lien to other real property I own. Does anyone know if a quitclaim deed to a trust fund or spouse prevents this? No, my wife is not part of the subject property.
The lender can garnish 25% of my disposable income. Does this still apply if I'm the Head of Household?
Thanks for your responses.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Real Estate > Mortgages
Similar Threads
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2018, Advameg, Inc.

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top