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We have a house that our realtor thinks is worth approx $125,000 due to the economy. Our first mortgage is $130,000 and HEL is $46,000. Our first is working on a Modification but taking months over it. We have talked to first and second and both verbally okayed a short sale (2nd will be happy with 10% of owed amount). So we are going to get it listed. The problem is I was laid off 15 months ago and have tried without success to get another job. We are now at the end of our savings (and 401k gone) and have no other place to get the money. What will happen if we are unable to pay the 1st or 2nd (or both) during the listing period? Will the arrears have to be paid before we can complete a short sale? Can they foreclose on us during the process? We don't know what else to do. We are currently selling what we can from the house to pay for food.
The amount of properties that are in default, but not forclosed on that
have been in this condition for MORE THAN 12 months is incredibly high.
Therefore, the chance that they would get to you and foreclose before
even the maddenly long short sale process was complete is very low.
Unlike you, many of them are using their houses like an ATM all over again
and just living in a place - squatting - without paying any rent. This is
believed to be a major source of the "economic recovery" that the economy
is experiencing. It's easy to consume when you have no housing expenses.
The smart ones are banking the saved expense rather than consuming
it, but I have never seen a breakdown of the people saving the money
and the people spending the money.
I'm assuming that I would be irritated by such a breakdown.
It's too bad you spent your 401k money. The entity that
owns your mortgage does not deserve that money.
Here in California (and many other states) they can foreclose on you during the short sale process, but not sure if they can do that in Georgia. I suspect they may be able to though.
If you are under contract for the short sale and things are progressing smoothly then odds are they won't choose to foreclose, as that would just delay their mortgage getting paid off since they'd have to go through the foreclosure process, re-list it, etc.
Most homeowners who are doing short sales aren't paying their mortgage, and may have even gone 90, 120 days late where the lender would have the legal right to the start foreclosure process. I've had friends and clients who haven't made mortgage payments in over a year and the lender still hasn't taken back to the home, it just depends on how marketable the home is, if it's in a slow demand market they will probably just let the homeowner hold onto it until there is a buyer.
I am not telling you to not make your mortgage payments, but if it was me and food for my family or paying the mortgage, I'd choose food for my family. I truly hope things work out for you and you are able to find employment soon.
I'm assuming that I would be irritated by such a breakdown.
It's too bad you spent your 401k money. The entity that
owns your mortgage does not deserve that money.
I think I would be mad about that breakdown too, I read all the time about people who have just quit paying their mortgage for the hell of it and are living it up on vacations and eating out. We went 15 days without making the main mortgage payment and I could barely sleep. Finally got it together just before the grace period ended. We are trying really hard not to go over 30 days late because I want to eventually get back into the financial services industry (if I can ever get a job!) and having screwed up credit goes against you for that industry.
And yes, I used the 401(k) money thinking it would keep us going til I found a job, but then the job never came and before we realized it, almost everything was gone. We have a little left in there, but are loathe to use it for the mortgage, when we know property taxes are coming due in a couple of months, and I'd rather not cross the line of owing taxes, so we are holding on to it for that, or for if we need to pay rent in advance once this house is gone since I don't know how bad my credit will be affected.
Shane - thanks for your comments, and your kind words. I appreciate all the input from everyone.
I don't know if a state by state thing, but in Virginia, they can certainly foreclose on you in the middle of the short sale process. Keep in mind, they are most likely different depts in the bank, and they probably aren't talking to one another.
I have a friend who was trying to buy a short sale, and the bank had started the foreclosure process. The bank approved the short sale, but the owner/seller did not get the notice before the house was auctioned off at the court house. The two depts of the bank weren't talking to one another.
I doubt the bank would try to make you pay back payments on the house to short sale, as typically the reason most people are ss'ing is due to hardship and they are out of money. Keep in mind a SS doesn't mean the bank can't come after you for a deficiency judgement (this may depend on state). However if you do SS, make sure you have a good realtor or lawyer to help you get the bank to give up this right. The banks can also ask for anything to approve the SS. They might ask you to sign a note for the diff, pay them some cash, etc, in order to approve. This is all part of the negotiations.
Also if you don't pay the taxes, that is just something else that will have to paid at closing, which will just reduce the banks net along with realtor fees.
As far as not paying the 1st or the 2nd, most likely the 2nd won't force a foreclosure, if the house were sold off, the 1st has to be made whole before the 2nd gets anything. In your case they wouldn't get a dime.
The reason short sales take so long is the bank is sizing up which is more profitable to them. It also has a lot to do if the home is in a state with a redemption period. (If the home is in a state with a redemption period, Fannie will not buy the purchaser's loan if the time period is not met). Check on your state's redemption period here: Foreclosure Laws and Procedures By State If your home is in a redemption state, your short sale odds just increased.
Once the bank gets the short sale request, a BPO or an appraisal is immediately ordered. We don't know the magic number, but the net to the bank has to be within a certain number, or it's more profitable to foreclose. If you have a second, well, the first lender could not care less and everyone needs the 2nd lender to play ball. Until you have that signature with the conditions of the approved short sale, you have zip, nada, nothing. We had a short sale in process for 13 months that Bank of America just denied June 30th. We had every indication to believe we were at the finish line and had everyone racing to get things into closing. Even more distressing, the terms of the denial were not specific. They aren't required to give a reason, so there is nothing anyone can do.
And let's face it, I'm sure they are taking some pretty nasty calls these days. We fully expect the person at the bank to understand they are talking to a person, a breathing, feeling being, but we forget the person at the other end is also the same.......they, too, are trying to put food on the table for their family. I've fielded a few calls for our bank (where a realtor had given my name to a friend of a friend as a possible contact at the bank) and I've got to say, some of the callers were very rude and threatening when I told them I had to refer them to another department. They didn't want to call the designated 800 number, so it's my fault. But I try to understand the fear of losing everything can create uncharacteristic behavoir, but even then, there's no excuse for some of the comments, and yes, threats. So, while I have no reason to believe the OP would behave this way, I'd like to give the gentle reminder to take the anger out of the call. It will only hurt your situation. I've now read the 800 folks now, like bill collectors, use psuedo names, and their physical location is not given out. Even the Fed Ex deliveries are not first delivered to the loss mitigation departments. Sad, huh?
Like Shane said, we can't tell you not to make your mortgage payment. It comes with our employment territory. But it's painfully obvious, you have reached the end of your time at the home. Assume the shortsale process takes 6 months - could you hang in that long? Nine months? My point is, is your credit taking a hit inevitable? If so, it may be prudent to hang onto your cash now. If you can hang onto your credit history, you could be eligible to buy a home as soon as you are employed - but a short sale due to loss of job is going to take some convincing your employment is secure.
It's a tough situation and I know it looks bleak......but surround yourself with experts (experienced short sale agents and attorney). Good luck and take any small comfort knowing you are not alone.
The reason short sales take so long is the bank is sizing up which is more profitable to them. It also has a lot to do if the home is in a state with a redemption period. (If the home is in a state with a redemption period, Fannie will not buy the purchaser's loan if the time period is not met). Check on your state's redemption period here: Foreclosure Laws and Procedures By State If your home is in a redemption state, your short sale odds just increased.
Once the bank gets the short sale request, a BPO or an appraisal is immediately ordered. We don't know the magic number, but the net to the bank has to be within a certain number, or it's more profitable to foreclose. If you have a second, well, the first lender could not care less and everyone needs the 2nd lender to play ball. Until you have that signature with the conditions of the approved short sale, you have zip, nada, nothing. We had a short sale in process for 13 months that Bank of America just denied June 30th. We had every indication to believe we were at the finish line and had everyone racing to get things into closing. Even more distressing, the terms of the denial were not specific. They aren't required to give a reason, so there is nothing anyone can do.
And let's face it, I'm sure they are taking some pretty nasty calls these days. We fully expect the person at the bank to understand they are talking to a person, a breathing, feeling being, but we forget the person at the other end is also the same.......they, too, are trying to put food on the table for their family. I've fielded a few calls for our bank (where a realtor had given my name to a friend of a friend as a possible contact at the bank) and I've got to say, some of the callers were very rude and threatening when I told them I had to refer them to another department. They didn't want to call the designated 800 number, so it's my fault. But I try to understand the fear of losing everything can create uncharacteristic behavoir, but even then, there's no excuse for some of the comments, and yes, threats. So, while I have no reason to believe the OP would behave this way, I'd like to give the gentle reminder to take the anger out of the call. It will only hurt your situation. I've now read the 800 folks now, like bill collectors, use psuedo names, and their physical location is not given out. Even the Fed Ex deliveries are not first delivered to the loss mitigation departments. Sad, huh?
Like Shane said, we can't tell you not to make your mortgage payment. It comes with our employment territory. But it's painfully obvious, you have reached the end of your time at the home. Assume the shortsale process takes 6 months - could you hang in that long? Nine months? My point is, is your credit taking a hit inevitable? If so, it may be prudent to hang onto your cash now. If you can hang onto your credit history, you could be eligible to buy a home as soon as you are employed - but a short sale due to loss of job is going to take some convincing your employment is secure.
It's a tough situation and I know it looks bleak......but surround yourself with experts (experienced short sale agents and attorney). Good luck and take any small comfort knowing you are not alone.
Smart Money is right on track about the process of a foreclosure. First let me say I understand what you are going through. I am not soliciting you, only trying to help you understand your position.
The link Foreclosure Laws and Procedures By State, right away you will find out if you are in a Judicial or Non Judicial state. Judicial states - the lender has to go through the court system in order to foreclose upon a house. Typically it takes 8 to 10 months before it goes to court, then a sale date is set. It can take longer then a year,
In a Non Judicial states after four months of non payment, the sheriff can come knocking at your door to evict you. (Above Shane mentions Georgia? Not sure if that is your state. I have talked with home owners who lost their homes promptly after four months of non payment). It is up to the lender on how fast they move to foreclose upon a home.
Here's the pros and cons of a short sale vs walking away from your home, vs a deed in lieu.
By doing a short sale is not the best way to walk away from your home. Normally a short sale is arranged with your lender for a period of three months of a being listed with a Realtor. If you are not making payments and in foreclosure - if the house does not sell, it can continue into foreclosure.
If there is an offer and the house does sell for less than the amount you owe on it. Expect at the end of the year a 1099-c, the amount it sold less to what you owe will be treated as income. Now you have the IRS knocking at your door.
-OR-
If the house does sell, the lender can track you down later and file a deficiency judgment. This is for the difference of what you owed and the selling the price. The lender will try and reclaim this by filing a judgment. Once you have a judgment, a sheriff can confiscate person property.
-The bank will do one or the other -
Walking away totally from your home is the worst thing you can do for your future. Having a foreclosure listed on a credit report, can be there for up to ten years. Not to mention not being able to own anything. You will be digging a hole so deep that nobody will be able to help you. Anything you do will cost you much much more. Again walking away from a home is ill-responsible and you will pay for it later.
The best way to let a house go is through a deed in lieu. Your income and expenses are reviewed to see if you can afford the home. If you show there is enough income, you can receive a loan modification. If you are found you cannot afford the house. The next step would be listing the house for three months through a short sale. If it doesn't sell, you walk away from the property free and clear.
What I said above is a typically the way it's done. I have worked helping home owners save their homes for almost three years. There are so many various differences between the states, the lenders, the homeowners, the value, the amount owed, ex... It is impossible to look into a crystal blue and tell you the future.
Suggestion - one thing I have noticed with home owners facing foreclosure. They are learning to reinvent themselves to make another source of income. Spoke to a man in Illinois last year after he was laid of a state job. He started his own business by going to home depot parking lots putting advertisements on windshields about his own cleaning business. In January he was looking to hire people because he had too much work.
Good Luck
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Last edited by Modification Specialist; 07-06-2010 at 05:14 PM..
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