Foreclosure crisis?
Posted in Renting & Real Estate on 01/29/2010 01:18 am by admin
amanda p asked:
Our home is in foreclosure and to help us save it, my parents want to take out a home equity loan. The thing is the bank gave us a payoff amount of $205,000 for both loans ($165,000 for the 1st and $40,000 for the 2nd). My parents want to pay the 1st mortgage with the loan and we will leave the second mortgage with our mortgage company. I was wondering how that would work as far as the Deed goes? Is it even a possibility? We just want to keep this home and if they were able to do that, it would make our payment very manageable, since we are caught up in the whole sub prime mortgage problem. Any guidance would help. Thanks so much!
MELVIN
Our home is in foreclosure and to help us save it, my parents want to take out a home equity loan. The thing is the bank gave us a payoff amount of $205,000 for both loans ($165,000 for the 1st and $40,000 for the 2nd). My parents want to pay the 1st mortgage with the loan and we will leave the second mortgage with our mortgage company. I was wondering how that would work as far as the Deed goes? Is it even a possibility? We just want to keep this home and if they were able to do that, it would make our payment very manageable, since we are caught up in the whole sub prime mortgage problem. Any guidance would help. Thanks so much!
MELVIN
01/31/2010 at 12:36 am
ROMAN
the first question the 2nd holder will ask is what is the property worth? do u know whether or not you are “upside” down (owe more than the property is worth). the 2nd holder may insist on a payoff or pay down!
Assuming the 1st and 2nd mtg is with the same lender you may be able to swing some type of negotiation! Remind them that it is far cheaper to work with you now than to take back the property. Ask them to lower your interest rate on the note and as a last resort tack on the “arrears” to the back of the 1st loan. Your parents “bailout” gives you leverage in dealing with the lender as they prefer NOT to own property. Remind them of the huge number of competitive listings in your area and the DIRE consequences of their intransigence in not being reasonable with you!!
If you cant afford the payment now, why would your folks risk their place too?
02/03/2010 at 12:44 am
CLAYTON
It sounds like the first and second were at the same company. So now they have combined the two and want to collect for all the money due. This also tells me you did not keep up on the payments on both loans so neither one the first or second will go for that idea.
We are in a declining market and your house may not be worth what it was when you bought it. Also the reason you are losing the house is that it was a 100% finance deal that was obtained with what they call a liar loan or stated income with no docs. There are 2 factors 1. The current value of your home may hinder even your parents buying it. 2. You are putting your parents at such great risk and jepordizing their future.
My advise is not what you want to hear but I sense you are young and you will recover. This is not the end for you. If the bank forecloses you can be purchasing something that you can afford in a couple of years. Put the house on the market and try to sell it at a short sale. Contact your bank and find out what documents you need. Make sure you hire a reputable Realtor. Start the price at a price that will sell and that may be less than what you owe. Do not attempt to do a for sale by owner this would be far to complicated for you. Besides you don’t want the liability.
02/05/2010 at 1:45 am
ROCCO
Thats a really nice thing your parents are trying to do for you. You should give them lots of hugs!!
It really depends. Have you defaulted on both mortgages or just the first mortgage? If you’ve defaulted on both it may do you no good to payoff the first as the lender who holds the 2nd mortgage can foreclose on you anyways. If thats the case, you might want to do a foreclosure bailout loan with a hard money lender. They will finance up to a certain dollar amount usually 50% to 65% of the present value of the home. Your parents can just payoff the rest and save some equity in thier home. When things get better, you can refi out of the hard money loan and into a regular 30 yr or 15 yr fixed loan. Hard money loans are expensive but so is losing your home.
If you’ve only defaulted on the 1st mortgage, then there is nothing wrong with paying it off. Your second mortgage would then take the 1st lien position on your house and you would continue to make payments.
Now if your parents are going to take out a loan and take that money to replace the 1st mortgage with a private mortgage of thier own, you may have some issues. The biggest one is called subordination. In other words in order for any lender or funding source to replace a 1st mortgage that currently has a 2nd mortgage behind it, the lender for the 2nd mortgage has to give permission (or subordinate) to the new 1st mortgage lender to go in front of them. That might be hard to do right now as the 2nd mortgage might want you to pay them off. In todays mortgage climate, that is the most likely scenario especially since you probably owe more than the house is worth.
None of these scenarios should effect your deed or title on the property as there is no sales transaction happening. However, your parents might want to go one title to your house anyways since they might want some type of security on the money they gave you. Someone has to pay that payment you know.
Also, is it really worth it to put your parents in more debt and liability on a house that may never recoup its value? There is life after foreclosure as most lenders will consider you for a loan a few years later. Sure you can expect to have to pay a down payment and a higher interest rate but its a second chance.
Check with a real estate attorney in your area as laws vary from state to state.
Good luck
02/07/2010 at 8:56 am
STAN
The list of various methods to stop foreclosure that is presented below is a nearly comprehensive accounting of the most common ways homeowners can use to save their homes, either by staying in them and avoiding foreclosure, or by getting out of a bad situation with as much of their financial lives intact as possible. There are really no magical ways to end the foreclosure process — but there are enough tools that homeowners have available, that they can choose from a number of options to help them out of their hardship situations.
1. Save up and get current on the mortgage by paying back the payments you’ve missed, plus the interest, late fees, attorney fees, etc. Understand that there are often thousands of dollars of extra charges that are added once you start missing payments and especially if the lender hires a law firm to pursue the foreclosure.
2. Work with the lender to put together a repayment plan, which would require you to put down part of the amount you are behind now and pay back the rest over a period of months, along with you current monthly payment. Usually, repayment plans can be worked out through your lender’s loss mitigation department, and will result in you paying almost twice as much per month as your regular mortgage payment. This is to help you get caught up on the payments you missed while you are paying your original monthly obligation.
3. Work with the lender to modify the terms of the loan to say that the missed payments are spread out over the life of the loan or put on the back end of the loan. This is called a mortgage modification or loan modification. Some lenders will not do this because they do not hold the paper to be able to modify it. This is especially true for mortgage servicing companies, who only service their loans and collect payments, but who do not own the loans.
4. Refinance — find a hard money lender or traditional lender that will consider foreclosure refinance loans. Qualifications include lots of equity and lots of income, since your interest rate will probably be over 10%. Foreclosure refinance loans can be difficult to qualify for and may result in higher monthly payments, but they are a good way for homeowners to get a fresh start with a new note and new lender.
5. If you have an FHA loan, you can get a one-time loan from the FHA that will bring you current and is placed as a lien on the property that you would have to pay back if you sell or refinance the home. This is called a partial claim. You would have to contact the FHA directly for this one time payout to get you caught back up on your mortgage.
6. Sell to a private investor or friend/family member and lease/rent the property back from them. That clears off the foreclosure loan on the property and uses someone else’s good credit to get a new loan and allows you to stay in the property. Investors can also work out short sales on properties, allow they usually do this in the hope of flipping the property by reselling it quickly at a profit.
7. Bankruptcy will stop the foreclosure process, but is usually an expensive alternative to setting up a repayment plan, mentioned above. Attorney fees, trustee fees, court costs, and high monthly payments cause a lot of people to fail their bankruptcies. Only consider bankruptcy if you desperately want to prevent foreclosure and if you have a significant amount of income you can dedicate towards the bankruptcy payments.
8. Short sales are a good option if you owe more on the property than it is currently worth. A short sale means the bank accepts less than what they are actually owed, and would allow you to get out of the loan, at least. The bank would not be able to come after you for the rest of the loan amount, since, by accepting a lower amount, they forgive the rest of the debt owed on the mortgage.
9. Sell outright if the property is worth enough and you have a willing and able buyer. List the house yourself of through a local real estate broker. In some cases, it is the right decision just to unload the house to stop foreclosure and focus on repairing your credit until you can purchase a new, more affordable home in a few years.
10. If 1-9 do not work, you can offer the bank a deed in lieu of foreclosure, which means you’re voluntarily giving the property back to the bank and they are agreeing that the property is payment in full of the loan. This is not much better than a foreclosure, and you have to leave the property anyway, but it will prevent the sheriff sale and eviction process. The bank will not be able to ask for any extra money or sue you for a deficiency judgment, because they accept the property itself as satisfaction of the loan.
11. If 1-10 do not work, you can just move out and walk away and forget about the property. This is definitely not recommended if you care about your credit and plan to borrow money for several years, but foreclosure should teach you not to rely on banks to help you out when you face a hardship. All they really do is promise great deals when you think of going with them, and then throw you to the foreclosure dogs if you miss a payment. Many homeowners simply walk away because the foreclosure situation is so intimidating, but, as listed above, there are numerous options that are better than just giving up on the property.
Those are the most common options that can be used to stop foreclosure. There are a few others (suing your bank, etc.), but they involve much more cost and legal involvement and may not end up stopping the foreclosure process in the end.
Hope that helps more.
ForeclosureFish
02/09/2010 at 8:40 am
REINALDO
You could also contact a loss mitigation company who could help negotiate a loan workout with the lender if you are behind on payments. I am the owner of a loss mitigation company and work on behalf of the borrower not the lender. There are many options that may be available.