Hi everyone Yes, I am new here...been reading for a while but decided to sign up and participate. THank you to everyone who participates on this forum to help others learn. I have already learned a lot and plan on doing much more! My husband and I decided to invest in rental properties in 2004/2005. We bought several in Arizona. Fast forward to 2009 - we both took pay cuts at work and after a hard long look at our finances, made the decision to walk away from 3 rental properties in AZ. Two foreclosed last month. THe third is taking forever and we have no date yet from the bank when they will finally take it from us. Our credit, which was near perfect, in the low 800's, is now in the 500's-600's. We still own 2 other homes (our primary home plus one rental we kept) We have good job security (they keep cutting our pay, but we wont lose our jobs) and without the 3 rentals, we have some breathing room now. We have continued to pay all of our other debts - 2 other mortgages and a few credit cards with very minimal balances) on time. My questions are: The two properties that foreclosed have Heloc's on them. Both were taken out as purchase money for the properties. Under Arizona law, they are "non-recourse" which means the bank cannot come after us for the balances. We hired an attorney who reviewed our loan documents and confirmed this. The foreclosures have been on our credit for a couple of weeks, but the Heloc's are still being updated (now 180 days late) How long can they keep those on there without charging them off (if I learned the right term?) I feel like the sooner they update our credit report, the sooner we can start moving forward and rebuilding. Since the Heloc's are tied to a house we no longer own, and the bank cannot legally come after us for them..can they continue to negatively impact our credit? I signed up for a credit monitoring service so that is how I am getting the continued updates. I will continue to research and do what we can to rebuild our credit. Any suggestions on what we can do are appreciated. We have never been late on anything our entire lives so it has been a hard thing to grasp. Sorry for those who dont agree with what we did, but we consider it a business decision and simply couldnt afford them after the pay cuts.
Welcome to the forum, and I'm really sorry to hear about what you've gone through. I'm sure there have been a lot of difficult decisions to make along the way. This is certainly an interesting question that I haven't come across yet. Creditors will usually charge off a debt when they finally deem it uncollectible. So, what I've seen and heard in the past is that this could take anywhere from 3-6 months after you become delinquent. You're at 6 months now, so it could happen anytime, or it could still be a few months if the particular creditor is dealing with a lot of foreclosures, etc. Your paperwork could still be lost in the mix. I'm not a lawyer, nor am I familiar with AZ law, but it sounds like you've consulted with an attorney and confirmed that the HELOC balance is uncollectible, so it's probably just a matter of time before the creditor determines the same thing and takes the proper steps on their end. Will your foreclosures recoup the full amount owed on the primary mortgages? If not, the primary lenders may be able to come after you for the difference as well. Again, I know this varies from state to state, and it sounds like AZ might be very consumer friendly. I, for one, thought basically all HELOCs were recourse loans.
I'm no expert on credit repair but my guess is that yes, they can. Why should you feel sorry for those who can't understand that you made a pure and simple business decision and took the only realistic course of action open to you? Be that as it may, I do have a question for you which is who were the plaintiffs in each case? I am well aware that AZ is a non-judicial foreclosure state meaning there was no court action taken to foreclose but who was it that did the foreclosure in each of the 3 cases? That's an extremely important question because it might well be that the entity who foreclosed on you may not actually have had any right to do so. If they didn't then you may have causes of action against them both under state and federal law. Normally I would have recommended that you get a fraud audit done but that won't help you on investment property. Only helps on your primary residence and yes, I'd suggest a mortgage fraud audit be done on your primary residence to see whether or not everything was done properly in that transaction. If not you might be able to take legal action against the lender on your home and get that free and clear or at least a goodly sum of money in recompense for the wrongs they might have done. The only real problem there is trying to find an auditor who will give you a decent job for the money you pay them. Most of the fraud auditors only give you their opinion of what might be wrong but won't give you any usable information in a court of law. The result is a waste of whatever you paid them. One resource you should start studying is Neil Garfield's excellent blog but there are several more. What you need to watch out for is people claiming to be able to save your home but haven't the foggiest idea of how to actually do that. An excellent example is a man who has a web site claiming to be able to save your home. He came to me for help in saving two of his properties but thought he knew more than I did so ended up losing his own two properties. His wife is a doctor and got at least two credit card lawsuits against her and he couldn't pull her fat out of the fire either so she got two judgments against her. That was equally unnecessary because she could have easily won those two cases as well. Some expert, eh?
Thank you both very much for the quick responses. I did a lot of research on AZ law before we walked from the properties. In AZ, much like California, lenders cannot pursue borrowers for purchase money loans. Heloc's were commonly used for purchase money during the housing boom. We did what are called 80-10-10 loans...10% cash down, 80% primary mortgage, and 10% Heloc..they did this to keep the buyer from having to pay mortgage insurance on the loans. Heloc's taken out after the close of mortgage (put a pool in, pay bills etc) are the ones considered recourse. I guess I will have to wait as time goes on, to see what the lender does with our credit. In our case, Bank of America serviced our loans (originally Countrywide - king of the junk loans- good buy B of A!) and they are owned by Fannie May (government backed). B of A is completely overwhelmed with foreclosures, being one of the largest servicer of loans. I wont expect any action anytime soon! Although they sure foreclosed on a very fast timeline and reported our lates & the foreclosures to our credit agencies fast! I dont think we want to bother looking into the loans. The two houses we kept are with different lenders..and I dont suspect any wrongdoing. I will definately keep it in mind though if the bank doesnt handle things right. At this point, we just want to get these things behind us so we can try to weather the next round of pay cuts (july 1st) and start rebuilding our credit. I printed a ton of info from this website and plan on contacting the bank and credit companies to see what I can do about improving our credit. Will let everyone know how it goes. Thanks for your understanding! As for the apology, I wasnt sure what to expect - some people get judgmental! We made no attempt to short sell or modify our homes (we are 99% sure they would have denied us for several reasons per the attorney we hired) we just stopped paying, after a long period of weighing our options. Times are tough these days...for everyone else out there, hang in there! I cant help but feel we are better off without credit anyway
That's about the way I see it too. At least as far as personal credit goes. Mine is bad to the bone these days but I can buy anything I want on my corporate credit but even there I'm not buying anything on credit. I'm building savings, not figuring out how to buy the world's junk. I got plenty of that already. We go to garage sales starting on Thursdays and I usually can find some little thing or other I can't live without (LOL) and we usually spend less than $10 or $20 a week on garage sales. Like most women, she likes knick-knacks and that is usually about all we buy anymore.
Well today is the day I can re-run all of my credit reports (every 30 days is what I pay for) so I did it. One of the two HELOC's is showing status as "CO" which on my report summarizes as: "Unpaid balance reported as a loss by the credit grantor." It also defines a "CO" as chargeoff or collections I am wondering if this means B of A is writing off the loan since it is non-recourse (purchase money) per AZ state law... Hope so...if so, hopefully they will do the same for the other one...
Minor Update I got an "alert" (oh boy) from Transunion today from the credit monitoring service. B of A reported one of our HELOC's as "Charged off as bad debt" like they did on Experian last week...but on Transunion they zero'd out the balance and monthly payment. I'm thinking that is a good thing?! Also, as a result (it was the only change) our credit score jumped almost a hundred points! Great. Can anyone advise if that is the appropriate status (collection/chargeoff) for this type of debt? It was a purchase money loan on a foreclosed house..so under Arizona law, it is non recourse debt (they cant pursue us for it). I was wondering if there was a better status for it to show.
It sounds like the appropriate status to me from what you've described. And when you mention the credit score jump, are you referencing your FICO scores? If not, I wouldn't place much value on the fluctuations.
I'm not sure what exactly the "FICO" refers to...I signed up for a credit monitoring service..it runs credit reports from all 3 credit bureaus montly and gives the score for each one of them. I'm not overly concerned with my credit score at this point..I just want to make sure these things get accurately reported. I want to do as much as possible to make sure the banks dont make things any worse on my credit than they need to!
I don't know which service you signed up for, but you're likely not getting your real FICO scores. You're getting generic credit scores generated by the CRAs themselves, which aren't the scores 99% of lenders actually use when assessing your credit risk. Take a look at this article I wrote about "Credit Scores that Matter", and it should help clear things up for you. If you're not too concerned about your credit score at this point, that's fine. My point is to not get too hung up on the fluctuations in your credit scores, unless you're looking at FICO scores. They're the only ones that really matter.
The one I used is Truecredit.com Runs credit reports for all three including the scores, every 30 days. Also alerts me anytime there is a change... Supposedly....any idea if this cite is a good one?
It's run by Transunion...in fact, I can re-run my Transunion credit anytime I want...the other 2 only every 30 days
Wow, I just went to your article and read it. I had no idea ! Yes, I am paying 14.95 per month for this service. I believe it is the score you are talking about "Vantagescore" because it also assigns a letter grade (I'm currently a D) Not bad for 2 foreclosures with one more pending! $31.95 is a lot to pay...especially since according to my other credit reports, Equifax isnt very used. In fact, I havent had an inquiry there in several years. The only two that most of my banks report to are Transunion and Experian. I had assumed that is why my Equifax score is so much lower than the other two..none of my "good credit" reports there. Out of the 8 mortgages we had, only one reported to Equifax. Any suggestions?
I've never used them personally, but I've heard mixed reviews (as with most credit-monitoring services). And yes, it sounds like it is the VantageScore you're receiving. Anyone else have more to say about TrueCredit.com? If you're in the process of repairing your credit and have the "need" to look at your credit reports constantly and receive notices of changes, paying for a credit-monitoring service isn't necessarily a bad investment. However, for most people, pulling one free report every 3-4 months through annualcreditreport.com is more than sufficient to keep an eye on their reports. The problem I have is that most of these services don't make it very clear which credit scores you will receive. I happen to think that's pretty annoying...in fact, I just tried looking through TrueCredit's service agreement and I couldn't find anywhere in the agreement that tells you which credit score you'll get. Anyway, just don't pay for the service any longer than it's really needed, and you may want to check in on your FICO credit scores at some point in time to get a real gauge of where you would stand in the eyes of most lenders.
Thank you Joshua! I have learned so much from this site. I had no idea I wasnt getting the "real" FICO scores. Yes, they dont make that obvious at all. But I read the fine print and there it was. I guess for now I will keep the service. I keep monitoring everything to see how Bank of America is reporting things. I find it odd there are so many inconsistencies. They report one Line of credit as charged off/uncollectable - and zero'd out the balance. Yet, nothing has been done (other than the 180 days late) on the other one. The foreclosures went through on the exact same day, under the exact same circumstances. I would really like them to zero the other one out too, and do it to all 3 agencies... I know above you said it takes several months for them to update. Is there a "rule" they have to follow as to when they report things? I'm wondering how long to wait before I start blasting off letters to Bank of America telling them to report things...
Glad to hear you've found our site to be helpful! Hearing that makes my day . So, it would seem to me that BOA can basically take as long they'd like to charge off the other HELOC. It's a business decision for them, and sometimes it can happen right away or take quite a bit of time. My feeling is that they'll likely write this one off their books too, and I doubt you'll have to wait too much longer before you see it updated on your reports. Keep us posted!
I hope youre right! I'm thinking in the near future, if they havent - I will write them letters telling them to do so (maybe they will listen??) I was actually very happy to see they did it on the one...that means they are following the law. There is no reason they wont do it for the other one as well - and hopefully all 3 credit agencies also. Time will tell - I'll keep you posted. Thanks again for this great website! I have learned a lot and am continuing to read as I still have much to learn.
For anyone interested: I checked my Transunion credit report today. I see that my lender has closed all of the loans relating to my two foreclosures. They zero'd out the balances on both the first mortgages and the lines of credit (all are purchase money - non recourse loans). The status shows "foreclosure redeemed." This resulted in a reduction of $271,000 debt overall between the 4 loans. That part of it makes me feel better! I'm thinking the status is as good as it gets when it comes to a foreclosure. They havent updated the other two credit agencies yet..at least not that I have been notified of. I can re-run the reports with them next week to get new ones..so I will check again at that time.
