Hi there - I'd appreciate any advice on this dilemma. I'll try to make it short: I own a house that is being foreclosed on. It is not my primary residence, so I am willing to turn it over to satisfy the debt. I have two mortgages on the property: a primary and a home equity line. I did about 15K worth of work on it after I bought it, so it now has a new bedroom and a new bath - better than when I bought it. The house has been on the market since October 2002. It has appraised for about 30K more than I owe on it, but the market for sellers is soft. My primary mortgager foreclosed on the house at the beginning of August. It did not sell at auction, so now their real estate division is attempting to sell it. They have not been in touch with the bank that financed the home equity loan. The HE bank has threatened to do their own foreclosure., but has not done so so far. I only work part time, and have no assets of my own except a $2500 station wagon (everything else was acquired by my spouse before we were married). Here are my questions: If the primary bank now owns the home, is my HE loan now unsecured? What happens if the home sells for less than I owe on the two notes? What if it sells for more than I owe? Should I declare BK7 now to shield myself from possible deficiencies, or wait and see what happens when they finally offload the property? Thanks for any help, Poochie
Laws may vary by state - I *believe* if they foreclose, the 1st lienholder would end up buying out the loan to protect their interest in the home. Less = a possible deficiency judgment More = They will pay you the difference. But remember, there will be all sorts of fees tacked on. Don't hold your breath, they are going to dump it as fast as they can, and really don't care about the new bed and bath. It might be worth checking with an attorney, but I believe you could wait until the outcome to make that decision. In fact, with such a big issue, it might be worth $25-50 bucks to ask an attorney all these questions.
Re: Re: Any foreclosure experts out there? Would you believe I shelled out $500 to an attorney and STILL don't know the answers to these questions? I'm getting ready to spend a couple hours on the phone trying to figure this out from the mortgage company. Blech. Thanks Jlynn! I appreciate your help. Poochie
Re: Re: Any foreclosure experts out there? No offense whatsoever to JLynn, but that is not entirely true, and much depends on the lenders and by what state. A 1st lienholder in our state NEVER needs to buy out a second. It is completely wiped out at the sale when the first forecloses. If your Heloc has charged off they will send you a 1099, but will probably send you to collections, unless it is satisfied in the sale. Large lenders like Wells Fargo and Countrywide are very difficult for the owner or second lienholder to deal with and they are interested in getting the property pronto if it has any equity in it. I know some lenders for a fact are not interested in discounting and want to get ALL their money, so they will put it on the market above value. This does work in the 2nd mtg holders favor and ultimately yours. You definitely needed advice from a true real estate attorney. Sometimes deeding the home to the lender in lieu of foreclosure can benefit you in some cases. If you lived in East TN we would have been interested in helping you avoid foreclosure. I would never recommend bk, but I understand why some people file if they end up owing a lot. I would really doubt in your case that if the house is appraised at 30k OVER what you owe on both loans that they couldn't get a big part of that. Although, what percentage of the appraisal do you owe.....like do you owe 90% or only 70%, that is a bigger factor in what you might be able to expect someone to spend on a quick sale. I personally would wait and see what happens at the sale if you have no time to pull it out of default or stop it. How far off is the sale? Only a BK atty in your state can tell you if he can put it off in time. Call some investors in your area, or I can post your info to an investors website. A cash buyer could get it closed quickly. 30k is enough to at least peak many investors' interest. Email me if I can help.
Re: Re: Re: Any foreclosure experts out there? No offense taken...didn't you see me disclaim myself around it LOL! My RE knowledge is TX, and we live in our own little world when it comes to 2nd mortgages. It was only in the past few years that some of the huge restrictions here were lifted, and too date, all mortgage loans combined cannot go over 80% LTV. Also, foreclosure on a 2nd is a judicial foreclosure here.
Re: Re: Re: Any foreclosure experts out there? I am sorry to hear you lost the house. I remember you writing before about all of the things you have tried or were going to try. I would definitely speak to a real estate lawyer to see what you need to do to protect yourself. Best of luck and good wishes! Michelle
Thanks to all y'all. So are you suggesting that I consult with a real estate lawyer as opposed to a BK lawyer (which is essentially what mine does?) Here are some stats, if it matters. I'm in GA. I bought the house for $165 K in april of 2001. One week after I bought it, it appraised for $235 K. I took out a $25K HELOC and used it to add a bathroom and a bedroom, turning it into a 3/2 instead of a 2/1. Then september 11 hit, and the market went screwy because it is an in-town neighborhood that is being yuppified but there are stil issues with drug users in the neighborhhod.. There are still 3/2s selling for upwards of $230, but it is not the hot neighborhood that it was when I bought there. The principal balances are less than $200K although I don't know what kind of fees they've assessed. I don't make much money anymore - all our assets are my husbands from before we got married. I bought the house before we were married. The primary lender foreclosed at the beginning of August, but it did not sell at the foreclosure sale on the courthouse steps. Now they tell me that Fannie Mae is handling the sale, and there is a broker assigned to list the property. I haven't heard anything from the HELOC folks in a while. I'm trying to figure out who owns the house, whether it's still a secured loan, whats going to happen with the second loan, what (if anything) I can do to keep this from dragging on forever. Anyway, thanks again to all of you for taking the time to share your thoughts with me. I really appreciate everyone at CNET! Poochie
