Foreclosure University Blog

Question: What should i do?

Answer: -Well, you can try to settle the debt with them and pay them a fraction (5% -10%) of the original loan amount, you can do nothing and hope they issue you a 1099 in which you will have to pay taxes on that money you received, or they will file a deficiency judgment against you in which they can garnish wages and so forth until that amount is paid.  If it goes that far, most people will file bankruptcy and either get it wiped out completely with a Chapter 7 or agree to pay the lender a certain amount (5% – 10%) over a period of time with a Chapter 13.

Question: Does the fact that my mortgage is 55% of my income help me prove financial hardship?  Can I short sell my condo to my fiance before we get married?  Should I consult a real estate attorney or an agent for help?  Any help on this would be greatly appreciated. Thank you!

Answer: -55% is a lot, but may not prove financial hardship, unless you’ve had a loss in income or increase in bills or something like that.  You can short sell you home to anyone you want as long as they are not related, but you also risk not getting the short sale approved in which then your home will go to auction and then the 2nd may file a judgment against you for the amount they lost.  But if that’s your best option then, yes a short sale is a great route to go.  I would definitely seek help from an agent if you need to find some buyers…or investors in your area would probably love to do a short sale on them.

Question: Who is liable for paying unpaid property taxes when I buy a foreclosed home from the bank?

Answer: -Typically property taxes are senior to any lien on the home including the mortgage…meaning they have priority over everything.  So if you are buying a property at the auction, it’s important to research the property and get a title report so you know if there are any unpaid property taxes because you or the winning bidder will be responsible to pay those off.  Now if you buy or purchase a property that is REO or in other words “bank owned” then they will pay any of those unpaid property taxes so they can sell the property with a clear title.  Hope that helps.

Question: We have heard recently from IRS that we may not qualify for the 1st time Home Buyer’s Tax Credit because of our past ownership. We foreclosed on our home due to business failure in January 2006. Home went to courthouse auction May 2006. New Home was purchased and closed on Aug 25th 2009.

At what point of our Michigan foreclosure process would one be no longer legally be considered a home owner of that foreclosed property? Assuming it would be as of the auction date May 2006 then it would be over 3 years from purchase date of new home. Or is the redemption period included as ownership?
The Question is: Do we legally Qualify for 1st time Home Buyers Tax Credit?
Deborah

Answer: -Yes from what you’ve described, it sounds like you would qualify for the 1st time Home Buyers Tax Credit based on the 3 years of non-homeownership that qualifies a person to receive the tax credit.  However, the IRS must be taking into account the redemption period time, which I believe in Michigan is anywhere from 6 months to 1 year depending on the property, after which time you would technically not own the property anymore.  There are other “things” that would disqualify you from receiving the 1st time Home Buyer Tax Credit, but if the IRS specifically told you it was because of past ownership, then I can’t think of anything else that would cause your ownership of a home to be less than the 3 years stated.  Maybe someone else can shed more light on this…or you can google IRS First-Time Homebuyer Credit Questions…it has a ton of answers there.  Good Luck.

Question: my x husband and I bought a home through USDARuralDevelopement program. We have our property taxes deferred because we are over 62. My question is one of us cannot afford the payment. We were told by a RE Agent that we can be “forgiven” one time on all we owe? Is this true? and as far as the property taxes can our Social Security be garnished?

Answer: -  Yes, there is such a program called Senior Citizens Tax Deferral Program and like everything else you must meet certain criteria in order to qualify, like Age, Income and how long you’ve Owned the home.  And as far as I understand it does not eliminate your property taxes, it only lowers the amount you have to pay in property taxes and “defers” the rest.  Each state may have different qualifications so you may want to contact the Property Tax Division in your state to get more info on it.

Question: I have a home in Florida with sever construction defects.
The house cannot be sold and does not have any real value (actually a negative value).
We have received a rather insufficient insurance settlement from the contractors’ policy.
Since the settlement was not enough to cover the existing mortgage and provide provide a new place to live we are planning to use that money to set up a new primary residence in Arizona Can we then offer a Deed in Lieu Foreclosure? Can they take our Arizona home.
PS: There is no record with the county or is there anything from the insurance company defining how we use the money.

Answer: -First lets address the whole insurance thing.  As with any insurance policy or insurance claim, it’s there to be used to fix or rebuild whatever was insured.  So that’ s up to you how you want to handle that.  In terms of offering your lender a deed in lieu of foreclosure is definitely a possibility as long as there are no other liens or mortgages on the property.  As for your Arizona home, if you didn’t pledge it as collaterial for the Florida home, then no…they can’t take it.  The worst they can do is sue you and file a judgment against you for the amount they lost.  Very rarely happens, but it can happen.

Question: How long after foreclosure do I have until I have to be out of my house?

Answer: -Well it depends on your states laws as to how much time you have until you have to vacate your home.  If you live in a trust deed state where the redemption period is before the auction, then you’ll have a few weeks to a month to leave your home.  If you live in a state where foreclosure is filed judicially, typically the redemption period is after the auction so again depending on your states laws and redemption period after foreclosure, it could be a few months up to six months.

The best way to find out how long after foreclosure until you have to be out of your home is to call up a title company and ask them or you can visit your State Laws page and see when you redemption period is.

Question: What is involved in a short sale?

Answer: -This is a great question…the short sale process involves several steps.  First the homeowner falls behind on payments because of some hardship or challenge and can no longer make payments.  The house is over leveraged, so the loans are more than what the house is worth, so it makes it near impossible to sell.

If you are the homeowner, here is what is now involved in a short sale…

Homeowner – Buyer/Investor/Agent approaches you to buy your home for less than what it’s worth.  You have to concent or authorize buyer to talk to lender about loan(s).  You will fill out some paperwork describing your financial hardship, describing your current financial condition, and most likely you’ll also provice some pay stubb’s if you’re employed, bank statements, W2’s, etc.  You will be asked to cooperate fully with the buyer to get the short sale pushed through.  Once the offer is accepted, you’ll have to sign some more paperwork basically disclosing to you the terms of the short sale agreement and you’ll go to closing and be done.  Then you’ll have to move out of your home if you haven’t already.  Then the bank will either 1099 you for the difference they lost or they can file a deficiency judgment against you.  But a good short sale expert can eliminate the whole deficiency judgment option all together, so really you just have to worry about the 1099.

If you are the buyer or investor, this is what is involved in a short sale…

Buyer/Investor – First you will fax the authorization letter to the bank, the homeowner just signed and wait 24 to 48 hours.  Then you will request a “short sale” or “workout packet” from the bank.  In the packet will be everything the lender requires in order to accept a short sale.  Fill it out completely and make sure you include everything the lender requires.  Once everything is filled out, send it back to the lender and start looking for an end buyer.  If you already have your list of buyers, call them up and let them know about your deal.  You’ll use wet funds to close your deal and sell the property to your end buyer.  You make your money and do it over again.

Question: Can an individual get a home modification for a home equity loan?

Answer: -Anything is possible if the mortgage company is motivated enough.

Question: I had an investment property go into foreclosure 9/1/09 in Arizona, Maricopa county. The home has a first mortgage for 160k and purchase money HELOC for 20K. Neither loan was ever touched after the purchase. On Aug 17, 2009 Countrywide sent me a letter informing me the HELOC will have a new servicer Real Time Resolutions, INC.
On 9/5/09, I received what seems to be an attempt to collect from Real Time Resolutions, INC. it states I have, “30 days to dispute the validity of this debt or any portion thereof, this office will assume this debt is valid.” The payoff they are requesting is $ 21,193.74 which I am assuming is the HELOC plus fees.

Is this allowed or legal, can a new servicer attempt to collect on the Heloc since the home has already gone into foreclosure? Should I meet with a lawyer or am I okay ignoring these letters?

Please advise and thanks for your time,

Aaliyah, Gilroy CA

Answer: -This is normal protical and yes since your loan was “sold” to a new servicer, they can try to collect the debt.  So they will send you certified letters in the mail every month telling you how much you owe and that it’s an attemt to collect the debt.  You don’t need to respond unless you are disputing the action and I’m sure they will try to call you every week and threaten you to pay…or else.  By sending these letters, it gives them the right to proceed with foreclosure if they want.  However, we all know they won’t unless there is substancial equity in the property.  More than likely they will just write it off as a loss and 1099 you for the difference.