sje123

Walk Away v. Bankruptcy

Recommended Posts

Scenario:

state: New York

county: Westchester

OC: Countrywide (now BoA)

mortgage 2x value of house, owner not interested in keeping the house

real estate taxes (already in double digits have doubled)

CC bills: high but manageable monthly

Some outstanding medical bills (less than 5k)

Bank has sent letter giving homeowner 90 days to cure the deficit (is already 90 days behind) but reserves the right to accelerate if owner vacates property.

One lawyer suggests filing for bankruptcy right before 90 days are up.

One lawyer suggests filing bk before the end of the year (to protect next year's tax return)

One lawyer suggests just staying in the house as long as possible and then walking away.

Thoughts?

Share this post


Link to post
Share on other sites

How do you make that decision? What are the pros and cons of each and why does each lawyer suggest something different?

Share this post


Link to post
Share on other sites

This is for a friend of mine that I've spoken about sort of ad nauseum (months ago) on the bk forum (suddenly widowed, took a lesser job to be home with her child, taxes increased [doubled]). She has still yet to pull the trigger on any solution and keeps getting/finding new advice. I don't know if she's deciding not to decide or if there is really some way to figure out the best way to go and she's just not figuring it out.

Share this post


Link to post
Share on other sites
Scenario....state: New York.. Westchester....Thoughts?

I can sympathize with your friends situation, I'm in L.I. with a Law Firm specializing in Mortgages Resolutions. Knowing the death of her spouse was the source of the problems. I understand letting the home and moving on with her life is the best thing she could do. Here is what needs to considered.

Foremost - you have been speaking to the wrong type of Attorney!!! Why would you want to file Bankruptcy if you are looking to let the property go?

First understand like Doctors, Attorney practice (specialize) in many types situations. If you needed a pair of Glasses and went to a Foot Doctor, you would end up only seeing two feet in front of you. Again you have been speaking with the wrong type of attorney.

They are wrong - people file Bankruptcy to save their homes, end up with a Chapter 13 making payments to a trustee, for up to 60 months. If you are looking to leave your property, why would you want to make payments?

There are so many negotiating options to save a home. Doing a bankruptcy is a last ditch option, because it will destroy your credit report and label as a credit risk for several years. Noting some people file Chap 7's when there is a 2nd mortgage. Again this is a mistake, because there are other options to take than filing a B/R.

By being 90 days late - on thin ice, but it hasn't started to crack. New York is a Judaical State, it takes around a year before it goes to court. Right about now you will be receiving paperwork, Notice to File Foreclosure . In 4 to 5 months, you are going to receive Notice of a Mediation Hearing (Governor Patterson signed into last this past year - there are actual two mediation hearings), Then if nothing is resolved - a month later getting a Notice of Court Filing of Foreclosure. Then a hearing to determine a sale date, then 30 days till the property is sold. Here in NY - once your home is sold, there is no redemption.

Bank of America has to go to court to foreclose on your home. That means they have to spend a lot of money in legal fees. Noting you are upside down, and BoA is a Profit Lender. They would lose money taking your home. Why would they spend $30,000 plus on a home that is not worth it? Dealing with BoA directly - you are going to get no sympathy. Each time they call you - rub it in their face about how much is owed and the value. Plus tell them in these words "Default is Imminent". As you can tell - I have a vendetta against Lenders.

Foreclosure - from the tone of your writing, think you understand that is the wrong way to resolve your problems. A Foreclosure is listed for up to 10 years on a credit report. If you have any concerns for your future, what you do today will affect who you become tomorrow.

The cheapest way to let a home go is through a Short Sale. Right away I see a problem - the bank is going to list this for 90 days and it is not going to sell. By not selling it will continue into Foreclose unless payments are made. By careful about people saying that can do a Short Sale. People go out and get the cheapest people they can find. Example a Realtor - what part of a mortgage transaction do they have? Their job is to find the buyer, what experience do they have negotiating with the bank?

People do not understand the legal ramifications after a Foreclosure. New York is different then most states where the Lender can within ninety days after make a motion to recover a deficiency with the courts. Where they have the option to file a lawsuit against you at a later date. I spoke to one individual upstate who had a Deficiency Judgment happen four years after their foreclosure. The had to file chapter seven bankruptcy.

I believe you best option is a Deed in Lieu of Foreclosure. Right away it is negotiated that there will be no further recourse action against you. After that two things happen simultaneously. Your home will be listed for sale for 90 days. Any offers will be presented to the Lender. Also a loan modification is attempted. The problem is the Lender it going to try and modify your loan to you can afford it. If you are going to choose this method - you need to calculate the minimum payment the Lender is willing to modify the payment and make sure the monthly income does not exceed that.

It gets deeper - commenting on the Taxes. Right now BoA is making the payments out of the escrow(?). When mortgage taxes go unpaid, the IRS can obtain a tax levy, which gives them the ownership of the home. If Bank of America wants to keep the their interests, they will continue to pay the taxes. The Fed/State is always in a silent first lien holders position and BoA is in 2nd lien holder position. They can do a government auction for the property.

For me to comment on this further, need to know the mortgage balance (including escrow) and the weekly or biweekly gross income.

One more thing - when it comes to credit card debt, it can easily be settled at a lower amount.

The trick is getting a settlement letter stating - Settled as Agreed.......:)

.

Edited by 2ndTimeAround

Share this post


Link to post
Share on other sites

Short sales are for idiots.

Bad advice but figures from the resident shills here...

The Lender will give YOU the 1099 for the deficiency between the sold price and what was owed on the note-can you say tens of thousands of dollars?

Then you got the IRS on your back.

Better to keep you money, fight the FC and stay 7-12 months in the home, at least.

The only person that wins in a short sale is the new buyer and lender.

Screw them before they screw you.

Share this post


Link to post
Share on other sites
Short sales are for idiots.

Bad advice but figures from the resident shills here...

I suspect there are differing opinions on the matter. Is that what you're trying to say?

Share this post


Link to post
Share on other sites
Short sales are for idiots.

Bad advice but figures from the resident shills here...

The Lender will give YOU the 1099 for the deficiency between the sold price and what was owed on the note-can you say tens of thousands of dollars?

Then you got the IRS on your back.

Better to keep you money, fight the FC and stay 7-12 months in the home, at least.

The only person that wins in a short sale is the new buyer and lender.

Screw them before they screw you.

Do you automatically get a chip on your shoulder everytime you read one of 2nds posts before you have time to read the original question and the complete reply opf the message?

sje123: How do you make that decision? What are the pros and cons of each and why does each lawyer suggest something different?

Now go read the reply over again, and I believe after her friend takes all the advantages, disadvantages, and ramifications of each the answer was pretty clear in this response:

2ndTimeAround: I believe you best option is a Deed in Lieu of Foreclosure. Right away it is negotiated that there will be no further recourse action against you. After that two things happen simultaneously. Your home will be listed for sale for 90 days. Any offers will be presented to the Lender. Also a loan modification is attempted. The problem is the Lender it going to try and modify your loan to you can afford it. If you are going to choose this method - you need to calculate the minimum payment the Lender is willing to modify the payment and make sure the monthly income does not exceed that.

The only way I would not pursue this first, would be in the case where sje has sent a Qualified Written Request, and the lender is unable to produce the note. If the bank does have the original note, then fighting it may give the homeowner free rent for a year, foreclosure will then proceed, and the free rent will not be so free. Forget your MERS theory, the owner of the note can and will be found.

Share this post


Link to post
Share on other sites

You will be on the phone for hours at a time, trying to get through customer service.

You will be hung up on, transferred to the wrong department, or perhaps somewhere in India or the Phillipine 'call center' only to be told to send or fax in paperwork.

You will call back a week later asking if they recieved it and they will tell you they never got it....and they you start the process all over again.

Been there, done that.

I had Several rental properties, all under water, all in depreciating markets.

Screw them before they screw you and dont waste your time.

Keep the property as long as you can and fight the FC, answer and have a defense.

Lots of good ones out there or I can recommend some sources for you..

Share this post


Link to post
Share on other sites
You will be on the phone for hours at a time, trying to get through customer service.

You will be hung up on, transferred to the wrong department, or perhaps somewhere in India or the Phillipine 'call center' only to be told to send or fax in paperwork.

You will call back a week later asking if they recieved it and they will tell you they never got it....and they you start the process all over again.

Gotta give it to you, that's a pretty accurate description. And the behavior you describe are 100% intentional, I believe.

Share this post


Link to post
Share on other sites

I would give my attorney the summons and complaint the minute you are served. Ride it out for about 12 months then file a 13 if possible. Once the automatic stay is in place you can try and get a Loan Modification for your mortgage company. Make sure your attorney submits the Loss Mitigation documents to the trustee for the judges approval. Once you have the approval (Westchester County usually takes a day or two to approve) you'll soon receive a Loan Modification. If they don't take the initiative to modify your loan, as per the Loss Mit, everyone will have to show up for court on the date specified. (Mortgage Company's really don't want Judges modifying your loan so they will usually send you a Loan Mod, before everyone is to appear in court). Once that is signed and binding, downgrade to a 7 to get rid of the rest of your debts.

Share this post


Link to post
Share on other sites
.....option is a Deed in Lieu of Foreclosure. Right away it ...The only way I would not pursue this first, would be in the case where sje has sent a Qualified Written Request, and the lender is unable to produce the note. If the bank does have the original note, then fighting it may give the homeowner free rent for a year, foreclosure will then proceed, and the free rent will not be so free. Forget your MERS theory, the owner of the note can and will be found.

The "Produce Tha Note" statement - it sounds very appealing, as to an easy way out for the homeowner - as not paying for their loan and getting rid of their mortgage problems. You I do not believe in putting all my eggs in one basket.

I agree and disagree with you Mortgageman, in the world of Loan Modifications every situation is different. You say - if the lender is unable to produce the note. I say - what if they they are able to produce the note. What will and will not happen, what might or might now happen is not as predictable is a refinance or purchase. Every case needs to be examined, to steer the enviable.

Last week spoke to a Massachusetts man 4 months down on his mortgage. He was panicking becuase he hadn't heard from his attorney. He just received notice of foreclosure. After talking to him - he told me he paid $750 to a company in California. As soon as he said that, asked him if it was for a Forensics Audit. He said yes, saying he was told he could get a free loan. He was very defensive initially, after I explained everything his tone quickly changed. I told him to do a check reversal to attempt to get his money back.....

The elements of a Forensic audit is getting/ requesting official copies of the Loan Note from the Borrower, Title Company, and the Lender. So they can be examined. This takes a lot of time. In a case just above, the first priority is to save the home, not an audit. One comment further - in my opinion on forensic audits, they are gravely over sold!!!....

The Massachusetts man thought an audit was going to stop the foreclosure. He was wrong - when a home owner is working directly with their bank, in the opposite direction people are working in against the homeowner (as moving to foreclosing on the property). At this point - a deed in lieu, or a short sale is out of the picture. A OWR along with proof the home owner can support their loan, needs to be sent over asap to postpone the imminent foreclosure from happening ...

In a case I could agree with you - applying for a modification, and simultaneously requesting them to produce the note. Side by side - the homeowner is working on two positive tasks in one direction, that can let them continue to live in the home.

This is an example at what happens at larger mortgage banks when payments are missed. In the lenders computer - the home owner is a number, people that are not late trying to apply for a Mod. Most times get denied, because their computer is showing them not late, affording the payments. So there is no sign of a hardship. When home owners go late after 60 to 90days, the primary account is frozen and a suspense account is set up. This new account - any payments made, interest, penalties and fees, tax and insurance escrows, are going into this bottomless hole.

Again every case is different, as to what the borrower has on their plate, to what priorities to work on first, to save them...

:):):)

Edited by 2ndTimeAround

Share this post


Link to post
Share on other sites
I would give my attorney the summons and complaint the minute you are served. Ride it out for about 12 months then file a 13 if possible. Once the automatic stay is in place you can try and get a Loan Modification for your mortgage company. Make sure your attorney submits the Loss Mitigation documents to the trustee for the judges approval. Once you have the approval (Westchester County usually takes a day or two to approve) you'll soon receive a Loan Modification. If they don't take the initiative to modify your loan, as per the Loss Mit, everyone will have to show up for court on the date specified. (Mortgage Company's really don't want Judges modifying your loan so they will usually send you a Loan Mod, before everyone is to appear in court). Once that is signed and binding, downgrade to a 7 to get rid of the rest of your debts.

Tootsie - your statement is not the way to go, here's why.

But first understand when starting a plan - starting at point A, planning to be in a better position/situation at point B. Is like a planning a trip, only having one tank of gas. Trying to take short cuts, going the wrong direction, you will run out of gas and never make it to where you intended to be. What you do today will make you who you are tomorrow, once you get there, you cannot turn back.

Being labeled as a credit risk for the next decade, is stupid and irresponsible! You are mentioning filing a chapter 13, then a chapter 7? Where do you want to be in 7 years, 10 years? The main theme of this website is to improve credit, not destroy credit. !!...

No pun intended towards you - what separates a Mortgage attorney from a Bankruptcy Lawyer. Our main goal is to negotiate a better position. Focusing on three things, - saving the home (postponing foreclosure), all loan arrears restructured back into the loan (sometimes negotiating a principle reduction), and getting the lowest payment possible. Many times the homeowner is not making any payments, the lender is going to want to put them into a Forbearance plan. Because we are a qualified 3rd party representing, we argue the home owner cannot afford any increase in payment, negotiating PITI payments to 31% of the gross income. Point - we are working with a the loan directly, because that is the problem at hand. Then after the modification has been granted on all the "smoke" cleared. Advise home owner to start sending extra into the principle. After a few months it can be reported them as being more responsible, Then rewarded and their credit starts to healing itself.

We have no relationship with the loan - with the Lender, mitigating for the borrower as a third party. We can represent the borrower in court - if needed. I will never recommend a chapter 13, only as a last ditch option - example tomorrow the home is going to be sold.

Going to a Bankruptcy, on a chap 13 - making payments to a trustee. Miss 1 or 2 payments - the Lender file's a "Relief Of Stay" to remove the home from the bankruptcy, and the chapter 13 is discharged. Now you have no protection.

Out of a home, totally shot credit, basically living on the street. Who is to blame? Bankruptcy Lawyer did what you paid him to do.

Again Bankruptcy is putting you into a worst situation.

.

Edited by 2ndTimeAround

Share this post


Link to post
Share on other sites

Is the only reason for you considering BK, just for the mortgage? If not, if you have alot of other debt, then BK would be a good solution. What are the anti-deficiency laws in your state? If they foreclose, do you walk away free and clear, even after the deficiency? If you can stay as long as possible, file bk, get alittle more time, then move on. Alot of the lenders are talkers, but their actions are delayed. I would ride it out as long as possible. I believe short sales do not benefit the homeowner & I am a realtor.

Share this post


Link to post
Share on other sites

I feel sorry for you as you have a bad credit situation but as the participant of this forum has given many many options, so i will not add any thing but i will pray for you to be get out out your problem without losing your property.

Tucson Apartments

Edited by Wallace

Share this post


Link to post
Share on other sites

BK is very tough, but if there is just no way a person can pay back their debts in a reasonable time, then I'd do BK 7. It's legal and protects your assets and peace of mind.

Share this post


Link to post
Share on other sites
Guest
This topic is now closed to further replies.