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Dennis Drake
321 Posts |
 Posted - 02/03/2010 : 1:37:54 PM
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http://finance.yahoo.com/news/Mortgage-lenders-pursue-cnnm-3107909798.html?x=0
Mortgage lenders pursue homeowners even after foreclosure
by Les Christie, staff writer, On Wednesday February 3, 2010, 3:21 pm EST
As terrible as it is to lose your house to foreclosure, at least it's a relief to put your biggest financial headache behind you, right?
Wrong.
Former homeowners may still be on the hook if there's a difference between what they owed on their mortgage and what the bank could sell it for at auction. And these "deficiency judgments" are ticking time bombs that can explode years after borrowers lose their homes.
It can even happen to people who got their bank to approve them selling their home for less than it is worth.
Vanessa Corey, for example, short sold her Fredericksburg, Va., home in April 2008. She and her husband built the house in 2004, but setbacks, both personal (divorce) and professional (housing bust), made it impossible for the real estate agent to keep her home. So she negotiated the short sale and thought that was the end of it.
"My understanding was that the deficiency was negotiated away," she said. "Then, last November, I got a letter from a lawyer telling me I owed my lender $65,000. I had to declare bankruptcy. There was no way I could pay it."
Many homeowners are now in the same boat. And not just those who took out bigger loans than they could afford or who did so called "liar loans" where they didn't have to verify their income.
Because of falling home prices, borrowers who always paid their mortgage but who have run into unforeseen circumstances -- like unemployment or a job transfer -- can no longer sell their homes for what they owe. As a result, they are being forced to short sell or foreclose and are getting caught up in deficiency judgments.
"After the banks foreclose, it's very common now to have large deficiencies with houses not worth the balances owed," said Don Lampe, a North Carolina real estate attorney.
Lenders mostly declined comment. Although Corey's lender, BB&T did indicate it was pursuing more deficiency judgments.
"They follow the rise and fall of foreclosures," said the spokeswoman, who would not discuss Corey's account.
Can they come after you?
Whether banks can and will pursue deficiency judgments depends on many factors, including what state the borrower lives in and whether there's a second mortgage or other liens. But if borrowers ignore the possibility of deficiencies, it could haunt them.
"Once they have a judgment, they can pursue you anywhere," said Richard Zaretsky, a board-certified real estate attorney in West Palm Beach, Fla. "They can ask for financial records, have your wages garnished and, if you fail to respond, a judge can put you in jail."
In the case of foreclosure, lenders can pursue deficiencies in more than 30 states, including Florida, New York and Texas, according to the U.S. Foreclosure Network, an organization of mortgage law firms.
Some states, such as California, are "non-recourse" and don't allow deficiency judgments. But, even there, if the original loan was refinanced, some or all of it may be subject to claims.
Deficiency judgments on short sales and deeds-in-lieu can happen in many more places. In these cases, extinguishing the debt is often a matter of negotiating with the bank.
But even when lenders are willing, many borrowers may not be aware that they have to ask for release. So, if you are pursuing a short sale, be sure your attorney asks the bank to release you from any further obligation.
"People shouldn't have a false sense of security that a deficiency judgment may not be later sought," Zaretsky said.
He expects many will be filed over the next few years, based on the fact that banks have sold many of these accounts to collection agencies and other third parties, at discount.
"The parties who bought those notes wouldn't have paid money for them unless they had the intention of acting," Zaretsky said.
Ticking time bomb
What can be scary is that the judgments don't have to be obtained immediately. Lenders or collection agencies may wait until debtors have recovered financially before they swoop in. In Florida, the bank can wait up to five years to file. Once the court grants a judgment, the lender has 20 years there to collect, with interest.
It doesn't have to be a large amount of debt for a lender or collection agency to come after borrowers. Richard Varno and his wife short sold their Nashville home back in 2004 after he lost his job.
It wasn't until 2008, when the second lien holder asked him for $25,000, that he realized he still was liable.
"I told them, 'Hey, you guys released the title,'" he said. "As far as I know, I'm off the hook."
He wasn't. Releasing title does not necessarily end the debt. It's complicated because of variations in state law, but, generally, a mortgage has two parts: a pledge of collateral, represented by the home, and a promise to pay off the loan.
Lenders may release property liens in order to facilitate short sales without releasing borrowers from their obligations to pay under the promissory notes. The secured debt can convert to an unsecured one after the sale.
Zaretsky had one client who was so relieved to have arranged a short sale that he signed every paper his real estate agent shoved at him, even a confession that clearly stated he still owed the debt.
"He had no idea what he was doing," said Zaretsky. "All the lender had to do was go to court to convert the confession into a deficiency judgment."
Lenders are also very inconsistent. One of Zaretsky's short-sale clients was ready, willing and able to pay, but the bank did not even ask; another lender always reserves the right to pursue the deficiency.
Strategic defaults
Sometimes lenders go after borrowers walking away from their homes if they have other assets, according to Florida real estate attorney Larry Tolchinsky.
"Banks are pulling credit reports to see if it's a strategic default," he said. "If you're behind on all your other payments, you're okay. But if you're not, they'll come after you."
If borrowers have any doubts about their risks, they should seek legal advice. Or, at least, call non-profit organizations such as NeighborWorks for advice. According to Doug Robinson, a NeighborWorks spokesman, its counselors always try to negotiate away deficiencies when they facilitate short sales or deeds-in-lieu.
"We don't favor any short-sale contracts that leave any deficiency that can be pursued," he said.
Robinson himself knows what can happen. He paid off a deficiency after his own New Jersey house went through foreclosure 11 years ago.
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eh6794
1599 Posts |
Posted - 02/03/2010 : 1:44:12 PM
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quote:
Originally posted by Dennis Drake
http://finance.yahoo.com/news/Mortgage-lenders-pursue-cnnm-3107909798.html?x=0
Mortgage lenders pursue homeowners even after foreclosure
by Les Christie, staff writer, On Wednesday February 3, 2010, 3:21 pm EST
As terrible as it is to lose your house to foreclosure, at least it's a relief to put your biggest financial headache behind you, right?
Wrong.
Former homeowners may still be on the hook if there's a difference between what they owed on their mortgage and what the bank could sell it for at auction. And these "deficiency judgments" are ticking time bombs that can explode years after borrowers lose their homes.
It can even happen to people who got their bank to approve them selling their home for less than it is worth.
Vanessa Corey, for example, short sold her Fredericksburg, Va., home in April 2008. She and her husband built the house in 2004, but setbacks, both personal (divorce) and professional (housing bust), made it impossible for the real estate agent to keep her home. So she negotiated the short sale and thought that was the end of it.
"My understanding was that the deficiency was negotiated away," she said. "Then, last November, I got a letter from a lawyer telling me I owed my lender $65,000. I had to declare bankruptcy. There was no way I could pay it."
Many homeowners are now in the same boat. And not just those who took out bigger loans than they could afford or who did so called "liar loans" where they didn't have to verify their income.
Because of falling home prices, borrowers who always paid their mortgage but who have run into unforeseen circumstances -- like unemployment or a job transfer -- can no longer sell their homes for what they owe. As a result, they are being forced to short sell or foreclose and are getting caught up in deficiency judgments.
"After the banks foreclose, it's very common now to have large deficiencies with houses not worth the balances owed," said Don Lampe, a North Carolina real estate attorney.
Lenders mostly declined comment. Although Corey's lender, BB&T did indicate it was pursuing more deficiency judgments.
"They follow the rise and fall of foreclosures," said the spokeswoman, who would not discuss Corey's account.
Can they come after you?
Whether banks can and will pursue deficiency judgments depends on many factors, including what state the borrower lives in and whether there's a second mortgage or other liens. But if borrowers ignore the possibility of deficiencies, it could haunt them.
"Once they have a judgment, they can pursue you anywhere," said Richard Zaretsky, a board-certified real estate attorney in West Palm Beach, Fla. "They can ask for financial records, have your wages garnished and, if you fail to respond, a judge can put you in jail."
In the case of foreclosure, lenders can pursue deficiencies in more than 30 states, including Florida, New York and Texas, according to the U.S. Foreclosure Network, an organization of mortgage law firms.
Some states, such as California, are "non-recourse" and don't allow deficiency judgments. But, even there, if the original loan was refinanced, some or all of it may be subject to claims.
Deficiency judgments on short sales and deeds-in-lieu can happen in many more places. In these cases, extinguishing the debt is often a matter of negotiating with the bank.
But even when lenders are willing, many borrowers may not be aware that they have to ask for release. So, if you are pursuing a short sale, be sure your attorney asks the bank to release you from any further obligation.
"People shouldn't have a false sense of security that a deficiency judgment may not be later sought," Zaretsky said.
He expects many will be filed over the next few years, based on the fact that banks have sold many of these accounts to collection agencies and other third parties, at discount.
"The parties who bought those notes wouldn't have paid money for them unless they had the intention of acting," Zaretsky said.
Ticking time bomb
What can be scary is that the judgments don't have to be obtained immediately. Lenders or collection agencies may wait until debtors have recovered financially before they swoop in. In Florida, the bank can wait up to five years to file. Once the court grants a judgment, the lender has 20 years there to collect, with interest.
It doesn't have to be a large amount of debt for a lender or collection agency to come after borrowers. Richard Varno and his wife short sold their Nashville home back in 2004 after he lost his job.
It wasn't until 2008, when the second lien holder asked him for $25,000, that he realized he still was liable.
"I told them, 'Hey, you guys released the title,'" he said. "As far as I know, I'm off the hook."
He wasn't. Releasing title does not necessarily end the debt. It's complicated because of variations in state law, but, generally, a mortgage has two parts: a pledge of collateral, represented by the home, and a promise to pay off the loan.
Lenders may release property liens in order to facilitate short sales without releasing borrowers from their obligations to pay under the promissory notes. The secured debt can convert to an unsecured one after the sale.
Zaretsky had one client who was so relieved to have arranged a short sale that he signed every paper his real estate agent shoved at him, even a confession that clearly stated he still owed the debt.
"He had no idea what he was doing," said Zaretsky. "All the lender had to do was go to court to convert the confession into a deficiency judgment."
Lenders are also very inconsistent. One of Zaretsky's short-sale clients was ready, willing and able to pay, but the bank did not even ask; another lender always reserves the right to pursue the deficiency.
Strategic defaults
Sometimes lenders go after borrowers walking away from their homes if they have other assets, according to Florida real estate attorney Larry Tolchinsky.
"Banks are pulling credit reports to see if it's a strategic default," he said. "If you're behind on all your other payments, you're okay. But if you're not, they'll come after you."
If borrowers have any doubts about their risks, they should seek legal advice. Or, at least, call non-profit organizations such as NeighborWorks for advice. According to Doug Robinson, a NeighborWorks spokesman, its counselors always try to negotiate away deficiencies when they facilitate short sales or deeds-in-lieu.
"We don't favor any short-sale contracts that leave any deficiency that can be pursued," he said.
Robinson himself knows what can happen. He paid off a deficiency after his own New Jersey house went through foreclosure 11 years ago.
Long post for something we already know |
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nowbroker
3075 Posts |
Posted - 02/03/2010 : 1:48:10 PM
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| Yep, it is O.K. for Tishman Speyer/ Blackrock to default on $3 Billion and walk away from the big New York apartment complex with no obligations, but not a homeowner. |
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Dennis Drake
321 Posts |
Posted - 02/03/2010 : 1:59:21 PM
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quote:
Originally posted by eh6794
Long post for something we already know
I think I hit a little too close to your foreclosed home for you. |
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madonna
416 Posts |
Posted - 02/03/2010 : 2:25:00 PM
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| the best for the homeowner is to declare chapter 7 to get rid of unbalance mortgage. |
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brandtrust
872 Posts |
Posted - 02/03/2010 : 2:35:12 PM
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I did a purchase on a short sale once, everything was all worked out, 1st mortgage was paid off in total, 2nd lien was taking a major hit (like half). They agreed, but at the table hit the seller with a promissory note on the balance. I don't know what happened, but the transaction closed, they went back and forth for awhile with the second lien holder and decided to sign anyway.
That was my only experience, but why are these people not getting these things in writing? I would guess that everything must be worked out in order to proceed and get the lien holder to agree to release the security, so wth?
They are agreeing to let them finance unsecured debt, so how is it that the people don't understand this? I'm not arguing for either side, I just don't know how it works that you can say "okay release the lien" and then come back and say "just kidding, pay up". |
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brandtrust
872 Posts |
Posted - 02/03/2010 : 2:51:04 PM
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quote:
Originally posted by Dennis Drake
quote:
Originally posted by eh6794
Long post for something we already know
I think I hit a little too close to your foreclosed home for you.
That's not very nice. I would much rather get my info from someone who has dealt with a foreclosure first hand, then from someone who gets their mortgage news off of CNNmoney.com, the same website that condemns the evil broker for causing this subprime crisis. Goodness, if only us brokers hadn't been so cavalier with our nonexistent warehouse lines, we could have avoided this whole mess.
I am sure there are many people who strategically default, but if a lender agrees to a short sale and then comes around for the check anyway, what is that called? Strategically f-ing up up your life?
"Hello kettle, this is your lender the pot."
They don't have to agree to short sales, they can refuse and let the property default and still probably never see their money, but at least they didn't trick someone into thinking the lien was released/forgiven in total. From what I can tell, it seems from the examples in the CNN article, these homeowners thought they were entering into an agreement. My above post still stands. How do you not know you are still going to be on the hook? There should not be any trickery. If the short sale is refused because the lender wants their money, then the homeowner should be able to make an informed choice before they proceed. Not all short sales are foreclosures. |
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eh6794
1599 Posts |
Posted - 02/03/2010 : 3:07:59 PM
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quote:
Originally posted by Dennis Drake
quote:
Originally posted by eh6794
Long post for something we already know
I think I hit a little too close to your foreclosed home for you.
What are you talking about.... i made a statement... thats it |
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eh6794
1599 Posts |
Posted - 02/03/2010 : 3:10:55 PM
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quote:
Originally posted by brandtrust
quote:
Originally posted by Dennis Drake
quote:
Originally posted by eh6794
Long post for something we already know
I think I hit a little too close to your foreclosed home for you.
That's not very nice. I would much rather get my info from someone who has dealt with a foreclosure first hand, then from someone who gets their mortgage news off of CNNmoney.com, the same website that condemns the evil broker for causing this subprime crisis. Goodness, if only us brokers hadn't been so cavalier with our nonexistent warehouse lines, we could have avoided this whole mess.
I am sure there are many people who strategically default, but if a lender agrees to a short sale and then comes around for the check anyway, what is that called? Strategically f-ing up up your life?
"Hello kettle, this is your lender the pot."
They don't have to agree to short sales, they can refuse and let the property default and still probably never see their money, but at least they didn't trick someone into thinking the lien was released/forgiven in total. From what I can tell, it seems from the examples in the CNN article, these homeowners thought they were entering into an agreement. My above post still stands. How do you not know you are still going to be on the hook? There should not be any trickery. If the short sale is refused because the lender wants their money, then the homeowner should be able to make an informed choice before they proceed. Not all short sales are foreclosures.
:) thanx branders :) |
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towney
97 Posts |
Posted - 02/03/2010 : 3:13:40 PM
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| I also read that the lenders will be sending 1099's for the difference from selling price to what was owed. The IRS will then count that as income to the person(s). So a foreclosure home sells for 200K and the amount owed was 300K, 1099'd for 100K difference. Now the previous owner is on the hook for IRS taxes on the additional 100K. |
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SD LO
178 Posts |
Posted - 02/03/2010 : 3:16:33 PM
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Lien release and satisfaction of debt are completely different events.
A lien release only removes the security interest (the right to use the collateral to collect). The ability to collect can and often remains intact depending on local laws pertaining to recourse.
I read this article last week and it made me wonder how many strategic defaulters considered this possibility in their strategy. |
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brandtrust
872 Posts |
Posted - 02/03/2010 : 3:18:26 PM
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quote:
Originally posted by eh6794
quote:
Originally posted by brandtrust
quote:
Originally posted by Dennis Drake
quote:
Originally posted by eh6794
Long post for something we already know
I think I hit a little too close to your foreclosed home for you.
That's not very nice. I would much rather get my info from someone who has dealt with a foreclosure first hand, then from someone who gets their mortgage news off of CNNmoney.com, the same website that condemns the evil broker for causing this subprime crisis. Goodness, if only us brokers hadn't been so cavalier with our nonexistent warehouse lines, we could have avoided this whole mess.
I am sure there are many people who strategically default, but if a lender agrees to a short sale and then comes around for the check anyway, what is that called? Strategically f-ing up up your life?
"Hello kettle, this is your lender the pot."
They don't have to agree to short sales, they can refuse and let the property default and still probably never see their money, but at least they didn't trick someone into thinking the lien was released/forgiven in total. From what I can tell, it seems from the examples in the CNN article, these homeowners thought they were entering into an agreement. My above post still stands. How do you not know you are still going to be on the hook? There should not be any trickery. If the short sale is refused because the lender wants their money, then the homeowner should be able to make an informed choice before they proceed. Not all short sales are foreclosures.
:) thanx branders :)
Not a problem Yoda, everyone runs into financial trouble sometimes. Hang in there   |
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brandtrust
872 Posts |
Posted - 02/03/2010 : 3:19:38 PM
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quote:
Originally posted by towney
I also read that the lenders will be sending 1099's for the difference from selling price to what was owed. The IRS will then count that as income to the person(s). So a foreclosure home sells for 200K and the amount owed was 300K, 1099'd for 100K difference. Now the previous owner is on the hook for IRS taxes on the additional 100K.
What's wrong with that? They can qualify for a bigger loan next time
It's the new stated. |
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eh6794
1599 Posts |
Posted - 02/03/2010 : 3:25:47 PM
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[/quote]:) thanx branders :)
[/quote]
Not a problem Yoda, everyone runs into financial trouble sometimes. Hang in there
[/quote]
i HAVE not lost a home or car yet.... YET i stress... haha |
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brandtrust
872 Posts |
Posted - 02/03/2010 : 3:30:28 PM
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quote:
Originally posted by SD LO
Lien release and satisfaction of debt are completely different events.
A lien release only removes the security interest (the right to use the collateral to collect). The ability to collect can and often remains intact depending on local laws pertaining to recourse.
I read this article last week and it made me wonder how many strategic defaulters considered this possibility in their strategy.
Again, why is it not disclosed to the homeowner/strategic defaulter/murderer of small children and fluffy animals, or whatever you like, since they seem to be one in the same?
If you owe someone money, HOW DO YOU NOT KNOW? Why is it taking lenders so long to go after the homeowner, when the homeowner has no recourse at that point?
People should be able to make informed decisions. They do not have to sell. If they want to short sell with the understanding that they still owe $$, okay. Maybe it isn't a choice to sell and they will owe anyway, but at least they are aware. If they have the possibility of retaining the real estate by renting, selling some other asset, deciding not to move, whatever, they only are able to do that before they sell. Right? So shouldn't they know this?
It seems kind of predatory to me that a lender would have someone believe they are free and clear and then come back for payment once there is no other option. |
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SD LO
178 Posts |
Posted - 02/03/2010 : 3:38:24 PM
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I believe the onus lies on the fluffy animal murderer to be aware of their obligations.
If the lienholder approved the short sale, the likely did due diligence to discover assets were not present to bring into closing. They will systematically check up on the debtors via future assets searches, and when they find assets they can and will make efforts to collect. Anything less would be irresponsible to investor/shareholder. |
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brandtrust
872 Posts |
Posted - 02/03/2010 : 3:50:36 PM
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quote:
Originally posted by SD LO
I believe the onus lies on the fluffy animal murderer to be aware of their obligations.
If the lienholder approved the short sale, the likely did due diligence to discover assets were not present to bring into closing. They will systematically check up on the debtors via future assets searches, and when they find assets they can and will make efforts to collect. Anything less would be irresponsible to investor/shareholder.
The problem is that they are making these terrible human beings believe that they are no longer obligated. Since these strategic defaulters are obviously malicious creatures planning to defraud the investor, one would believe that they are capable of understanding a simple fact, that they are required to pay the lien back at some point in the future when they have moved on and financially recovered from their horrific acts.
I can kind of see your point of view. The Auschwitz sign was there to comfort all who passed under it, "Work Sets You Free". It's cool to trick people.
Lay it all on the table and make people understand that they are going to owe. That's all I am saying. I am not advocating that the homeowner be forgiven of all debt, I am advocating disclosure. FULL and total disclosure of the terms of the agreement, not fine print.
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JoeThe Appraiser
255 Posts |
Posted - 02/03/2010 : 4:14:09 PM
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add in that many Realtors sell short sales to their buds or family members
http://forum.brokeroutpost.com/loans/forum/2/251500.htm
at a much reduced price in order to make more $ and
the plot thickens... |
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SD LO
178 Posts |
Posted - 02/03/2010 : 4:37:29 PM
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Strategic defaulters aren't by nature defrauding anyone, they are simply making a business decision they believe to be in their best interest. Since it is their decision, it is their responsibility to be aware of repercussions.
If I'm a strategic defaulter sitting in my gas chamber deciding if I should continue making my house payments, I cannot reasonably expect that my creditor will not only know of my contemplation, but also have a method to simultaneously warn me while I am making my decision. |
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brandtrust
872 Posts |
Posted - 02/03/2010 : 4:59:44 PM
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quote:
Originally posted by SD LO
I believe the onus lies on the fluffy animal murderer to be aware of their obligations.
If the lienholder approved the short sale, the likely did due diligence to discover assets were not present to bring into closing. They will systematically check up on the debtors via future assets searches, and when they find assets they can and will make efforts to collect. Anything less would be irresponsible to investor/shareholder.
Well at least GS hedged their investments. If you google GS the headline "exotic house betting" pops up. Lovely.
It was okay for lenders to make money available that to people who they knew would default. I guess their due diligence was done at that point -
Lend to those likely to default at a high interest rate CHECK
Hedge the investment so that they are protected from their 'calculated' risk - CHECK
Sell off to foreign investors through the Cayman Islands thus providing no recourse and avoiding the essentially useless SEC- CHECK
Admit this in a congressional hearing and watch the idiot incumbents do nothing - CHECK
Due diligence DONE.
Time to move on to screwing the homeowner who hasn't the ability to pay a resetting ARM rate on their otherwise affordable mortgage. First let's have some fun by promising unicorns and modifications to everyone and keeping them on hold for hours and hours and hours before they realize what we are doing and they are too far behind to ever catch up.
Not everyone had/has malicious intent to defraud (in the case of homeowners that is). Sometimes things happen, a lot of people on this board have had financial difficulties, LO's, realtors, and even those outside the real estate professions. Unless we all planned to get together and throw a recession and I just missed the invitation. I'm pretty popular, so I think they would have included me.
I cannot accept the fact that YOU, an LO, who have first hand knowledge of the terrible products that were being offered (option ARMS, neg am, ect) don't understand why people are in trouble, I don't care if you sold them or not. And that you, can judge said people from your terrifically high retail banking horse (just a guess, but I wouldn't be shocked if I were right).
I bet you think origination is sales and sales alone. It is not, it is a tremendous responsibility to handle someone's real estate transaction. An investment that literally shelters their family and future. We have a responsibility to help people understand and navigate mortgage products. The lender should have a responsibility to make clear the terms of the contract when they enter into a short sale agreement. Do you think it's fair that the lender with a high priced legal team can trick the average person into believing there is an agreement that doesn't exist? I'm not calling for absolution for homeowners, they should bear responsibility in understanding the terms of a contract. That said, if they understood mortgages, what would there be left for us to do? Take orders and earn 15 bps (or whatever you retail LO's earn.
There are bad apples in every bunch, but I don't know why you think its acceptable to condemn them all as fraudsters and let the banksters go. Oh, but they employ us, don't they?
Getting off the soap box now. I'm sure I will be back again when you damn all the sinners to hell for unforeseen circumstances.
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KLandis
7109 Posts |
Posted - 02/03/2010 : 5:12:14 PM
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quote:
Originally posted by SD LO
A lien release only removes the security interest (the right to use the collateral to collect). The ability to collect can and often remains intact depending on local laws pertaining to recourse.
That really is the key nugget of info |
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SD LO
178 Posts |
Posted - 02/03/2010 : 5:33:00 PM
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Not judging anyone, mostly just playing off your selected words and sarcasm.
Wrong guess. If you ever find me employed at a retail bank or being compensated in bps, please drag me outside and put an end to that misery.
The blame game has been hashed and rehashed. Every component shares a piece of pie, and the pie is called Greed. You can find the mix in the Capitalism aisle. Does it really matter who gets the biggest slice?
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brandtrust
872 Posts |
Posted - 02/03/2010 : 7:25:35 PM
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quote:
Originally posted by SD LO
Not judging anyone, mostly just playing off your selected words and sarcasm.
Wrong guess. If you ever find me employed at a retail bank or being compensated in bps, please drag me outside and put an end to that misery.
The blame game has been hashed and rehashed. Every component shares a piece of pie, and the pie is called Greed. You can find the mix in the Capitalism aisle. Does it really matter who gets the biggest slice?
I do apologize for the retail LO comment, that was harsh :)
Let's make a pact that we will shoot each other if either one of us heads in that direction.
You are absolutely right, greed is at the root of it all.
I just don't like to see any taken advantage of and I think that default is a terrible hardship on people, not a strategic business move. I can't imagine feeling relief to be out from under a financial burden and then learning one year later that you are in just as bad of a position and that you are even further away from moving along with your life. And I don't like when the judgment implied by Dennis Drake, everyone that defaults is not some low life dirtbag. They are your neighbors, family, and friends.
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mcmoney
1179 Posts |
Posted - 02/04/2010 : 2:32:08 PM
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quote:
Originally posted by brandtrust
[quote]Originally posted by SD LO
Lay it all on the table and make people understand that they are going to owe. That's all I am saying. I am not advocating that the homeowner be forgiven of all debt, I am advocating disclosure. FULL and total disclosure of the terms of the agreement, not fine print.
Not to be a smart ***, but didn't that happen when they signed the loan docs? So, you give back the house or sell the house and the bank takes part of what's owed.
The trouble is that little PROMISE TO PAY thing that is separate from the security instrument. So if what you have paid, or what the bank has recovered is less than what is owed, you have not satisfied the promise to pay. Why is this such a hard concept for our fellow Americans? If I give my car back to the lender now that it is upside down, are they going to be cool because they now have that POS that is worth less than note? And, are they in the business of lending money or selling cars (in the case of the mortgage company, real estate)?
Ignorance has never been a good defense.
No picking on you brandtrust, but it amazes to hear people say, "I can either pay them, OR give them back the house." |
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brandtrust
872 Posts |
Posted - 02/04/2010 : 6:27:09 PM
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mcmoney, I don't advocate default whatsoever. People have a responsibility to make good financial decisions, you are absolutely correct. The thing I don't condone is fooling the homeowners. A short sale is an option, the lender does not have to agree, but if they agree to release the security, then they should make the homeowners aware that they are still obligated to pay.
I can't understand how so very many people are unaware. When I was sitting at the table and the sellers saw the new promissory note, everyone was floored. The sellers realtor and the title company told me that the bank agreed to forgive the shortage, they explicitly implied that they were free and clear. At least this issue happened before the signing was completed. The homeowners featured in the article had no idea whatsoever.
I just think that the lender has an obligation to make them aware of the fact. Clearly, they weren't. I saw it first hand and it isn't an uncommon occurrence it seems. |
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steve_sushner
227 Posts |
Posted - 02/04/2010 : 9:00:46 PM
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We have represented, as attorneys, scores of short sale sellers and in the states we are licensed to practice law, mortgage loans are recourse. I advise every single client that it is strongly in their interest, after we have negotiated the short sale, but before they close it, that they should consider negotiating the deficiency (which for the record we can usually negotiate for .08-.10 on the dollar). If the client doesn't have it in cash, most lenders/ mortgage insurers will take it in the form of a zero interest promissory note. Nonetheless, almost none of my clients are interested. Almost all of them would rather take the chance that the bank never goes after them.
I have no pity if they are now getting sued. When the borrower signed the loan documents they signed BOTH a promissory note, for which they are personally liable and a deed of trust, which holds the property as collateral. I tell every borrower that the lender has the right to proceed under both avenues and not either/or. I specifically tell people that the lender can first foreclose and then sue them for the deficiency.
Accordingly, I find people's argument that they didn't know, disingenuous. It is much like the option ARM mortgages and all of those people that claimed they actually thought the interest rate was a fixed 1%. At best, the borrower knew they didn't know the ramifications. They knew (particularly on the east coast) that they could consult an attorney and they chose not to.
One last point, if you are doing short sale negotiations, it is wise to inform your clients in writing that negotiating the short sale does not prevent a deficiency. If you are referring short sales out, consider working with an attorney.
quote:
Originally posted by brandtrust
mcmoney, I don't advocate default whatsoever. People have a responsibility to make good financial decisions, you are absolutely correct. The thing I don't condone is fooling the homeowners. A short sale is an option, the lender does not have to agree, but if they agree to release the security, then they should make the homeowners aware that they are still obligated to pay.
I can't understand how so very many people are unaware. When I was sitting at the table and the sellers saw the new promissory note, everyone was floored. The sellers realtor and the title company told me that the bank agreed to forgive the shortage, they explicitly implied that they were free and clear. At least this issue happened before the signing was completed. The homeowners featured in the article had no idea whatsoever.
I just think that the lender has an obligation to make them aware of the fact. Clearly, they weren't. I saw it first hand and it isn't an uncommon occurrence it seems.
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crankyusi
908 Posts |
Posted - 02/05/2010 : 10:38:43 AM
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quote:
Originally posted by steve_sushner
consider negotiating the deficiency (which for the record we can usually negotiate for .08-.10 on the dollar). lender can first foreclose and then sue them for the deficiency.
steve sushner,
(1) if there's a short sale and the homeowner doesn't negotiate the deficiency, and the homeowner then receives IRS Form 1099-c for the deficiency amount, does that mean the lender can not pursue a deficiency since the debt is cancelled?
(2) in the case where you negotiate a 10cents on the dollar settlement as full satisfaction for the deficiency, can the homeowner still receive a 1099-c for the "unpaid" 90 cents on the dollar? |
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madonna
416 Posts |
Posted - 02/05/2010 : 4:25:23 PM
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| what if you declare chapter 7 bk? |
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steve_sushner
227 Posts |
Posted - 02/07/2010 : 5:37:16 PM
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1)No. A 1099c is issued to permit the lender to write the debt of their own books. They could sell the deficiency to a third party, still issue a 1099c for the deficiency less what the sold it for. Many lenders sell the deficiency to a subsidiary, issue a 1099c and they sucessfully sue for the difference.
2) if they settled short you would get a 1099c for the shortage. In the current tax year it is not taxable on your federal returns for a primary residence.
quote:
Originally posted by crankyusi
quote:
Originally posted by steve_sushner
consider negotiating the deficiency (which for the record we can usually negotiate for .08-.10 on the dollar). lender can first foreclose and then sue them for the deficiency.
steve sushner,
(1) if there's a short sale and the homeowner doesn't negotiate the deficiency, and the homeowner then receives IRS Form 1099-c for the deficiency amount, does that mean the lender can not pursue a deficiency since the debt is cancelled?
(2) in the case where you negotiate a 10cents on the dollar settlement as full satisfaction for the deficiency, can the homeowner still receive a 1099-c for the "unpaid" 90 cents on the dollar?
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crankyusi
908 Posts |
Posted - 02/07/2010 : 8:45:47 PM
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| Thank you Steve Sushner. |
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johnnyboy38109
4665 Posts |
Posted - 02/09/2010 : 07:17:15 AM
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quote:
Originally posted by madonna
the best for the homeowner is to declare chapter 7 to get rid of unbalance mortgage.
Please tell us you are not serious.
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FFG123
499 Posts |
Posted - 02/09/2010 : 08:07:57 AM
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I would also think bankruptcy would be a better alternative in this case... What else could someone do if being sued the defficience balance in a non-shortsold foreclosure? If there is a better option I would like to know to relay to those who ask me for info on the matter..
Thanks. |
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johnnyboy38109
4665 Posts |
Posted - 02/09/2010 : 08:36:51 AM
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quote:
Originally posted by FFG123
I would also think bankruptcy would be a better alternative in this case... What else could someone do if being sued the defficience balance in a non-shortsold foreclosure? If there is a better option I would like to know to relay to those who ask me for info on the matter..
Thanks.
How on Earth you all can make these statements is beyond my comprehension.
Its downright shocking.
You really, seriously, would make the statement that a BK is better without knowing the facts........? Can none of you see the clear, obvious answer to such a fundamental question?
How can you all make these statements and not have the slightest idea of their implications?
God I am truly ashamed to have to chew the same dirt as some, probably most, of you folks.
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FFG123
499 Posts |
Posted - 02/09/2010 : 08:47:07 AM
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In many states once a collection agency (CA) sues, and files a judgment, next is wage garnishment, and in many states wages can be garnished.. So you remain to state that someone who is being sued for a home they could no longer afford allow the bottom feeder aka CA a nano second to try and garnish their wages?
What do you propose someone in that predicament do? Let the FC sit on their credit and pray and hope they are not sued for the balance? |
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mwfan55
720 Posts |
Posted - 02/09/2010 : 08:57:28 AM
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I thought in CA purchase loans were NonRecourse and they can't come after you for Non Recourse.
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johnnyboy38109
4665 Posts |
Posted - 02/09/2010 : 09:05:47 AM
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quote:
Originally posted by FFG123
In many states once a collection agency (CA) sues, and files a judgment, next is wage garnishment, and in many states wages can be garnished.. So you remain to state that someone who is being sued for a home they could no longer afford allow the bottom feeder aka CA a nano second to try and garnish their wages?
What do you propose someone in that predicament do? Let the FC sit on their credit and pray and hope they are not sued for the balance?
Sir, I see no value in this perpetuating this discussion with you. Its a waste of my time, which I have little of, and it lifts you.
This is such a fundamental, basic issue, so very easily addressed, yet your sage advice is to file a BK 7 without knowing any of the ramifications of that act. You have no idea of anything.
You really don't know how to handle this?
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conk0029
110 Posts |
Posted - 02/09/2010 : 09:14:00 AM
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mwfan55, I think CA they can come after you for N/O/O investment, but not your primary.
I know a lot people who let investment properties go and ended up w/ a nice 1099 from the bank.
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crankyusi
908 Posts |
Posted - 03/22/2010 : 10:52:26 AM
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quote:
Originally posted by steve_sushner
... A 1099c is issued to permit the lender to write the debt of their own books. They could sell the deficiency to a third party, still issue a 1099c for the deficiency less what the sold it for. Many lenders sell the deficiency to a subsidiary, issue a 1099c and they sucessfully sue for the difference.
Steve, if the existing lender completes the short sale, can that lender decide not to issue a 1099-c? Or is the shorted lender (even if the they decide to not pursue a deficiency) required by the IRS to report the amount shorted via a 1099-c? In other words, is the 1099-c supposed to be issued for all short sales? |
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madonna
416 Posts |
Posted - 03/23/2010 : 12:17:03 PM
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| if someone declare chapter 7 and foreclosure, they ae not liable for the difference and it will be noted on the 1099 that repaying liability is not possible due to bankruptcy. The same as in the credit cards also. |
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