As a result of a divorce, I’m stuck with a house in another state that I’ve been paying $1200 a month on for the past 18 months (with nobody living in it).
The house has been on the market all this time but I haven’t gotten a reasonable offer. For the past year, the house has been listed at exactly what I need to pay off the mortgage and closing costs, etc. The real estate market in Southern Mississippi sucks and nobody wants to pay anywhere near the value of anything. The comps are really low because there are so many houses on the market and people are taking whatever they can get for their property.
About 3 months ago, I quit paying the mortgage. I just couldn’t do it anymore…I decided other bills were more important, such as the $25,000 worth of credit card debt my ex-wife left me with.
What exactly is going to happen when they finally decide to foreclose?
I don’t know, but I’ll share my husband’s experience. He walked away from a mortgage when he was divorced 15 years ago. He called the bank before missing any payments and told them he couldn’t pay. He cleaned the place up and gave them the keys.
The bank did nothing – they didn’t even dun him. The house was worth more than what he owed though, so maybe that’s why the bank didn’t chase him down and pummel him until nickels flowed from his pockets. He would have filed bankruptcy, and the bank probably considered that and decided not to waste their time.
You might want to do something more formal than just stop making payments. Contact the mortgage company, get the circumstances on record, which might help protect your credit rating.
It happened to my brother and his wife. They owed almost $125,000 at the time of the foreclosure. The house then sold for a little over $70,000 at the sheriff’s auction. Now the bank is coming after them for almost $60,000 for the deficiency and legal fees. They can’t file for bankruptcy, they did this about 4 years ago because of medical bills from my SIL’s fight with cancer for the second time.
I agree with AuntiePam. You should be discussing this issue with the lender. Perhaps you can arrange some form of altered payment schedule? It’s better than just ignoring the issue, because it’s **not ** going to go away.
Deed in lieu is a fairly popular option. Another that may be available is a short sale. In this, you and the bank negotiate to unload the house for whatever price you can get.
The traditional rub is the difference between the sale price and the amount to satisfy the mortgage will hit you next year as income on your income tax. You’ll walk away without much, if any, damage to your credit rating, but you will get a whopper of a tax bill next April.
However, this has changed with the Mortgage Forgiveness Debt Relief Act of 2007 - the tax liabilities are generally removed, making short sales an even more palatable option if the lender will agree to one.
Whatever you do, call the bank now. If it’s been three months since you’ve stopped paying, they’ve already tagged your credit report with a 60-day late “derog” and your credit score has probably already dropped 25-40 points as a result. The higher you can maintain your credit score through all of this, the better your chances are that your credit cards won’t slash available credit lines or jack up the interest rates, either of which will interfere with your ability to pay off the outstanding balances.
One caveat to this is that they won’t accept a deed in lieu if there are “junior liens” also encumbering the property (i.e. a 2nd mortgage, or a money judgment against you). If these exist, you’ll need to find a way to satisfy them before the lender will take the deed; they don’t want a house that is subject to other debts, so they’d just as soon foreclose to wipe those debts out.
Allow me to join in the chorous that says you should try and contact your loan servicing company to discuss a forebearance plan (assuming you want to keep the house). They are notoriously hard to get in touch with, and they will ask your for lots of information (like financial statements and a hardship explanation), but lenders make deals with people (such as putting the arrears at the end of the loan as increased principal) all the time.
Understand, though, that this isn’t something they have to do; legally, they can just accelerate the loan and call the whole thing due. So don’t wait on them! You need to be diligent if you want some sort of payment plan.
Yes, yes, call the mortgage company right now! They don’t want to be in the real estate sales business, so they may be willing to work with you. You might be able to work something out with them. Anything is better than foreclosure.
However, in Indiana, the next step would be increasingly nasty letters from the attorneys for the mortgage company. Then the lawsuit is filed. If you do not respond, then a default judgment is entered against you, and a sheriff’s sale is set. At the sale, the home is auctioned off to the highest bidder. You will still be responsible for the balance due the bank on all liens, taxes and any other judgments that have attached to the house.
I work as a bankruptcy paralegal, and I recommend you go see a lawyer. Bankruptcy may not be an ideal option, but you would be rid of the mortgage debt, the credit cards, and as a bonus, the credit card companies would pursue your ex-wife with much more gusto.
Please note - I am not a lawyer, I am not your lawyer, etc., etc.,
Perhaps that’s too high a price. The market doesn’t care about your mortgage.
The value is what people are willing to pay – pretty much by definition.
You’ve lost $21,600 or so waiting for a price you think is reasonable. Perhaps in your situation you end up best by selling at a loss. Perhaps, YMMV etc.
Agree that you should call the bank/lender and understand exactly what your options are.
Credit report-wise, if you have many credit cards, and one mortgage, it will hurt you more if you stop paying the credit cards vs. the mortgage. Odd, but true.
However, they can still sue you and garnish wages etc for the deficiency depending on where you reside.