Your Questions About Foreclosures | foreclosureorder.com

Your Questions About Foreclosures

Your Questions About Foreclosures

Donald asks…

Foreclosure consequences on my rental property in Michigan?

I moved to Oregon 3 years ago. My home in Michigan never sold. The rent income has been below my mortgage the entire 3 years. I can no longer afford the mortgage and my renter is moving out in 1 month. I am considering letting the bank foreclose on the house since I can’t refinance and can’t afford to pay someone to manage the property for me. I have a 80/20 split loan thru Countrywide (now B of A)
I know that the lenders can come after you and there are tax consequences but…the house is valued at $63,000 and I owe $63,000 on it. Any idea how much I may be penalized or responsible for if they foreclose? This is SO stressfull. Any help is appreciated.

Your Questions About Foreclosures

The Expert answers:

In the last 5 years there have been almost no instances where a bank came after you for money ( a judgement) after a rental property foreclosure. It isn’t worth their time and effort. But that doesn’t mean they won’t start tomorrow so you are correct to worry.
Short-sales have increased their success rate from 4% to 8% but that just wastes time for you.
Your first choice would be for the lender to accept a Deed In Lieu of Foreclosure. You sign a deed today and the bank owns it. But the banks have been scammed so they are reluctant to do this … But you should call to offer it.
If the bank sells your house for $53,000 and pays $5,000 in “costs”. You would owe them $15,000 if they got a judgement against you. There is a good chance that they would accept $5,000 cash from you since they usually get zero.

Your Questions About Foreclosures

Chris asks…

Federal income tax consequences on foreclosure that was primary home then rental property?

Here is the scenario: A condo was purchased in 2007 as a primary residence for $215,000 using a loan of $195,000. After living in it for a year, the buyer got married and moved in to the spouse’s home. Since the resale market was terrible, she rented it out to a tenant for about 18 months. Because the rent was lower than the costs of the mortgage, eventually she fell behind, and lost the house to foreclosure. The fair market value of the condo at foreclosure was about $150,000 (much less than the original purchase price and much less than the balance owed on the loan).

The foreclosing lender has not yet sent a 1099-C, and has not pursued the buyer for the deficiency yet, and I am not sure if they will. However, if they do send a 1099-C, can anyone provide advice as to whether or not this cancelled debt is reportable as income. If it might qualify for an exemption where can I research the rules for this?

I don’t this condo-buyer is unique in this situation, but what I can find on IRS.Gov only addresses primary residences (which this was not at the time of foreclosure) and business/rental property. I can’t find anything on a hybrid of what was primary residence and became rental property.

Thanks in advance for any advice and help.

Your Questions About Foreclosures

The Expert answers:

Its now rental, not a hybrid. Usually 1099c’s can take an extra year to come. They are reportable in the year they come. Since it is a rental it is reportable income. I think you can still do a 982 for insolvency but not sure for rentals. Good luck.

Your Questions About Foreclosures

George asks…

We have our House through a VA loan. We are considering foreclosure, what are our options?

The company that my husband works for is going bankrupt. He should be out of the job in a matter of a few months. My husband has applied for many jobs in our area with no luck. We have two children we need to think about so my husband and I decided it would be best if he rejoined the Marine Corps (he was previously in the marines 2001 through 2005) This would solve all of our problems except that the base we will be moving to is across the country. We put our house up for rent but we can find anyone to rent the house for what our monthly payment is. We are considering letting our house go back to the bank. Our loan is a VA loan, is there anyway that the VA can help? Do we have any other options? What are the consequences in letting our house go into foreclosure?

Your Questions About Foreclosures

The Expert answers:

Yes you do have other options! Call The VA with your closing documents handy! They will bend over backwards to help you avoid foreclosure in various ways because they have a stake in your success to avoid foreclosure. Good Luck and congrats on keeping your wits during this stressful time.

Your Questions About Foreclosures

Mary asks…

anyone experienced foreclosure of a house before?

what is the consequence that i should prepare, as i tried short selling the house, and the lender turned it down saying 410k or else. and now, looks like i got no other choice but to foreclose because the bank foolishly refused the good offer that has been waiting to happen. agent said bank will probably suffer lot more to foreclose

now, what is to happen for me…? i’m so new at these… i hear gov’t is doing investigation now to see why ppl got approved for home loans while back.

rumor says gov’t might maybe exempt or whatever to the credit issues for ppl like me. that’s a dreamy thought.

Your Questions About Foreclosures

The Expert answers:

Unfortunately there is not much you can do. Your agent is correct, bank will suffer more. Not sure why banks turn down offers quickly.

If you own more on your mortgage than on your property, you cannot sell it due to agents not making any money.

You can try to find an investor who is willing to negotiate with the bank to take the loan. The bad side is that investors tend to low ball the bank so low that deal is off most of the time.

Here is the problem: If you own 100,000 on your loan amount and bank eventually sells your property for let’s say 80,000 there is a difference of 20,000. That means that even though you have no more house, foreclosure on your credit report, you still own 20K to the lender and believe or not in 1-3 years they will send you 1099 for this.

In foreclosure situations I advice you to seek help from loss mitigation specialists who can help you with this.

As for the gov’t helping borrowers with situation like yours, there will be not much help. I believe they will extend your loan from let’s say 30 years to 40 or 50 year loan.

Your Questions About Foreclosures

Daniel asks…

How can we get away from owning this house?

We want out of our house..we’ve owned it for 7 months. We have been having money problems and they want to foreclose the house. What are our options? Bankruptcy? Foreclosure? And what are the consequences of our options?

Your Questions About Foreclosures

The Expert answers:

You can do a deed in lieu which can get the house off your back rather quick, but you need to be ready to move out quickly. If you have equity in the home the lender has no problem taking it and selling it to someone else to get their money’s worth.

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Your Questions About Foreclosures
Your Questions About Foreclosures
Your Questions About Foreclosures
Your Questions About Foreclosures
Your Questions About Foreclosures

Your Questions About Foreclosures

Your Questions About Foreclosures