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Foreclosure Forum |
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If you don't see a better way out...In Reply to: Should I go into foreclosure? posted by Dave on June 03, 2002 at 9:20 PM : Dear Ward, : I am a Realtor and a loan officer here in California. My wife and I bought a house 9 months ago for $510,000 with 100% financing. It was an 80% 1st TD at $408,000 and a 20% 2nd TD at $102,000. The payments are now a strain. We need to sell but the neighborhood is valued a little lower than what we bought at. Especially with real estate commissions, we will not be close to breaking even. : We did both purchase loans in my wife's name only and she is the only one on title. At this point, we are current with all our payments and have excellent credit. We thought that if the house goes into foreclosure, it would only be my wife's credit that would be damaged. We would still have my credit to move forward in life. I have already been pre-approved for a new purchase loan for a lower amount in my name only. I figued once we have almost closed on a new house, we would attemped to sell this one. If it didn't sell, we would just let it go in foreclosure. Here are my questions: : 1. If the bank forecloses and takes a loss, will we be liable for a deficiency? Will it only be in my wife's name? : 2. Who will foreclose? The 1st or the 2nd? Should I try to keep the payments of the 2nd TD current? : 3. If we are responsible for a deficiency, can we file a chapter 7 BK? Can my wife file a BK by herself? : 4. We both had a Chapter 7 BK discharged in 1/93, almost 10 years ago. How does that affect this? : 5. We own a rental property with $50,000 equity. We are both on title. Should we take her off title temporarily? We do not want to sell it. : 6. What verbage should I look for in my Note & Deed of Trust on both of my loans? : 7. Should we have an attorney? Will we have to go to court? : 8. Do we need to occupy the property for a certain period of time? Or can we move out before the Notice of Default is filed? : 9. What tax issues are we looking at? : Your thoughts and advice will be greatly appreciated. I anxiously look forward to hearing back from you. : Thank you very much, : Dave =•=•=•=•=•=•=•=•=•=•= 1. There’s no deficiency for purchase money loans in CA, unless they are FHA/VA involved.. 2. It’s any body’s guess as to who will foreclose first—the 1st lienor or 2nd lienor. Why would you keep the 2nd current when you weren’t paying on the first? If you’re not going to keep up all the payments then you might as well stop paying on all of them. 3. As I mentioned in #1, you’re not liable for a deficiency on purchase money loans. 4. Not applicable (since you aren’t going to suffer a lawsuit for any loan deficiency). 5. You shouldn’t have property in your name. You should be holding it in a title holding trust. 6. If your two loans are purchase money loans, made by conventional lenders, you have no deficiency to worry about. 7. If you can’t be pursued for a deficiency then you don’t need an attorney. 8. Feel free to move out at any time. But you might be a lot of money ahead to stay in residence during the 4 month foreclosure period—to save on your monthly overhead. 9. No tax issues here, since there’s no issue of forgiveness of debt, because you aren’t personally liable for the repayment of the loans. Hope this helps. Follow Ups:
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