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Re: Conserve your cash and energy. Thx Ward. Comment and question.
Posted by Steve on March 24, 2008 at 9:19 PM
In Reply to: Conserve your cash and energy posted by Ward-CA- on March 24, 2008 at 6:56 PM
Ward
Thanks for the input. I tend to agree with you that foreclosure is a better alternative than SS. Besides, we've contacted the Banks loss mitigation department, explained our situation, and got very little input or energy from them to work out any sort of arrangement. What is unfortunate is that it is in both ours and the banks best interest to work something out NOW before the value of the property drops any further. An economic upside to allowing foreclosure is that we can rent the unit during the foreclosure process and receive rental income. Question:
If we do suspend mortgage payments and force foreclosure, what is the effect of a foreclosure on credit scores?
Is there any rule of thumb on the credit hit? 15,20,30% decrease in scores? Or a 100, 200, 300 pt drop?
Many Thanks Steve : Steve, : IMHO, I would walk. : #1. Your credit report would simply show you were late making X number of payments. : #2. No, because the foreclosure of any senior lien wipes off title any junior lien. : #3. Intent to occupy is demonstrated by a person’s conduct. So if you changed your voting district, driver’s license, children’s school…all in anticipation of moving and then didn’t at the last minute, I’d say your intent to move to the new locale was genuine. :
: -------Ward : =========== : Is it better to walk or attempt to negotiate a SS under the following circumstances:
: My wife and I own a property in Rancho Mirage, CA.
: Purchase price $385k. 80/10/10 financing. The HELOC second was refinanced into a better interest rate, but the balance was not paid down nor used for anything other than the purchase. The 80 first is original PMM. Both are with the same lender.
: Current MV is +/- $350k.
: Total P&I and taxes is +/- $2400/mo. including a very expensive HOA.
: When we purchased the property in '04, long-term rents were around $2500/mo., so we felt comfortable in case we needed to rent to cover expenses. Since, with the slump in the sales market, there is a glut of rentals on the market and l/t rents have plummeted to $1250/mo.
: We no longer want the property. We've actively but unsuccessfully tried to sell the property over the last several months, dropping the price from $439K to $389K.
: My questions are:
1) If we negotiate a SS, what are the effects on credit? I understand that it's "bad", more specifics would be appreciated.
2) If the Bank forecloses on the first and uses the "one action", does the Bank have recourse for the HELOC even if the two loans are from the same Bank and were used to fund the same purchase?
3) What determines if the property was purchased as a primary residence? Is it the buyers intent at the time of sale? In other words, we live and have a home in the Bay area that has been our primary residence for tax purposes. Can it successfully be argued that when we purchased the RM home it was our intent to move into the RM home as our primary residence (but were forced to stay in the Bay area for reasons beyond our control), thus preserving the primary residence protections?
4) Under these circumstances, is it more advantages to SS or let the bank foreclose?
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