Posted: Thu Dec 11, 2008 8:43 am Post subject: 2 homes, 2 mortgages, cannot afford home 1 anymore
Hello,
We currently have 2 homes, a mortgage on each from the SAME Lender. We have had home 1 up for sale for over a year and cannot afford the monthly payments anymore, we have run our savings accounts dry. I have been reading about Deed in Lieu, will it affect my 2nd mortgage on my 2nd house by the same lender? Also, home 1 is worth way less now than what we owe on it, approx $35k less, will there by any obligation left for us on this? What is the best route to take? Foreclosure on the 1st home or DIL? Advice?
Sorry to hear about your mortgage issues. Many people are facing the same issue as you.
You should be talking to someone within the Loss Mitigation department of your lender. They will be able to tell you about workout options that you may actually qualify for so you won't face a foreclosure.
As far as the Deed in Lieu vs Foreclosure; they both are very damaging to your credit. A foreclosure will drop your score around 250 pts. A deed in lieu will drop it about 100-150 pts.
There are certain eligibility requirements that you must meet, before your lender will even entertain the option to accept a Deed in Lieu from you:
•Are you imminently facing foreclosure? Are you at least 31 days delinquent?
•Have you exhausted all means to avoid foreclosure?
•You, the borrower, must voluntarily submit a written offer of the Deed in Lieu and it must specifically state that the offer to enter these negotiations is being made voluntarily. You must list all the conditions for which the DIL will be accepted. Including the agreed upon transfer date of the property. On that date, the property must be vacant and clear of all your personal property.
•Usually the lender requires that you have listed your home with a Realtor for at least 30 days. They need to see that you have attempted to sell the property, but that you have been unable to sell the property. They prefer for there to be no other liens against the property at all.
•The property should still be occupied, unless you provide documentation that can verify your need to vacate the property, i.e. loss of income, increased living expenses.
•The property is not a rental investment, nor used as a rental for more than 12 months.
Keep in mind, that neither you nor the lender is obligated to proceed with the DIL unless a final agreement is reached. The lender is not required to accept the Deed in Lieu. And as each day continues to pass, you may become further in default with your mortgage. If the Deed in Lieu has been approved, the lender must complete the process within 90 days that it was initiated.
Remember that a short sale is also a workout option to talk to your lender about as well.
Please let us know if you still have questions. You may visit home-buddies.com and view the free mortgage resolution guide that is available there.
You will have to write a hardship letter to the lender and apply for a deed in lieu. It will be totally the lender's discretion whether he will accept a deed in lieu or not.
In the deed in lieu foreclosure, the lender will try to sell off the property in the market There are chances that the property will sell at a lower price than the amount he owes to you. Thus there will remain a deficient amount. In a deed in lieu, the lenders forgive the deficient amount . I don't think it will affect your 2nd property in any way.
However, you should note that you will have to pay taxes on the forgiven amount as it will considered as an income on your part. Moreover a deed in lieu foreclosure will also lower your credit score by 250 points. To know more about deed in lieu, check out the following link:
http://www.mortgagefit.com/deed-lieu.html
If you have only one mortgage on the home that is for sale, and the mortgage holder will accept a deed in lieu, that's what you should do. However, a deed in lieu is just a tool for the mortgage holder to avoid the costs of a foreclosure proceeding, and a quick and easy way to get the property into their name, so they can put it on the market and sell it. Since they know it is already on the market, and especially if they are receiving their payment every month, I doubt they will accept a deed in lieu until you are several months in arrears. Is an auction possible? What you should try to do is make an agreement with the bank to allow the property to be sold at auction, and for them to accept whatever it will bring. After all, this is what they will have to do anyway. Then, that leaves the question of the deficiency balance. If you have the ability to pay, the bank will probably want to collect the deficiency which means they can sue you, get a judgment, and collect from the equity in your other assets, i.e. your second home (if there is equity), bank accounts, stocks, etc.
Eve Guest
Posted: Tue Jan 06, 2009 10:05 pm Post subject: Can I foreclose one and keep the other one without a problem
I currently have 2 homes, a mortgage on each from the SAME Lender, if I let one go into foreclosure, can the lender keep my other home for which I owe less and is worth more than the one I want to foreclose on.
cliff
