Should I stop payments before negotiating for short sale?

kingno1 · Joined: 25 Apr 2008 Posts: 12 5.39 Dollars($)

Hi Jessica,
Thanks for your reply. Mine is not a purchase mortgage. It was refinanced. But, the amount that Iowe the bank is less than purchase price. Does the non-deficiency still holds good?
Also, I wouldnt be paying taxes on the 1099 the bank issues for the difference by the mortgage forgiveness act..right? I spoke with a tax attorney and he said so. But, want to hear opinion from experts here as well.
Please let me know.
Thank you.

Niicss · Posted: Tue Jul 15, 2008 4:34 am Post subject:

Welcome back kingno.

I am sorry to say that as this was refinanced the mortgage company can come after you for the deficiency judgment. But if the mortgage company forgives the deficiency amount then you need not to pay the tax on it because of the Mortgage Debt Forgiveness Act

Let me know if you have any further queries.

kingno1 · Joined: 25 Apr 2008 Posts: 12 5.39 Dollars($)

Hi Niicss,
Thats what I thought. The bank countered the buyer with 335K for the offer he submitted for 320K. Today, he submitted counter offer for 325K. They did not say anything about the deficiency yet.

Niicss · Posted: Wed Jul 16, 2008 2:51 am Post subject:

Hey kingno.

You should contact with the mortgage company directly or the loss mitigation department and clear it whether you need to pay the deficiency judgment or not.

Guest 0.10 Dollars($)

I am involved in a short sale. I received and offer but it is a very low one. The lender has verbally stated that this offer is not going to work. They said that want at least 88% of the value of the home. Won't they still take a low offer vs. letting the property go into foreclosure? Is this a ploy to get the potential buyer to make a higher offer? Also, I have heard that if you stop making your monthly mortgage payments the lenders will move faster so as to avoid going into foreclosure. How accurate is that information?

helping_user · Posted: Thu Jul 31, 2008 2:51 am Post subject: RE: short sale and stop payments

This doesn't seem to be a ploy. The lender is not willing to accept such a low offer because he thinks perhaps you won't be able to pay off the rest with your own funds. So, he's going to lose a lot of money. Since you are not getting a good offer, what I doubt is perhaps the housing market in your area is on a decline. So, the lender may not gain much from a foreclosure. Moreover, he'd have to pay sufficient money in order to arrange for foreclosure.

Guest 0.10 Dollars($)

Thanks for your feedback. I thought when you're involved in a short sale the remainder of the balance is wiped clean. Basically the lender takes the loss of the residual when they accept the offer. I need to find out if there is a deficiency law in IL. As for my credit score, it's going to be tarnished with the short sale so I will have to rebuild my score anyway.

Samantha · Posted: Fri Aug 01, 2008 4:37 am Post subject: RE: deficiency judgment in IL

Hi Amber,

Deficiency judgment is allowed in IL but it's not applicable in case of purchase mortgages. Did you have a purchase mortgage?

Regarding the short sale, well, the balance is not wiped out. Either the lender will forgive it or else you'll have to pay it off. And as you said, you'll have to repair your credit. By the way, there are tax consequences of short sale unless you qualify for mortgage debt tax relief . So, just check them out in case you'd have to pay the tax.

Hope this helps...

God bless you.

Samantha

larry · Joined: 27 Jun 2007 Posts: 3328 473.51 Dollars($)

Hi Amber.

Welcome back.

Short sale doesn't affect your credit report much. It only drops 80 to 100 points whereas the foreclosure or deed in lieu will drop you credit 250 to 300 points. But it the loan is a recourse loan then the lender can seek deficiency judgment from you.

Best of luck,
Larry

Guest 0.10 Dollars($)

I'm thinking to do DIL on my 3 investment properties in NV and NC. I live in CA. All 3 properties are with the same lender. The one in NC has 2nd mortgage. I talked to one attorney firm and they suggested to do DIL and they can help with a set fee. They said it will take up to 8 months. Is DIL something I can do it on my own by talking to the lender? I tried calling the lender but they kept transferring me to different people and it was very frustrating. The attorney I talked to said I should stop paying the mortgage and property tax on these 3 properties since I'm giving them back. Will that destroy my credit further or will it be the same in the end? I haven't missed any payment yet. I'm very confused. Also, with the 1099 and Mortgage Debt Relief.... that would cause me a lot of tax, is that true? Please advise. Thanks.

Niicss · Posted: Mon Aug 18, 2008 6:56 am Post subject:

Welcome Jenisa.

Stopping mortgage payments? Boy oh boy Rolling Eyes

It will be a case mortgage fraud if you stop making payments even though you have the ability to make the payments.

Talk to the lender and if you don't want to carry on the mortgage then sell the property and pay off the lender. That will not affect your credit as much as the deed in lieu of foreclosure.

Let me know if you have any further queries.

sara

Hi Jenisa,

Perhaps the lender has referred you to the loss mitigation dept which handles loan workout options like dil. But you haven't missed your payment, therefore I don't think lenders would easily agree to a workout plan If you stop payments, well it will affect your credit.

The form 1099-C will be sent to you only if the lender forgives the debt. However, since you are in CA, therefore chances are that you may be eligible for mortgage debt tax relief under certain conditions.

Take Care

Guest 0.10 Dollars($)

Thanks Niicss and Sara. No, I'm not able to continue to make payments. I'm going more than 5000 negative each month. The attorney just mentioned that since we will be doing DIL, why would I want to continue to borrow money to make payments. If I stop making payments, my credit will be affected. But if I do DIL anyways, will it make a difference?

jameshogg · Posted: Mon Aug 18, 2008 10:46 pm Post subject: RE:

Hi Jenisa,

If you stop payments, it will affect your credit. Also, if you are going for a deed-in-lieu, that too will affect your credit score and it'll go down by at least 250 points or so. The reason is, you're attempting a dil just because you can't pay and that is considered as a negative factor when it comes to assessing your creditworthiness.

Thanks

Guest 0.10 Dollars($)

Jameshogg, if I don't do DIL, what is my option? In the end, I'll not be able to make payments even on my own home and I'll have to face foreclosure or bankruptcy. So I thought if I do DIL now, it will be better than to wait until things get worse. Thanks.

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