Other than that the options aren't too positive. Has she gotten approved for the loan?
I would start taking control of this situation, call the bank, work out a modification, find a renter that will pay and throw your friend out. Sorry you need to start looking out for yourself, your life will be hell if a short sale or foreclosure happens and your friend walks away clean as a whistle.
Ramifications of Foreclosure, Short Sale or Deed-in-lieu-of-foreclosure
Here are some of the ramifications of foreclosure, short sale or deed-in-lieu-of-foreclosure, there are many more like your job, yes employers are checking credit records these days.
Your credit score will be reduced by 200-400 points, short sale a little less 100-200 points.
All forms of foreclosure stay on your credit report for 10 years.
After you have gone through foreclosure, short sale or deed-in-lieu-of-foreclosure there will be what is known as the "waiting period", this period of time varies for each and can be reduced if you had some type of extenuating circumstances that caused the foreclosure:
Waiting Periods to Buy After Foreclosure
* Buying After a Foreclosure
The waiting period is 5 years up to 7 years.
* Buying After a Foreclosure with Extenuating Circumstances
The waiting period is 3 years up to 7 years.
* Buying After a Deed-in-Lieu of Foreclosure
The waiting period is 4 years up to 7 years.
* Buying After a Deed-in-Lieu of Foreclosure with Extenuating Circumstances
The waiting period is 2 years up to 7 years.
* Buying After a Short Sale
The waiting period was just upped from 2 to 3 years. However, if a seller does not have a 60-day late pay, that seller may immediately buy another home. It's a reason to stay current on your payments while the home is on the market as a short sale.
In addition to the waiting period, most loans require a minimum down payment of 10% and a minimum FICO score of 680. The home purchase must also be the principal place of residence, not a rental nor a vacation home.
Lastly, most loan applications will ask the dreaded question "Have you ever been foreclosed on?" this stays with you for life, many think that because it will not show up on the credit report after 10 years they can answer "no", well lying on a loan application is a felony that carries a major jail term, so be aware.
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Sorry to hear about your situation. Unfortunately there are not a whole lot of options for you in this situation. Becuase you are the one who signed the loan and the mortgage is your name, you are ultimately responsible for the loan. Are you on title at all? Is the reason the property going to foreclosure becuase the rents do not cover the expenses? Have you looked at trying to see if you can get a loan modification?
If you are able to work out a situation where the property does not go into foreclosure, you may want to consider becoming a business partner with your friend and being added to title. Unfortunately you may not be able to do anything about the loan at this point. If your friends credit is still bad then they would not be able to assume the loan. In addition depending on what the loan to value is on the property, you may not be able to refiinance. One idea you may want to explore is seeing if you can have your friend added to the loan. This would help you in terms of sharing the responsibility.
Sorry to hear about your tough situation and I hope you are able to work something out.
Hope this helps,
Alain Pinel Realtors
I agree with the answers below and will not reiterate their points. Since having your name removed from the loan is not an option you should think about immediately switching gears as far a damage control because time is NOT on your side.
If you go through a Short Sale, you will be the one who gets dinged from a credit perspective, and if your name is not on title you may also be subject to taxes on the portion of the loan that has been written off - if a Short Sale is "successful". A similar "double-whammy" can occur with a foreclosure.
I would suggest you speak with a Real Estate Lawyer about your options and/or walk you through a list of options you may have. I would suggest you take what the Lawyer outlines as options to a CPA (or perhaps a CPA that the lawyer regularly works with on distressed property situations) that can help review the financial/tax implications of each option. Once this is done I would revisit with the lawyer who can construct an agreement between you and your friend based on the strategy you select, if applicable.
First Weber Group
Certified Distressed Property Expert
John & Sarena Villaescusa
Keller Williams Realty