A foreclosure is worse than a short sale with regards to your credit. When you can buy is determined by your income, job security, your reason for the foreclosure, and your new lender. There are a few lenders out there that will, with private money, provide the loan for you to purchase a new home. Typically they require 20% down as well as 5points but even with that, your mortgage would still, more often than not, be lower than rent of a similar home and you get to take the mortgage interest tax deduction that renters do not get to take.
If the HOA forecloses on you prior to negotiating a short sale, you still have the debt regarding the 1st as well as any 2nd lien.
Premier Real Estate
Las Vegas, NV
Ironically, at a time when most mortgage lenders are bending over backwards (using HAMP and other modification programs) to work with borrowers, HOAs are breaking records for fast foreclosures. So while you could be negotiating with your lender to save your home, your HOA could be positioning itself to sell your home on the courthouse steps at the same time.
The issue you have is not with the HOA. Huh, what did he say?
The HOA has done what they did. Your credit report to purchase another property is not the issue.
Your real issue is that the 1st and possibility 2nd mortgage companies have not been paid. You still owe the amount borrowed. Since they are not the foreclosing entity, they may have up to 6 years to collect the amount due. If mortgage fraud is suspected, there is no statute of limitations.
Once the HOA takes possession of the property through the foreclosure, you have violated the terms of your mortgage contract. Since the HOA cannot participate in a short sale, the mortgage holder will have to foreclose on the property to collect their collateral. It gets worse from here.
You think the foreclosure is on the HOA and you are off the hook. Nope. So sorry. The foreclosure will be on your credit report. You see, the HOA never borrowed the money. You did. Your name is on the loan.
If the Investor forecloses, the HOA loses the right to the property. The Investor will need to pay the HOA any money due the HOA, with a few limitations, before the property becomes sold again. You see, the HOA wins no matter what happens. They get their money. Collateral damage (no pun intended) is not the HOA's problem. All they want is their money.
I negotiate many times with HOAs to reduce the amount owed or provide time to complete a short sale of the property. This prevents the bad stuff from happening to the Owner of the property. These options take a lot of time. The HOA BOD meeting is required. Many times multiple BOD meetings are required. A successful negotiation results in the HOA, mortgage company, Investors, and the home Owner all get paid. WHAT A DEAL !!!
All is not lost if the HOA does foreclose and you are stuck with paying the mortgage loans. A Bankruptcy, if you qualify, will typically remove the now unsecured mortgage debt. Not everybody qualifies for a BK. Check with your favorite BK attorney for details to see if you qualify.
While you are at it, you may want to chat with your CPA and investigate the IRS income tax liability for any forgiveness that you may receive from the mortgage holder. Any tax liability is not removed by a bankruptcy.
I am not an attorney and this is not to be considered legal or tax advice. Consult your favorite tax and legal advisors for details about your specific situation.
Moral of the story - Pay the HOA fees. Don't mess with HOA's or the IRS.
Unless you have cash to purchase another property or are over 62 years old, you will be renting. Get used to it.
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Please contact me immediately if you know a person that cannot make their mortgage payments. I will work with them to avoid foreclosure or bankruptcy at no charge or fees to them.
Steven Goldman, CRS
Certified Distressed Property Expert (CDPE)
Certified Default Advocate (CDAT)
Certified Short Sale Professional (CSP)
Certified Probate Real Estate Specialist (CPRES)
GRI, ABR, SRES, CNHS, PM, CCI
Realty One Group
10750 W. Charleston #180
Las Vegas, NV 89135
It all depends if it shows up on your credit report? Lenders would look at your credit report to see if there is any liens or foreclosure on your credit.
Here is the contact info for one of my lenders you can call.
Jared Penn with First Cal Mortgage 702-419-6342
Barrett & Co., Inc.