Foreclosure in Holly>Question Details

Brandee, Other/Just Looking in Holly, MI

what happens if you let your house go back to the bank?

Asked by Brandee, Holly, MI Thu Mar 19, 2009

We are going to start a famiy and need a bigger house. We can't afford to take a loss and our house is worth 30,000 less then when we bought it four years ago. What happens if we just let the bank have it?

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Brandee,

This may be considered mortgage fraud, so I do not suggest simply walking away from your home without the advise of a real estate or foreclosure attorney.

In the meantime, I suggest these two websites that offer help and advice.

http://www.michigan.gov/mshda/0,1607,7-141-45866_47905-177801--…

http://www.hud.gov/local/index.cfm?state=mi

Remember, things will get better just give things a chance to recover.
Web Reference: http://mi-living.com
1 vote Thank Flag Link Thu Mar 19, 2009
Dear Brandee,

I agree with Gary, do not just walk away. You do not want something like this to haunt you. Research all your options. Are you in a financial hardship?

Wendy Valko
Your Caring Local Realtor®
Web Reference: http://www.LiveInMI.com
0 votes Thank Flag Link Mon Aug 3, 2009
Brandee,

The Federal Government has a new website that provides information that may help you.

The site below contains information on if you may qualify for refinancing or loan modification programs.

http://makinghomeaffordable.gov/index.html

I received this information from our company Distress Property department along with a note that they provide no obligation appointments. Let me know if you may qualify or if you would like to schedule an appointment.
Web Reference: http://mi-living.com
0 votes Thank Flag Link Fri Mar 20, 2009
Hi Brandee,

I'm also sorry for the position that you are in. But agree that it makes little sense to take the huge hit to your credit and go into foreclosure. You won't be able to buy another house for probably 2 years if you do.

Not the news you want to hear - but prudence is to stay in the house, do everything you can to improve your credit, take 2nd jobs, make improvements to you house by yourselves - where your investment makes more than you put in (typically kitchen and bath) - and consider if you two might hold off on starting a family.

In the grand scheme of things, $30K isn't a huge sum - about $150 a month on your mortgage. Perhaps you can rent out a room or basement also and get more income from that?

The only way that I can see for you to proceed with your plans in place is buy a property contingent on your sale, where your new house has a bigger mortgage that provides the $30k buffer to close on your current house - if you find the buyer for that price. Not impossible but super tricky in this market. Sellers don't want to sell to a "sale contingency" and then your new home would have to appraise for at least $30K+ more than it's worth for this to be a possibility.
0 votes Thank Flag Link Thu Mar 19, 2009
Brandee,

I wanted to follow up with you about the 1099 as mentioned. Without knowing your situation, we would recommend you talk with a tax accountant at some point to see there might be an exception.
0 votes Thank Flag Link Thu Mar 19, 2009
Call Kay. She's closest to you. Ignore the "you will owe taxes on a 1099". The mortgage Debt Relief Act makes it possible during this year to file a tax form that will cancel money shown on a1099 you may or may not receive. That presumes its your primary residence and you have only 1 lien.
0 votes Thank Flag Link Thu Mar 19, 2009
It will ruin your credit for approx. 7 years. Best contact the bank work direct with them modication. You wont be able to purchase anything unless you paid high interest rates over a 7 yeart time period can be expensive.

From cars, receiving no lines of credit, employment, insurance and much more.

I do consulting on this issues if I can be of any further assistance

Lynn911
~ National Featured Realtor and Consultant, Lecturer regarding Credit Repair, Mortgage Loan Officer
Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Thu Mar 19, 2009
Brandee,

I am very sorry for your situation. What you are describing is the situation in which so many people are finding themselves today. If you just let yourself fall into foreclosure, you will take a very hard hit to your credit which will make it impossible to obtain a mortgage for the purchase of a larger house for several years.

Before you make such a drastic decision, talk with your lender to see if you can qualify under a loan modification program with them. Each case is unique. Here are some websites that may offer some assistance as well:

http://www.hopenow.com

http://www.oakgov.com/egov0016/video/SearchVideo.jsp?cmd=sho…

You may also consider discussing with your lender the possibility of a short sale. A short sale occurs when you sell your house for less than the amount owned. You would need an experienced real estate agent to help you with the selling process.

Best of luck to you.

Shirley
0 votes Thank Flag Link Thu Mar 19, 2009
Brandee,

I would recommend you consider all options. I would be happy to talk with you further about such options. Meanwhile, visit our website regarding foreclosure and also review the information we have regarding short sales. You will be unable to purchase a home for a number of years if you have a foreclosure and likley a shorter time frame and less of a credit score hit if you settle the sale as a short sale. Again, our site will provide a start of information and we can fill in the gaps where needed with any additional questions you have.

Kay Pearson, CRS
Associate Broker
Real EState One
31 S. Main STreet
Clarkston, Michigan 48346
Kaypearson@maxbroock.com
248-860-0366
Web Reference: http://www.KayPearson.com
0 votes Thank Flag Link Thu Mar 19, 2009
Should you let your house go back to the bank, your credit takes a 100-150 point hit and will obviously show as a foreclosure on it as well. You also have to keep in mind that whatever loss that the bank takes once they are able to sell it, the bank will 1099 for the difference as income for you that you would have to pay taxes on.

Let's say you actually owed $300k for the home; the bank takes it and is only able to sell it for $200k. They will 1099 you for the difference of $100k as income for you for tax purposes. If you can help it try other alternatives than just walking away.
0 votes Thank Flag Link Thu Mar 19, 2009
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