Home Selling in Charlotte>Question Details

Meyersk76, Home Seller in North Carolina

In the foreclosure process in NC with an 80/20 loan mortgage and HOA dues(Late), what are the guidelines for

Asked by Meyersk76, North Carolina Fri Jan 2, 2009

this property being taken over by banks. 1st mortgage by mortgage company, 2nd by HELOC with local bank. I'd sell, but market value less than what's owed.

Scenerio 1: I could sell it for the price of the 1st mortgage, but the 2nd would be left unpaid. Also, 2K worth of HOA dues remain. What would happen?

Scenerio 2: Begin foreclosure. 1 loan taken back by mortgage comp. 2nd one be wiped out?? I heard of this in other states, but don't know about NC. What about the HOA dues?

Scenerio 3: Short sale? Not sure yet how these work.

Scenerio 4: Do I have any other possibilities?

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Answers

7
I’m sorry that you are in such a difficult position right now. To answer your question, your negotiations should be with all parties…The 1st mortgage lender, the HELOC lender and the HOA. The deed can not be transferred until all parties are willing to remove their liens against the property. Well, at least no new lender will provide a loan without clear title. That means that they will all probably lose on the deal when it sells or they will all continue to lose while mortgage payments and dues are not being paid. Believe me the lenders do not want your property, so they will work something out if you have an offer from a qualified buyer to present to them. The 1st mortgage lender is in the best position to receive a larger percentage of what is owed, so they may allow the other lender involved to get 10% of their loan balance. That will not be their first offer though, but I'm sure that is what the HELOC lender will end up accepting.

Regarding your side note about investors walking away from projects…if you are referring to construction projects or multifamily projects that require commercial loans… those are usually done with non-recourse loans. That means that the lender foreclosing on the property is the only recourse against the investor. There is a lot more to that which I will not discuss here, but that is the answer in short for some projects.
Web Reference: http://www.explorealty.com
0 votes Thank Flag Link Thu Jan 8, 2009
First of all, I am sorry to hear you are going through this.

It is a tough situation because you cannot sell unless all three of those parties sign off on the deal. The problem is that if you are able to get the amount of your first mortgage for the house then they will be very reluctant to negotiate a short sale with you, because they would rather just foreclose since they would be in first position and they know they would likely recoup their entire investment at that point.

The HOA will also be very unlikely to try to work with you.

However your HELOC are the ones that are most likely to try to work with you because they know if your home gets foreclosed on then they are likely left with nothing. The other problem is that neither of the banks will probably give you much guidance in terms of what they are willing to do without an actual offer on the table.

Your best bet is to go ahead and try to get an offer as quickly as possible and then at least you have some real numbers to work with that you can present to the various parties and see what you can work out.

If you email me your property address I can try to give you a few more specific ideas.

Best of luck!
Matt
0 votes Thank Flag Link Fri Jan 2, 2009
Thanks! Will most of these short sales follow the same policy if this home is currently a 2nd home(rental). I'm trying to keep my primary house in which I live in and let this rental one go. Is that going to be a problem viewed by the mortgage lenders and such?

On a side note, my question is, how do all these investors let go of projects so easily and continue doing more investments??
0 votes Thank Flag Link Fri Jan 2, 2009
A short sale occurs when the proceeds of a real estate sale fall short of the balance owed on the property.[1] In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor. This negotiation is all done through communication with a bank's Loss mitigation department. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. Most Short Sales leave a deficiency balance for which the Mortgagor / Borrower is still liable. In 99% of all cases it is not a settlement-in-full. A deficiency balance will remain while the mortgage broker, real estate agent / broker, loan officers, title and closing agents retain their profit. No regulatory agency governs this hybrid transaction.

Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market and the borrower's financial situation.

A short sale typically is executed to prevent a home foreclosure. Often a bank will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. For the home owner, advantages include avoidance of a foreclosure on their credit history and partial control of the monetary deficiency. A short sale is typically faster and less expensive than a foreclosure. In short, a short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer.

Short sales are common in standard business transactions in recognition that creditors are not doing debtors a favor but, rather, engaging in a business transaction when extending credit. When it makes no business sense or is economically not feasible to retain an asset, businesses default on their loans (called bonds). It is not uncommon for business bonds to trade on the after-market for a small fraction of their face value in realization of the likelihood of these future defaults
0 votes Thank Flag Link Fri Jan 2, 2009
Contact your lender, asap!! Let them know the situation, the unfortunate part, is they do not want your house either....therefore you are going to have to reach a decision that will benefit the both of you....short sale??? is probably a good option, but contact them, and a local agent asap!!!

The website I provided, can answer those types of questions as well. Good Luck!!!
0 votes Thank Flag Link Fri Jan 2, 2009
I forgot to mention I don't want to save the property. I'm burned out. Rented it out, etc. I've gone through every exhausting ordeal with the mortg company. It's not an FHA loan. The HOA dues are a year overdue. I've already been overdue that long before but as stupid as I am I pulled $ out my Roth IRA because I was simply scared by threating letters, so I caved. The only assistance I've ever gotten was tacking on an addition $150 per month to compensate for the missed month's mortgage. BUt we all know, that's usually not possible to pay more per month or else I wouldn't have been put in that position in the first place. I just need to drop all of it and pay the consequences down the road credit wise if that's what happens.
0 votes Thank Flag Link Fri Jan 2, 2009
http://www.hud.gov/local/nc/homeownership/foreclosure.cfm
or
(888) 995-HOPE

Please take a look at the website above, it has provided me assistance in the past with any foreclosure questions I have had!!

Best of luck, if you need any assistance, please do not hesitate to contact me.

Suzanne Whealan
REALTOR
http://www.propertiesseller.com
suzanne.whealan@era.com
0 votes Thank Flag Link Fri Jan 2, 2009
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