Foreclosure in Sacramento>Question Details

Jim Wise, Other/Just Looking in Sacramento, CA

good morning.. I am 62 years old, my 401 has apx $190,000, and i own a small piece of real estate

Asked by Jim Wise, Sacramento, CA Sun Feb 8, 2009

(land)valued at $20,000. .I am upside down on my current morgage the loan is $235,000 10/20 arm. I am paying interest only monthly payments of apx $1,300 PI. the home value now is apx $132,000.
my question if I walk away from this house (foreclosure) will the bank come after my money in my retirement account/land to recover the difference from what they receive from the forclosure sale? thank you

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Sorry. I"m going to weigh in here again.

It used to be that you needed to be late with your lender before they would consider a loan modification or other recourse . That's not true anymore with most lenders but why not call them and find out? A call to your loan company, and talking to the loss mitigation department, will clear up what their policies are. I'll guarantee that when you talk to an attorney, or a tax accountant on the tax consequences, they'll ask you what your lender said. So make that your first step.

Also, legislation is changing. If your mortgage was used in the initial purchase of the house then there are no tax consequences for any write off or settlement of monies. Others had the potential to have a 1099 attached, but more and more legislation is dismissing those. But that really is a matter to handle later....it's a whole other discussion.

Save your house if you can. Call your lender. If you can't save it, then sell it in a short sale. You are definitely not alone in getting mixed up in this financial crisis but we all have to do what we can to resolve the individual situations. Foreclosure will hurt the worst for all involved; yourself, the lender, and the public and is not necessary.

Don't worry, you'll get through this and with a little information it will be a lot less stressful.
Web Reference: http://www.suearcher.com
1 vote Thank Flag Link Sun Feb 8, 2009
Hello Jim. You can get a free consultation with an attorney. I don't want to post the attorney's name in this public forum as I don't want her to get flooded with requests for free consultations. You can just e-mail me and I'll be happy to provide you with her contact info. She deals with foreclosure, bankruptcy and loan modifications all the time.

Sue summarized the basics very well for you already, but I would recommend that you still seek legal advice as there are potential tax consequences of which you should be aware before you make a decision as to how you want to proceed.

While you are upside down, I don't see your situation as hopeless. There are a lot of people who are more upside down than you are and a loan modification would not make sense for them. You don't mention whether you are currently behind with your payments. Many lenders will not talk to you seriously about a loan modification if you are current with your payments. This may not make sense, but it's reality and I would not want you to think that you can't qualify because they turned you down once. I don't want to give you unwarranted hope. I just want to encourage you to explore all your options even if you may have received a "no" before.

One last thing, it is crucial that you take action immediately. The sooner you get started getting the information you need, the better you are off and the more prepared you'll be.

Wishing you the best of luck and please don't hesitate to contact me if you'd like the name of the attorney who offers free consultations.

Ute Ferdig
Broker-Consultant
Avalar Real Estate
uteferdig@yahoo.com
(916)751-1267
Web Reference: http://www.themlshub.com
1 vote Thank Flag Link Sun Feb 8, 2009
Ute Ferdig -…, Real Estate Pro in Newcastle, CA
MVP'08
Contact
Hello All, just some clarifications:

"The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief. This provision applies to debt forgiven in calendar years 2007 through 2012."
See: http://www.irs.gov/individuals/article/0,,id=179414,00.html


I'M NOT A LAWYER; however, my understanding is as follows if a foreclosure takes place:

There a number of ways a lender may or may not be able to go after personal assets via a deficiency judgment after a foreclosure, but it makes a difference on how the property is foreclosed.

For a Owner-Occupied where:

1) A lender made a purchase money (non-recourse) loan, then NO deficiency judgment can be attempted. If a senior lienholder forecloses on the property, the "wiped out" junior lienholder who no longer has a secured note may not sue on this promissory note.

2) A Seller financed a purchase money loan (non-recourse), NO deficiency judgment can be attempted (non-recourse loan). If a senior lienholder forecloses on the property, the "wiped out" junior lienholder who no longer has a secured note may not sue on this promissory note

3) You as the owner of the property, refinanced the property (recourse loan), then a deficiency judgment CAN be attempted if a judicial foreclosure was used. This is NOT allowed under a trustee sale foreclosure. HOWEVER, if a senior lienholder forecloses on the property, the "wiped out" junior lienholder who no longer has a secured note MAY SUE on this promissory note.

IN ANY CASE, A REAL ESTATE LAWYER SHOULD REVIEW YOUR SITUATION TO KNOW WHAT YOR OPTIONS ARE IF A LOAN MODIFICATION IS NOT ALLOWED.
0 votes Thank Flag Link Mon Apr 27, 2009
the lender can always file a judgment against that can garnish income or assets according to an attorney of mine. Your best option maybe to try an sell your house before the auction. There are investors that can put together offers to purchase your house to your lender to review to postpone your auction date.
0 votes Thank Flag Link Sun Apr 26, 2009
Be careful and consult an attorney. Many of the realtors here likely have someone they can refer
Web Reference: http://borrowerhotline.com
0 votes Thank Flag Link Sat Apr 4, 2009
Absolutely Ute! There's hope out there to resolve these situations.
Web Reference: http://www.suearcher.com
0 votes Thank Flag Link Mon Feb 9, 2009
Sue, it is encouraging to hear that the lenders will talk to borrowers about loan modification even if they are not behind. My point was mainly to encourage Jim not to give up on the loan modification just because he may have received a "no" in the past. As you know, things change so quickly in this industry and a no yesterday does not necessarily mean no tomorrow.
Web Reference: http://www.themlshub.com
0 votes Thank Flag Link Sun Feb 8, 2009
Ute Ferdig -…, Real Estate Pro in Newcastle, CA
MVP'08
Contact
Also, legislation is changing. If your mortgage was used in the initial purchase of the house then there are no tax consequences for any write off or settlement of monies . . . Sue

Just so you know, Sue, there are tax consequences. Only an owner-occupied residence is exempt from federal taxes, but investment properties can be taxed. Also, regardless of whether the home is owner occupied, the state of California will collect taxes. The state exemption expired last year, and there is legislation pending regarding this (which is what you may be referring to) but it hasn't happened yet -- and god help our state budget deficit. Federal exemptions apply to only owner-occupied residences through 2010.


However, I am not licensed to give tax advice. For more information, please contact a CPA.
0 votes Thank Flag Link Sun Feb 8, 2009
Jim, I would take advantage of Sue's contact. $200 is cheap insurance to make sure you do the best thing in your situation.

Although I'm not a lawyer, I believe the answer to your underlying question will be based on the types of loans you have. You first have to determine whether your loan(s) are classified a recourse or non-recourse loans. You will need to find your Promissory Note, not the Deed of Trust, to check this out. The Promissory Note may or may not specifically state whether your loan is non-recourse, so for the formal definition please review questions 4-6 of the document found here:

http://sbaor.affiniscape.com/displaycommon.cfm?an=1&suba…

Best Steve
0 votes Thank Flag Link Sun Feb 8, 2009
For $200, Stephen Beede, who is a real estate attorney in Fair Oaks, will explain all the ins and outs for you. But I will explain it here (jumping to the conclusion). In most cases of financial concern, they don't touch your retirement monies. A foreclosure in the state fo California is in almost all cases handled through the trustee foreclosure rather then a judicial foreclosure. When they do a trustee foreclosure it's a total of 111 days from the notice of default through to conclusion and that is all that they can pursue...the property. No other assets can be seized. If they go through a judicial foreclosure it can take years and years, lots of attorney fees and they can go after more, but I don't know anyone who does a judicial foreclosure ever. As a lender, you'll likely get less than the value of the house. And even then retirement monies are left alone.

Now for the better alternative. Call your bank. Complete a financial form, write a letter of explanation and they will work with you to come up with a better alternative. Those alternatives include a loan modification, or for them to accept a short sale for the property. It is a win win situation for you and the bank to work out a solution. You need to be talking to the loss mitigation department, not customer service, And if you need any help doing that, understanding this in more detail, or just some discussions on possible alternatives, please give me a call.

I work as a home retention consultant for many banks. They hire us to do nothing more that call on their clients and encourage the client to talk to them when they appear to have difficulty paying their mortgage. There is no charge to the borrower. The bank just wants to talk to them to work out a solution.

So there is a solution for you out there, that is alot better than you are imagining.
Web Reference: http://www.suearcher.com
0 votes Thank Flag Link Sun Feb 8, 2009
If your current mortgage is a purchase-money loan, meaning you took out the loan to buy the property, and the lender elects to pursue a trustee's sale, as most of them do, the lender can't get a deficiency judgment. You might want to consider doing a short sale over letting the home go through foreclosure. C.A.R. has published excellent documents about short sales and foreclosures. If you email me, I will send you the PDF files. As always, realize I can't give you legal advice. If you desire legal advice, you need to seek the services of a lawyer.
0 votes Thank Flag Link Sun Feb 8, 2009
Your best option contact a real estate attorney who can protect all your assests. Have you contacted bank make attempts resolve any issues. Lenders are very reasonable most instance willing work with property owners.
Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Sun Feb 8, 2009
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