Posted on 10/10/2011 11:27:43 AM PDT by RetiredArmy
My advice is: This is not an item for “internet advice”.
Your pal needs to consult an attorney familiar with specific laws in his/her state.
“security clearances”
Seems as though that depends too. I know a couple of cleared gov employees that have been given a pass. Who knows if it’ll come back on them later.
The mortgage company will sell for what they can get, then trash your credit, then eventually write off the balance. Then, the IRS will tax you on the written off amount and hound you forever on that owed tax.
Some of us have no credit history. *sigh*. Hard to explain, yes, we do pay cash for most everything.
What’s pretty funny about mine is that my credit absolutely SUCKED about 6 or 7 years ago. I distinctly remember the phone call with the last collection agency on the last loan confirming that I would get all the paperwork I needed to ensure it was considered paid in full.
Interestingly, I had a great relationship with them and actually dropped by their office to shake the guys hand and give that last check. I was shocked that their offices were sort of hidden and when I did find them their door was extremely secure and they would not let me in. But I realized why it was set up that way. :-p
And along with that I had not filled out an income tax return in four years. I ended up paying uncle sam an additional $900 a month for well over a year back then.
The Lord ALWAYS took care of us though. As bills went up, so did income, and vice versa.
Our new tenant is a breath of fresh air!
When I landed a stint with the FDIC all the checks (9ncluding credit) were brutal.
It depends upon your State.
In California the initial purchase loan is a non-recourse loan, meaning that the borrower can return the house to the lender without further consequence. Now this is true only for the initial purchase loan- those who have refinanced are subject to being sued for the difference between the value of the house and the amount of the mortgage.
There’s also the looming threat of receiving a 1099 for debt cancellation. Cancelled debt, ie the mortgage you walk away from, can be considered income by the IRS. The Mortgage Forgiveness Debt Relief Act of 2007 currently protects against this but the law expires in 2012.
Why can’t he rent out the house out?
I did the same while I was unemployed.
I find that some people who haven’t been jaded in this business seem to project the same sensibilities they have themselves on to the people living in their rentals. 80% of tenants are barely equipped for life and generally don’t care about anything. That is why they are renters. Otherwise they would save money by taking that rent check and buy a cheap house. They just don’t want any responsibilities.
Walking away also affects the value of his neighbors’ properties.
Some good advice here. I would definitely talk to the bank about a short sale. I don’t know all the ends and out of doing this, but it has helped a lot of people out and the bank would rather get something than nothing.
Also renting the home may be an option, if there is someone who will be able to keep an eye on the place. Some real estate companies will help you check out renters and have a list of companies available to fix things.
I saw an article recently where the mortgage company came after the person in default. Since he is going to a new job, the bank may be more likely to come after him.
First, he needs to factually establish the likely selling price of the house (Realtor’s market analysis based on comparables)
The Realtor can also establish a market rental value for the house. If he can rent the house with an option to buy in 1-2-3 years, maybe that is a solution.
but he cannot just make an “assumption” that the house cannot be sold or rented
If market value is low, then seek bank approval for a short sale with no recourse. If the bank is uncivil, then his options are to get legal advice about deed in lieu of foreclosure, documenting that he tried to work with the bank
That is what a civil person would do, imho
First, he needs to factually establish the likely selling price of the house (Realtor’s market analysis based on comparables)
The Realtor can also establish a market rental value for the house. If he can rent the house with an option to buy in 1-2-3 years, maybe that is a solution.
but he cannot just make an “assumption” that the house cannot be sold or rented
If market value is low, then seek bank approval for a short sale with no recourse. If the bank is uncivil, then his options are to get legal advice about deed in lieu of foreclosure, documenting that he tried to work with the bank
That is what a civil person would do, imho
First, he needs to factually establish the likely selling price of the house (Realtor’s market analysis based on comparables)
The Realtor can also establish a market rental value for the house. If he can rent the house with an option to buy in 1-2-3 years, maybe that is a solution.
but he cannot just make an “assumption” that the house cannot be sold or rented
If market value is low, then seek bank approval for a short sale with no recourse. If the bank is uncivil, then his options are to get legal advice about deed in lieu of foreclosure, documenting that he tried to work with the bank
That is what a civil person would do, imho
NO NO NO
use property management to run credit checks on prospective tenants VITAL) and hire a lawyer to draft a legal lease
BUT a friend or relative will do 1000% better in managing a property than professional manager who will charge $150 every time they have to go unclog the toilet or change a lightbulb or furnace filter or mow the grass
The last professional manager we had kept all the rent and declared bankruptcy
Just make sure Pop goes to the courthouse and reads up on landlord-tenant code for your county and knows how to process an eviction by the book, step by step, if needed
I think what happened here, in my opinion, is he bought a house at an over rated value and the bank gave him the money for it, and not it is not worth anything what he actually got a loan for and is probably way way over his head and would still stand too lose thousands if he sold it at a reduced price, and still be in the hole.
I talked to my wife about that short sale thing. Honestly, I had not heard of it. She had and had some info on it in her more established brain than mine and told me all about it. That makes sense if the bank buys off on it. Thanks.
http://money.usnews.com/money/blogs/my-money/2011/05/12/the-consequences-of-walking-away-
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