Here’s a story about from US news and world report:
http://money.usnews.com/money/blogs/my-money/2011/05/12/the-consequences-of-walking-away-
Remember this term. “Deed in lieu of forclosure”. Tell him to go talk to the mortgage Co about it. While it will suck for his credit, it isn’t as bad as foreclosure.
Odds are that he will be sued by the bank. The only way I see this ending would be through a bankruptcy filing. His best bet would be to contact the bank and they very well may slash his mortgage payment, just in order to get some return on the property.
I wish him the best of luck.
In other states they can sell the house and bill you for the remainder of the mortgage, and you don't even have a place to live out of it.
How about a short sale
Certain Freepers who will remain nameless come to your house tar and feather you, hang you and then set you on fire. And if they are in a good mood they will do it in that order.
Why can’t he rent out the house out? We did that a couple of years back when we could not sell it. We have a great lady living there. Sure, sometimes it is a pain being a landlord, but it pays the mortgage and keeps us up to date with our obligations to our mortgage company.
Has he looked into a negotiated short sale?
A short sale will probably be much better for him then a foreclosure
If the son lives in a state that allows deficiency judgments, then yes, the mortage company can get a judgment against him for the balance of the mortgage that they do not recover in selling the home. A deficiency judgment can ultimately allow the mortgage company to garnish his wages. With the significant number of defaults and sad shape of the housing market these days, mortgage companies are pursuing deficiency judgments more and more because they’re left with 50% or more of the loan balance unrecovered at auction.
Obviously, ditching a mortgage will adversely affect his credit - usually by 250 - 300 points.
Why not ...
1) move the whole family into one room
2) rent the other rooms
I have absolutely no experience with this, but I do know that the bank would rather have 50% of something, than 100% of nothing.
And, working with the bank has the added benefit of not harming your credit.
Walking away from a mortgage, while the chic and trendy thing to do, will destroy your credit for a long time. In this day and age, when companies run credit checks as a part of the employment process (this I *know* happens, I do have experience with it) ... wrecking your credit has long term consequences.
Additionally, the company I work for runs credit checks (and drug tests) dead *last* in the hiring process, just as a matter of routine. If this guy trashes his credit before actually walking on to the company premises and starting to draw a paycheck, he may find himself out of luck.
Just my $0.02.
Try to get the lender to short sell. If that is not going to cut it, walk away and file for Bankruptcy. If you are going to damage yourself this way, you may as well get protected and get an exit strategy instead of having this debt hanging over your head for 20+ years.
The son should get a Property Management Company to rent his home for him.
1) That way he can his home and sell it when the market gets better.
2) It will allow him to focus on the new job.
3) It will give him money for his home
4) It will not hurt his credit compared to walking away
Hope this helps.
A) Tell him to go to either Angie’s List or the Better Business Bureau web page to locate a good Property Management company.
Contact a local apartment management company and rent it out when he moves. While he still has good credit buy one in the new area (prices are low)
He can continue making payments from the rental income, and then with luck the market will go back up and he can have a house he owns that someone else paid for.
I did this with 14 units. It was surprisingly easy. I told everyone i know how to do it- no one else did, but they all complained that I should give them some money when I got rich.
Also, second mortgages, and etc, are usually not "non recourse" loans. In other words, you can't walk away from said loans without being liable for a deficiency.
PS: I'm not a lawyer ... get a lawyer if you want to follow this path.
"Walk Away: The Rise and Fall of the Home-Ownership Myth" by Doug French
"This elegant and fact-filled book by Mises Institute president Doug French examines the background to the case of "strategic default," or walking away from your home, and considers its implications from a variety of different perspectives. The thesis here is that there is nothing ominous or evil about this practice. It is an extension of economic rationality."
Don’t want to hijack your thread, but I have a related question. What happens when the homeowner dies? Will the bank go after his heirs if the house isn’t worth the amount of mortgage?
I’d talk to an attorney who specializes in bankruptcies. Have your friend’s son explain the situation to him/her and get their advice.
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.