Due to the economy, my husband took a $10,000 per year pay cut, and I took a $5000 pay cut. We also had two family-foster children living with us that were adopted, thus losing our $1,300 per month foster reimbursement. My husband's job is proposing another pay cut to take effect in July. We are upside down a minimum of $100,000 on our home. The first balance is $230,000 and the second is $25,000. We are still paying them both, but they are late every month, so nothing is coming off the balance. We filed bankruptcy 6 years ago, retaining our home and auto loans. We then refinanced the first to pay off the auto loan we retained. The second was also taken out for home improvements after the bankruptcy when homes were at an all time high. It seems that we are throwing money away, because we will never own the home at this point, and it cannot be considered an asset. I've been told by friends in similar situations that the bank either refused to work with them, and/or refused the short sale offers they had received. I am not concerned with ruining our credit score, because it isn't that great due to the bankruptcy and being 30 days behind on our mortgage two years ago. I just do not want there to be any legal ramifications such as court or wage garnishments. What is our best course of action? Reno, NV
My answer explores options for you to stay in the home or sell it without incurring a large liability, including:
The foreclosure process is expensive for all parties concerned, and the cumulative effect of many foreclosures can depress housing prices. To stabilize the housing market, the Obama administration created the Making Home Affordable (MHA) initiative. One program in MHA is the Home Affordable Refinance Program. HAMP is available to residents of their homes whose first mortgage is no more than 125 percent of the property's current market value. It is open to open to homeowners whose mortgage is guaranteed by Fannie Mae or Freddie Mac. Borrowers must be current on their mortgage, but at risk for foreclosure. To qualify a homeowner must also not owe more than $729,750 on a single-unit home, and their monthly mortgage payment must come to more than 31 percent of their gross income.
Another MHA program is Home Affordable Foreclosure Alternatives (HAFA). HAFA sets guidelines for short sales and deeds in lieu of foreclosure for distressed homeowners. If your servicer (the financial institution collecting your mortgage payments) participates in HAFA, then the servicer must follow HAFA's guidelines and deadlines. The guidelines provide financial incentives for both servicers and homeowners. The homeowner must also be eligible for HAMP, as set forth by the program guidelines.
Foreclosure is the legal process through which a lender (most typically a mortgage lender) repossesses an asset from the consumer borrower who has defaulted on their mortgage payments. Because foreclosure is expensive and usually results in a poor return, lenders do not like foreclosure any more than homeowners do. Accordingly, learn more about HAFA, as discussed above.
The Nevada Department of Business and Industry offers a Nevada foreclosure help resource page Nevada residents should review. Nevada Chapter 1-7 -- Deeds of Trust governs foreclosure and deficiency balances. Under Nevada law, the lender may recover any deficiency balance. However, if your servicer participates in the HAFA program, then it is barred from collecting a deficiency balance.
Nevada offers simple and inexpensive foreclosure mediation for distressed homeowners who face foreclosure. See the State of Nevada Foreclosure Mediation Program (FMP) pages at the Supreme Court of Nevada's Web site for details. If you receive a Notice of Default (NOD), consult with a Nevada lawyer who has experience with FMP. Eligible homeowners have 30 days after receiving a NOD to request mediation. At minimum, working within the FMP puts a hold on foreclosure during the mediation process. Homeowners in the FMP are advised to continue to pay their property taxes and insurance.
You can resolve a deficiency balance or deficiency judgment in bankruptcy or debt settlement. Bankruptcy is a complicated process. Chapter 7 and Chapter 13 bankruptcy are the options appropriate for most consumers seeking debt relief. Unfortunately, after the passage of the Bankruptcy Reform Act in 2005, it became harder to file for a liquidation bankruptcy, and there is now more complexity to an already intimidating process. Filing bankruptcy can be difficult and, though a consumer can do themselves, I advise consumers to consult with an attorney licensed in their state to ensure the filing is completed accurately.
You mentioned you filed for bankruptcy 6 years ago. The general rule for the amount of time that must elapse between bankruptcy filings is 7 years. Therefore, bankruptcy is not an option for you to resolve a deficiency balance until another year passes.
Debt settlement is an alternative to bankruptcy. It is also called debt negotiation, and is the process by which creditors agree to forgive a part of a balance, saving the debtor up to 60% of the original balance. The debtor pays the new agreed-upon sum. A debtor can negotiate directly with creditors or hire a debt settlement service to negotiate for you.
Uncooperative banks are the subject of many modern horror stories. That is no reason to avoid taking advantage of the MHA HAMP or HAFA programs. Apply for HAMP first. If you do not qualify and cannot afford to remain in your home, ask your loan servicer about putting the home on the market in the HAFA program. Do what you can to avoid foreclosure.
I hope this information helps you Find. Learn & Save.