My husband & I can no longer afford our home. We haven't paid our mortgage since Aug '09. We tried to get a modification done on our loan, but it was denied. Both the mortgage & the deed are under my father's name since we could not qualify for the home loan when we first purchased it. Now, we're wondering if we should do a short sale or just let the house get foreclosed. Being that the loan is under my father's name, and he has a home of his own, we don't know what to do. Some have told us that the creditors may come after my father for the balance & put a lien on his home and even do wage garnishments. Is there any way to protect him, his home & wages? We've already done enough damage to his credit. Should we do a short sale or foreclosure? Is there any other way out?
Thanks for the question and sorry to hear about your situation. Unfortunately, you are not alone in your predicament as a record number of American homeowners are facing foreclosure as a result of expensive mortgages and declining home values.
Based on what we know of your situation, your best course of action is the short sale. The federal government has been encouraging mortgage lenders, banks and servicers to reduce the foreclosures they initiate and try to find other ways to resolve homeowners delinquency issues. Now that these mortgage lenders are properly motivated, the short sale has become much more common. A short sale will be the quickest way to resolve this issue and will avoid the uncomfortable foreclosure process. In this process the lender and homeowner (you) will sell the property and apply the proceeds of the sale to the outstanding loan balance. If the proceeds are not enough to cover the full balance, usually the lender will forgive the remaining balance and not pursue the deficiency balance. This is also the best way to protect your father, though, as you suggest, much of the damage to his credit has already been done.
I answered a question similar to yours recently and there is more information on short sales here: Home Affordable Foreclosure Alternatives Program.
Thanks for your question and trust.