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I have a relative in Florida who is going through some housing woes. I have no idea why or how they got overextended but last night she mentioned to me that they're going to have to foreclose and walk away from their house. I don't know the exact details, but I think they're upside down in their mortgage. Since they had a previous foreclosure a number of years ago (in NY), I can't imagine their credit was good so they probably had some sort of subprime loan.
I was trying to give her some ideas to avoid foreclosure which I know really screws up your future ability to buy a house, not to mention your credit.
If anyone has any ideas, I'm happy to pass them along. I told her everything I knew, having just gone through some significant financial troubles ourselves and taking some drastic measures to avoid our own foreclosure (we wound up selling the house to pay off the loan and the 2nd and now we're renting. But we live in MA and the housing market though weakened, is significantly stronger here).
I told her to put the most aggressive price she could live with and try to sell the house on her own. I thought if she told her lender what she is trying to do, they might allow her the chance to do this. But she said that wouldn't work, which is why I think they might be upside down in the loan. Or maybe she's just looking for a fast and easy way out and not thinking of the consequences?
In addition, they may be able to create a forbearance agreement if they have the income to do so, although in this day and age it's rare that people can do this. This agreement essentially allows them to pay extra above their current mortgage payment to get caught up.
Everything will really be based on equity. First if they have more than 30% equity in their house based on a market value they can probably find a hard money lender to bail them out. This of course won't fix the situation in the long term, it's really a band aid to help you sell and get some of that equity. Unless of course they were both out of work, and have now returned...then it could help them recover.
If they have very little equity, then the bank really doesn't want to foreclose...not that they ever want to because of the costs involved, and it hurts their internal numbers as well. So, if this is the case they can call the bank and try a couple of things. They could ask for them to refinance them into a payment they could afford, although that's unlikely. It can't hurt to ask though...worst they say is no. More than likely they got into a short term loan with an affordable payment which has now gone adjustable and become a HUGE payment. In addition, sub prime has become much more strict in the recent months, and rates have climbed substantially. So they probably couldn't qualify for a new loan, hence their being trapped in the huge payment.
Another option would be to try a "short sale". They need to deal with the bank on this, and it's less likely to be allowed the closer they get to foreclosure. ie. late payments and such. They are much more open if you start discussions with them before you have any late payments, but you know for sure late payments are on the horizon.
I would definitely check out the thread I posted, and go to the governments website and try and contact their counselors. They will be trained in this and likely offer the best advice.
Thank you! I'm compiling a list of links she can use. She's got some other mitigating issues I'm trying to help her with but the first step is for her to get educated instead of leaving it in others' hands.
Thanks. Unfortunately, I'm encountering the "you can lead a horse to water" syndrome. She just wants to be out from under the house. "Free and clear" were the words she used. Every suggestion I have made has been met with an objection. I'm trying to get her to think 3, 5 or even 10 years down the road and how this decision could affect her. I'm trying to get her to understand that she might still wind up owing the bank big money after foreclosure.
Well, you could lie to her to kick her into gear.... The truly ignorant can be forced by fear... Tell her people have been getting arrested for letting their house foreclose in the wrong way. She needs to protect herself and do things right during the foreclosure.
At the very least you should be able to generate enough short term fear to force feed her the information to educate her somewhat. I would probably try and get her on the phone with the HUD counselor, as they will be well versed into how to help her.
Then when she comes back and says... no one has ever been arrested, you get to say... ahh you are right, it was from some stupid post in a forum from someone I thought I could trust... I just care so much it scared me.
Now you've simply snuck out of the lie, blamed it on me if you want and they can't get too upset because you did it because you "care"
Granted, this is an outside of the box suggestion for manipulation, but it could work.
On the other hand, I moved my cousin in with me for a time since she was going to be thrown out of her apartment. After about 4 months, I paid her deposit and first months to get her out of my house. There was nothing I could do to help her... she wouldn't even try to change. (lots of issues)... in any case, I finally realized that she's destined for failure. Her best case scenario would be to survive check to check with no emergencies popping up. Some people can't be saved... and you can't ruin your life trying.
On the other hand, I moved my cousin in with me for a time since she was going to be thrown out of her apartment. After about 4 months, I paid her deposit and first months to get her out of my house. There was nothing I could do to help her... she wouldn't even try to change. (lots of issues)... in any case, I finally realized that she's destined for failure. Her best case scenario would be to survive check to check with no emergencies popping up. Some people can't be saved... and you can't ruin your life trying.
I'm beginning to think she might be in this category too. Sad to say it seems to run in that family. I won't bore you with the details. But I thought she was different. It's just frustrating when you're on the outside looking in and see someone potentially about to make a very big mistake. I've asked her at the very least to make sure she is making her decisions from a rational and not an emotional point of view. But as with your cousin, every suggestion I've made has been met with some objection or reason why it won't work. Granted, not every suggestion I've made has been stellar (some of them have probably been pretty crappy!) but I'm just throwing stuff out on the table for her to consider as an alternative to ruining her credit rating, possibly affecting her job stability, the ability to get her kids through college (loan applications), and so on. Even if she never wants to own a piece of real estate again, I *still* don't think she should be going this route.
BTW, she said they have NO equity in the house. I keep telling her to get the lender involved NOW before they fall behind in payments. Would there be a chance they might suspend the interest payments on the loan for a period of time (4-6 months) and put them at the end of the loan so she can have some time to try to sell the house and afford the lower prinicipal only payment on the reduced salary?
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