Posted on 10/10/2011 11:27:43 AM PDT by RetiredArmy
Need assistance from the FRpeer Nation out there. I have a dear friend whose son has lost his job and will have to relocate to take a new job. This person owns a home and has a family.
The deal: the market here is in terrible condition and there is little if any hope of selling his home. He has considered walking away from the mortgage. Just pick up and tell the mortgage company what is going on and that he is simply leaving, here is the house, come and get it. Then rent on the other end.
My friend is in a condition over this. He thinks his son should just hang in there. But, the son insists on doing this. I told him that I was glad that I did not have that decision, because in this day's markets, I would be in the same boat. I would probably not be able to sell either.
So the question is, what happens if this son walks away from his mortgage? Just tells the company come and get it, I am gone. What is his legal consequences? Can the mortgage company just sell the house for what they can get for it and hold him responsible for the remainder or what?
If any of you out there can provide me information, or a place that I can pass on to my friends to assist them and their son, I would be most thankful. Thanks.
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.
Sounds like a good article, but the link is bad.
That article did not come up. That sounded like something to send to them to read. Can you repost it?
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
—In California, walk away and the bank has no further recourse. —
This. You’re gonna have to check your state’s laws. I do have one acquaintence that has not made a mortgage payment in two years and still lives there, the whole time trying to work something out with the bank to no avail.
And at the rate people are walking away, any bank that DOES try to sue you (assuming they can in your friend’s state) is gonna have to wait in line for a court slot, maybe several decades. One car speeding is a ticket magnet. A car speeding in a pack of a thousand speeding cars, less so.
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.
Thanks to all who are providing responses. I am forwarding all your comments via email so that they can process through these.
The comments regarding the mortgage co. holding him responsible is one of the things I told my pal that might happen. I know that is normally what happens if you have a car repossessed.
FWIW, I rented a house for around $1500 that, had I bought at or near the peak of this housing debacle, would have had a $3,500 mortgage (including RE taxes), and it STILL has a rental value of $1,500.
The link will work IF you include the “-” at the end. For some reason when you highlight the entire link it does not underline the “-”.
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.
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