econ.fail

We know our house will go into foreclosure and are just waiting it out (we moved out of it already so we have nothing to do with the actual physical property anymore). We received a letter today from a collection agency stating that our 2nd mortgage holder turned our account over to them for collections. Is this a common thing? Will it change anything regarding the foreclosure process? TIA

We're in default on both mortgages and plan to let the house go (we no longer live in it and were trying to do a short sale which didn't work out). The junior lienholder sent us a pre-foreclosure letter today which seems to indicate they'll be pursuing foreclosure before the senior lienholder. What happens if they go "first?" Will the senior bank see the info then file themselves to take "lead" on it, or does it matter which of them files first? I know the bank(s) will be taking the house at some point - I'm just wondering what happens if the 2nd mortgage holder files first and trying to get an idea of what might happen and how long it will take to happen. The house is way underwater, so there's no way the junior will actually get anything from the sale, so I don't know what their hurry is, but it's not up to me to know their reasons.

Thanks for the replies, you guys! We're definitely going to set up an appointment to speak with an attorney. It sounds like chapter 7 may be the option with the least fallout if we qualify (our actual annual income would qualify but because of the way our pay periods are structured we got an "extra" paycheck in July, so since bankruptcy court appears to use the previous 6 months to determine annual pay it's skewed a smidge too high), but we'll get as much legal advice as we can before deciding.

Thanks for the response! We are not trying to save the house at all - it has multiple major issues (septic, plumbing, and foundation) that we can't even come close to affording to repair. My disabled MIL, who lived in our house with us so we could help care for her, sold her old house, got a mortgage on a house that is much more handicap-accessible, and we moved with her, so we've been out of that house physically since early summer (our names aren't on any part of the "new" house except the cable bill). We last made mortgage payments in April/May and have been working with an agent on a short sale since that time which just fell through because the 1st mortgage holder did only a comps-based appraisal and insists we try to sell the house for 40k more than anyone we've had look at it is willing to pay given the amount they'd have to shell out on repairs. We have kept the utilities on and paid up since we were trying to sell it, but our agent said we could go ahead and cancel them since there's no point paying for utilities no one is using while we wait out the foreclosure process, so I shut them off today. I wasn't sure about insurance, but it's really not all that much per month, so we'll keep it (the company knows the house is vacant - costs a bit more but at least that won't come back to bite us if something happens while no one's there). We have a family thing out of town next week, but once we get back we'll be meeting with a couple of attorneys to find out what our options are - and I certainly wouldn't be opposed to BK if it helped minimize the damages down the road. Will they do BKs just for mortgages? That's the only debt we have other than some fairly small medical bills (we got ourselves into trouble with credit cards a few years ago that we dealt with via payments plans and our credit hasn't recovered from that yet, so the only credit card we have is a secured card with a very low limit and almost nothing on it).

Can't see a button to edit my original, so... We're in GA. Mainly I just want to know about maintaining insurance since we always paid it separately - it would save us a nice chunk monthly to drop it, but I don't want to end up shooting myself in the foot by doing so. Also, I'd love info about potential pros/cons of filing BK prior to foreclosure proceedings (according to means test we qualify for ch7, but the mortgages plus some medical debt totaling maybe 2k are our only debts, so not sure if we can do a BK just for the mortgages?)

We tried going the short-sale route - the agent had everything lined up: a buyer willing to take it on, estimates on getting the house marketable/livable (roughly 50k because of catastrophic septic system failure and foundation leak plus other major and minor issues), the 2nd mortgage holder (Ocwen) approved the greatly reduced amount they were offered, everything. The senior mortgage holder (Chase) did only an outside+comps based appraisal and said we had to try to sell it for 39k more than any of the potential buyers who looked at it were willing to even consider, and they won't budge on that, so the agent told us to go ahead and shut off utilities and prepare for the foreclosure process. Unfortunately I have no idea *how* to prepare for that. Can I go ahead and cancel the insurance on it or do we have to keep that? We'll still have to pay taxes on it until the foreclosure is complete, right? I'm assuming Ocwen will also begin proceedings, so how does it work with two mortgage holders? Any other ideas on how to be prepared or minimize the coming "hit?"

Thank you! We'll definitely make sure any money applied to the new mortgage goes through MIL first and figure out some way to best ensure the house stays with us in the event of her death. We're going to try for a short sale on the current home which might (crosses fingers) allow us to avoid bk, but if we do end up going that route we'll absolutely be completely honest with the attorney because we have no idea what we're doing or what's legal or anything like that.

Thank you both!

I've posted what's going on with us personally in other threads, but the bottom line is we'll be doing either a short sale (if the lender agrees to it) or a foreclosure on our flood and septic damaged house in the next couple of months. My neighbors, with whom we've always been friendly and wanted to give them a heads-up so we told them what's going on, want to try to get first shot at buying the house so that they can have a say in their future neighbor as well as try to head off any problems that often go along with a house sitting vacant. Is there a way to do that? He doesn't want to buy it directly from us for what we owe because that + the really expensive repair work he'd be looking at having to put in it would end up costing him a LOT more than he'd ever be able to get back out of it. So is there a way for him to find out maybe when it would actually go up for a short sale or something so that he could try to be the first offer?

We are roughly 4 payments behind (or maybe 3 plus fees? It's happened gradually over nearly 10 years, so I'm not sure at this point, just know the total owed and it's equal to about 4 payments). I don't think a mod would help us - even if we got lower payments that still wouldn't help us come up with the $12K-$18K for the mandatory septic system replacement, so we'd still be looking at walking away whether through short sale, deed-in-lieu (can you do a deed-in-lieu if there's a 2nd mortgage?) or foreclosure. Thank you so much for the great information, btw!

My mother in law just sold her small-but-well-located house and is using the proceeds plus a smallish mortgage (she's already prequalified) to buy a house we'll all live in and we'll pay her rent that will be applied to the mortgage payment. We're still making the payments on this house and, though we're behind on the 2nd mortgage, we haven't received a notice of default. I've seen on some sites that a sudden, expensive major repair can qualify as a hardship - we've been trying to tackle the repairs from flood damage caused by recent heavy rains as we can afford them, but the flooding has pushed our septic system to the point of failure (as in: when it rains it's now backing up into the lowest bathroom, so this is definitely an urgent repair if we were to try to stay here) and a recent soil test showed that an alternative system is now the only type the soil will support (ball park estimates are between $12K and $18K which we do not have). There's also a balloon payment of $38K that's supposed to hit in July or August on the 2nd mortgage - we definitely don't have that. Would either of those be considered a hardship by the lender? I only mentioned being underwater in case it's something that would make the lenders less likely to approve a short sale.

We've been expecting/planning for a foreclosure (I explained a bit in another post - I can combine them in necessary, but this is a completely different topic), but the real estate agent who sold my MIL's house (in under 24 hours!) and will be helping us find a new home once that closes wants to take a look at our house (after we move - there are reasons to wait that are long and drawn out and boring) and see if a short sale might be possible. We've been assuming that, because of the flood damage/septic system failure that was the final straw in pushing us out of this house, the bank would take one look at the problems and not even consider a short-sale. I know no one can tell me if my house is for sure a candidate, but can someone help me out with general information about houses/situations that will or won't qualify for a short sale? I'll try to give some basic info that might be pertinent... We live in GA, our first mortgage is with Chase (upside down), our 2nd mortgage is with Ocwen (completely underwater), there's probably $25k-$35k worth of repairs needed (roughly $15k of that is a repair that would be needed asap and the final straw that is pushing us to leave). Anyway, can anyone give me some info on what usually will or won't be accepted by a bank for short sale? TIA.

Thanks for the suggestion - I'll do that!

Thank you for the response. My mother-in-law is selling her house (which she owns full-out but isn't big enough for all of us) and will be using the proceeds + a smallish mortgage (which she's already prequalified for) to buy a house in her name that will hold everyone and we'll pay her rent (the current payments aren't the problem - it's the upcoming balloon payment on the 2nd mortgage plus a couple of mandatory repair issues that simply aren't financially feasible at the moment that put us over the edge and have us planning to give up). We're not opposed to filing bankruptcy (after taking out loans - including the aforementioned 2nd mortgage - to try to keep up with the repairs then falling behind on them our credit is already bad. Really bad. So all a bankruptcy will do is keep it bad longer. Since we're used to it already and have gone to a save-up-and-pay-cash-for-everything plan that won't be the sudden jerk it is for a lot of people). I've just heard people say that BR attorneys will try to push us into filing whether we really should or not, but then other people have said that credit counselors would probably try to convince us NOT to file BR even if it might be best. We just really need advice from someone knowledgeable yet unbiased. Would a Certified Distressed Property Expert be able to give us that advice?

We're looking at allowing our house to go into foreclosure (a loooong list of reasons and years of trying to keep a "dying" house livable - it's just not worth it anymore as the failing structures keep getting more and more expensive), but we'd like to do it in such a way that it minimizes what can come back to bite us later, so we'd like to talk to someone familiar with our state/local laws. Some people have advised talking to a credit counselor and staying away from bankruptcy attorneys (it's a possibility if needed to help handle our 2nd mortgage which has a balloon payment due later this year) while others have given us the opposite advice. For those who have gone through the process, who would you recommend talking with to get the best advice (at least as a starting point)? We live in GA, btw, if that matters. TIA!