Two properties in MN, thinking of letting bank foreclose

[karim0028]

Hi Guys,

i bought a house back in 2000 as a personal residence in MN, after 2-3 years i moved out, rented it and then bought another property as a personal residence and then got a job out in AZ, so i rented out the second property as well.

So as follows here are both properties..

1) First property, was residence turned to rental. This property was refi'ed several times thanks to my mortgage broker..
1st 148K
2nd/Heloc - ~70K
ARM mortgages

2) 2nd property, this was also purchased as a residence and after two years rented it out after i got a job in AZ.... This is completely purchase money 80/20..

1st 250K
2nd 25K
ARM mortgages

BOTH properties are in MN, i live in AZ....

I am wondering

1) what would would be considered recourse vs non recourse in MN?
2) What are the legal consequences of walking away?
3) What are the tax consequences of walking away?
4) Would they likely get a deficiency judgment against me?

Essentially what is the likely outcome of my little debacle?

Thanks,
Karim0028

[karim0028]

BTW, i forgot to mention, on the 2nd property with 250k and 25k; i suspect mortgage fraud, bc as i was getting the purchase money mortgage my broker told me that it was going to be 30yr fixed and that is what i recall signing... I recently went back to the mortgage servicer and asked for my mortgage contract and found out that it both the first and second were ARM.

The signature on the papers is not my own; its not the paper i signed, like the signature pages were changed; each signature looks different than the other and they look like scribbles.... So, i am unsure how to proceed as i am thinking of contacting an attorney. Interesting thing as that the contract is notarized; i would like to see this notary and the proof of that signature....

[helpinNE]

A quick search on MN foreclosure laws found that MN is a state that DOES allow for deficiency judgments thus it may be more beneficial for you to try to short sale the properties.
If you suspect mortgage fraud, you would need to contact a lawyer who specializes in real estate law to advise you. It maybe expensive for you to pruse a lawsuit against the mortgage company, however, it might give you some bargaining power durning a short sale.
I am not tax expert my any means but I think you may have some tax liability because the mortgage releif acts only cover primary residences (i think) and not rentals.
It may be extreme but if you qualify, you could file chapter 7 BK and walk away from these mortgages and not have to worry about taxes. Just a thought.
Good luck.

[karim0028]

a BK is intrusive as hell and im not broke (yet) so this is just me walking away from something that is costing me money that seems to never be coming back.... Also, i tend to look at work prospects overall and in general and im not too confident with the way the economy is collapsing that i will have a job in the next two years then i would let the properties go anyway since im not planning on throwing away my life savings and to still lose the props if/when i lose my job...

What would happen if i just stop paying the second mortgages? I highly doubt the seconds would foreclose, would they come after me? I would be willing to settle for cents on the dollar....

[helpinNE]

My best guess is the seconds would eventually charge off the debt and sell it to a collection agency for cents on the dollar. The collection agency would be the ones you would then have to try and settle with.
I had a family member (we live in a recourse state) short sell their residence. The first was paid in full, the second had sent it to a collection agency and they were able to get them to accept about $6,500 in payment for a $32,000 debt, however, they did require financial information and proof they were insolvent so if you have assets worth going after it may be a little harder to get them to settle. Again, this is just my .02 cents.