Buying and bailing in MN

[movingalong]

I've been lurking on this website for a few weeks and decided it's time to post my own thread. Thanks so much to everyone for sharing their experiences. It has been very helpful and this website is a great source of support.

A little background - we purchased our Minnepolis suburb home in 2004 for $192k as a starter home for my wife and I with a plan to move in a few years as we start a family. Fast forward to 2012 and we're still there with a mortgage balance of $183k (we've refi'ed 2x to lower the interest rate and never taken any money out and there is no second mortgage) and the house is now worth about $130k on a good day even after many improvements (new kitchen cabinets, new furnace, etc.). My wife has been wanting to move to a bigger house for several years and I've been dealing with the reality for the past couple of years that the value of our home will never recover to the point we can sell it for what we owe on it. After serious consideration over the past year and after much convincing of my wife we finally decided to go forward with a buy and bail. This would allow us to get out of our dumpy neighborhood (it was much nicer 8 years ago) and into a house that is big enough for us as we now have a 3 year old son in our family as well as a dog.

We just finished the buy portion of our buy and bail which I understand is the most difficult part. We are in our new home and are loving it! We found a house that is just right in a very nice neighborhood and the mortgage payment is not much more than it was on our old house. Now we are beginning the portion of the buy and bail I have been dreading. Our mortgage payment on the old house was due July 1 to Wells Fargo and we will be officially late on the 16th of this month. So I'm expecting to receive lots of calls and some letters at that point. My plan is to ignore them so WF does not get the impression I want to do any kind of modification or anything to save my home. I want it to get foreclosed asap.

I should also mention we did meet with an attorney to discuss our situation and a possible short sale. He said we wouldn't have a chance of getting a SS accepted as we do not have a hardship (fortunately). He thinks we will be likely to be among the 98% of homes that are foreclosed by advertisement and therefore not have any deficiency judgment. I'm keeping my fingers crossed that this is the case!

I have a couple of concerns that maybe someone else has dealt with or has some info on. Our new mortgage is also with Wells Fargo which really worries me. I'm nervous that they may try to take our payment on the new mortgage and apply it to the old mortgage. Maybe I'm just a worrier... Does anyone have any experience with a buy and bail and Wells (or the same bank) holding the old and new mortgage? The attorney mentioned that each mortgage probably has a different set of investors in the mortgage and that this would be extremely unlikely to happen.

I'm also a little nervous about a possible foreclosure by action where WF can pursue a deficiency judgment. This is because I did have our down payment money in our WF bank account for a couple weeks (about $14k plus another $5k of other money so $19k total). I've since xferred all money out of WF to another bank but is this enough money for WF to think that we have money and make it more likely to pursue a deficiency judgment against us? We really do not have a lot of money as that money was from a 401k loan and most has been spent but WF saw it in our account. Sometimes I feel like my mind wanders to the worst possible outcome with our situation and it really can be stressful. (To those people who think strategic defaulters are getting away with something I would like them to walk in our shoes for a few weeks with the stress of the credit hit and all of those little worries that run through a person's mind during this process. It's not a small price to pay.)

That's pretty much it. If anyone has any advice or experiences to share that may help it would be very much appreciated. Thanks!

movingalong

[movingalong]

Just a couple more quick questions...What bills can I stop paying? From what I've read I can stop paying property taxes. I think we will have the home insurance covered as that money is escrowed and there is plenty sitting in the escrow account right now. Luckily there are no association dues to worry about.

What about the water bill, the electric bill, and the gas bill? I'm assuming I should turn off the water if the city will let me. Any reason to keep the electric going? Should I keep the gas going to keep a minimal level of heat this winter so the pipes don't freeze?

[movingalong]

Quick question-we just finished buying a new house and we are letting our old home go into foreclosure (buy and bail). We qualified for the new house with a mortgage broker and WF ended up with the new mortgage. WF also has the loan on the old home that we are letting go into foreclosure. We are officially late on our old home's June mortgage payment today and the first payment on the new home is due to WF on August 1st. Is there any way WF can try to take our mortgage payment on the new house and apply it against the past due mortgage on the old house? I've been nervous about this since I found out WF ended up with our new mortgage as well as the old one. Any help or insight to put my mind at ease would be much appreciated. Thanks!

[movingalong]

I meant to say we are late on the July payment today (not June).

[Evan Bedard]

Is there any way WF can try to take our mortgage payment on the new house and apply it against the past due mortgage on the old house? I've been nervous about this since I found out WF ended up with our new mortgage as well as the old one. Any help or insight to put my mind at ease would be much appreciated.

'

As long as you clearly put the account number and address along with the payment they should apply the payment to your new mortgage and not the one you are defaulting on. You may want to make the payment over the phone to ensure it is being applied to the correct account..

[movingalong]

Thanks for the quick reply! I was planning on using electronic billpay through US Bank which sends the
payment with the correct WF mortgage account number. Does that sound okay?

[Evan Bedard]

Thanks for the quick reply! I was planning on using electronic billpay through US Bank which sends the
payment with the correct WF mortgage account number. Does that sound okay?

Sorry for the late reply, but yes that sounds like a great idea.

[movingalong]

Thanks Evan. I made the payment through bill pay and it went through just fine. I'm feeling much better about the situation now that I have one payment made and everything has started. Thanks for the help!

[Ed_Wilbur]

A asked the same question here . We are going to winterize our house as best we can when winter comes. In the meantime I am going to turn off the AC & maybe the whole electric as well. Let the bank worry about it. Same for the water. Not like we are going to be using it.

[movingalong]

Just a quick update on our situation. We are now 45 days late with WF and have missed 2 payments on our old mortgage. I checked our credit score today and it dropped 48 points as the 30 days late hit the credit report.

So far so good on our new mortgage. I made the first payment via bill pay with no problems and will make the second payment today. One interesting thing is there have been no phone calls yet, not one. We received a letter for a WF home ownership workshop but that's been the only communication so far.

[ross_]

I had a few questions about your "buy", since I'm in the same state and in a similar situation.

1. When you were getting the new mortgage did they ask what you planned to do with the current house?
2. Did they require you to have 6 months of reserve payments, since you were taking on a second mortgage?
3. Finally, if you don't mind saying, what kind of mortgage (30 yr conventional?) and what was the required down payment?

[movingalong]

Hi ross_. I did have to write a one sentence letter saying that I intend to rent the old house. Of course intentions can change. I did check the rental market and the rental income would not even cover our mortgage payment, let alone any repairs or general maintenance.

They did require 6 mos reserves, but my retirement account counted towards this.

It was a 30 yr conventional with 5% down.

Good luck with your b&b! I hope it goes smoothly. They make you jump through many hoops throughout the process but it's 100% worth it.

[movingalong]

Just a quick update on our situation. Our first missed payment was July 2012 so we just missed our 4th payment on October 1st. I haven't received any phone calls on my cell phone which I know WF has on file. I assumed because of this we had not received any calls at all but I found out from our receptionist at work there has been an automated WF phone call each week for the past few months. She always hangs up and they do not say who the message is for but I can only assume it's for me. Our receptionist knows the situation and is very cool about everything so all in all that's really not too bad at all. I expected to be hounded relentlessly on the phone calls.

We stopped by the old house about a month ago to get the final few bins of stuff still there and a big sign was posted on the window stating that WF had declared the house to be abandoned and because of this they changed the locks to protect their interest. Luckily my key still worked in the front door but all of the other locks had been changed. The boxes/garbage from the new door handles and accessories were on the floor by the door so we may have caught them right before changing the front door lock.

We did receive the attorney letter in the mail last week from a small local law firm I've never heard of. It said they were retained by WF to start foreclosure proceedings and it gave us one last chance to call the help number and try to save the house. I also noticed that the mortgage for our old house is no longer on the WF website when I login, just the new mortgage is there.

So it seems like it's getting near the point of a Sheriff's sale being scheduled, at least I hope that is the case. So far the process has moved about as fast as it can move and I hope it continues at this pace. I was doing some poking around on the website that lists Sherrif's sales in our area and it looks like the redemption period for every WF mortgage I can find is 6 months. I was hoping to find at least one with a 5 week redemption period since WF knows we have left the property. I would love to have a 5 week period to shorten this up but I'm guessing WF is pretty backed up and the 6 month period is pretty standard for them regardless of the situation.

A quick note on my credit score. It started in the 780 range before this process started and now it shows up at 696 on Credit Karma. They show both morgages for the new and old house and a 90 day late hit for the old house's mortgage. That's not bad at all but I'm assuming it will get beat up a little more during the rest of this process but hopefully I can start to rebuild it soon. I'm still getting lots of credit card offers and nobody has cut any credit limits or closed accounts yet on my existing cards.

Thanks again to everyone on this website who shares their experiences. This site has been a great source of support and wonderful information through the entire process so far.

[vantuckian]

I'm on the same path, but a bit behind you on the timeline, and also in a different state... but I was wondering if you could coarsely/roughly describe any impact to your credit cards? Any limits being cut down or out right canceling cards? Thanks!

[driftwood]

I am also interested in those same things. Just starting my b&b, we found a house and our offer was accepted. I dont have much credit card debt but I use my credit lines a lot paying them off monthly. It would sting if they were cut back drastically.

[movingalong]

Nothing so far - no limits cut and no cancellations. I also use one card monthly for expenses and pay it off in full so I'm keeping my fingers crossed. From what I can remember in reading many many threads on this forum, the worst companies are Chase and AmEx for cutting limits. I have both of these and nothing has happened so far.

[movingalong]

An update on our situation - our sheriff's sale is scheduled for mid-December. I've been checking online every morning and it was posted yesterday. We also received a packet in the mail with the details of the sheriff's sale.

Does anyone know if the sheriff's sale is the trigger for a 1099 being sent out by the mortgage company? I'm just curious if that is the event triggering it or if the 6 month redemption period needs to elapse before a 1099 would be mailed out (if there even is a 1099). It would be nice to have the 1099 go out for the 2012 tax year just in case the mortgage debt forgiveness law does not get extended.

[ross_]

Any more updates on this?

We've just completed the buy portion of our buy and bail, and are comfortably living in our new place. Old mortgage is due today, and will go unpaid.

Pretty sure we won't complete the foreclosure in 2012; so the soon-expiring Mortgage Debt Relief act is on our minds, but I'm just happy to be out of our old place.

[movingalong]

Hi ross_. Congrats on completing the buy! That is the hard part.

I really don't have any updates. I did talk to an attorney about the timing of the 1099 and he thought it would be issued when the 6 month redemption period has expired but he wasn't entirely sure. I know there are a lot of inconsistencies among mortgage companies in issuing 1099's - when to issue them, the fair market value listed on the form, and some companies not issuing the 1099 at all. So it really is a mystery on whether you will receive a 1099 or not and what the 1099 will show if you do receive it. I've decided to not worry about it for now and deal with the form if I receive it. I'm keeping my fingers crossed that Congress does extend the mortgage debt forgiveness act.

I will update again when the sheriff's sale happens. Enjoy your new house!!

[movingalong]

Well our sheriff's sale took place this week. I called a super nice lady at the county and she told me WF purchased the house. They paid what we owe them on on the house plus fees which is about double what the house is actually worth. I asked about the redemption period hoping for the 5 weeks but it's the usual 6 months. So 6 more months and this process should be finished which will put the entire process from 1st missed payment to the end of the redemption period at about 1 year. That was the best case scenario I had in the back of my mind when we decided to do this so I'm very happy.

I posted on a different thread that WF sent us a letter requesting proof of insurance on the house. Our ins company canceled the policy a month ago when they found out the house was vacant and they also copied WF on the letter. I was a little anxious about this at first, but the back of the WF letter says that they will put their own policy in place and bill us for the policy so I'm not going to worry about it.

Credit score is at 686 on credit karma and it started around 760 so it's not horrible. It actually went up 7 points last week!

That's pretty much everything new that's happened. I will check in after the new year. Happy holidays to everyone!