What happens if I only make partial payments?

[crucifixion]

I have a CA townhome.
First, $452K, non-recourse
Second, $112K, recourse (most likely)

Monthly pmt for first = $1600
Monthly pmt for second= $1000

I've been debating about stopping payments, but its a tricky situation since I'm renting out the place now and have a contract till July 2009.

I was originally planning on timing it right so when I miss my first payment, the foreclosure date would happen after the renters agreement ends. So say for example I stop making payments in February, and foreclosure is August 2009. I'm not making payments (saving money there) AND making rent income too.

However, I worried about hearing stories of banks actually going to peoples houses and delivering late notices and if my renters saw that, then they'd stop paying me rent most likely.

So now I'm debating just making partial payments. So say I only pay $500 on the first and $500 on the second or something.

What happens then?

Does the bank still agressively come after you, posting notes on your door, and proceeding with the foreclosure process as if you made $0 payments?

Or does the whole process drag out longer since you are actually making some payment?

Or does the bank refuse to accept partial payments and ultimately proceed with normal foreclosure process since they act as if you never paid anything at all?

[The Professor]

My realistic belief, given the current foreclosure climate, is that you are probably too worried about what your lender will do and are giving the lender too much credit for reacting quickly. Truth is they are likely overwhelmed with the volume of foreclosures to pay much attention to one more delinquent loan. The truth is the chances of them actually completing the foreclosure sale before July is slim to none. I don't know what you think partial payments will buy you. Maybe a little more time, but if what you indicate from prior postings is true, more time isn't going to buy you much.

Daniel

[crucifixion]

What I'm hoping is that partial payments will buy time in the sense that the banks won't bother the tenants.

That's really my only concern. From postings of other people in various threads, it seems within about 3 months of missed payments, both the first and second have sent certified mail, as well as letting sales agents know which causes the agents to show up at the door to ask if they can help with refinancing.

So I'm just trying to find the best way possible that will avoid the first and second from alerting my tenants.

My assumption is that since I'm making some kind of payments, they won't send someone to the door at all, or maybe not till 6 months later at least, and by that time the rent agreement would only have a couple months left anyway and I could deal with that.

Problem is I have these renters who are really stretching it every month, always giving rent a day or two late and only doing so when I remind them, never proactively paying rent. It seems like they think if I don't call them for rent, they don't have to pay. So I know if they see a notice or someone comes to the front door and starts talking and they find out I havent made my payments for a few months, then they will take the liberty in not paying me either.

[The Professor]

Why not give the renter the benefit of the partial payment by being honest with them and reducing their rent as the result of inconvenience associated with the potential of your losing the home due to a pending foreclosure.

Alternatively, rather than make a partial payment, reduce the rent by the amount of that partial payment. Or, keep making the full payment on the second, since that action will reduce your potential deficiency liability, and stop making payments on the first and works towards a "modification" in the first.

Daniel

[crucifixion]

I have considered lowering rent once the renter tells me they've seen the notices on the door. So I might do that then.

But if I make partial payments, or even no payments, as long as someone is living in the house, the bank can't come to the house and put locks on the doors to prevent anyone getting in, right?

[The Professor]

They could but would be exposing themselves to potential liability for wrongful eviction.