question for professor Shay (3 foreclosures at once)

[larryb]

Hello Sir, I was hoping for your opinion and advice.

I am in Michigan and spoke with a lawyer with regarding my 3 rental properties and he advised me to foreclose on all of them and take the wait and see approach. This is what I am doing.

Last payment on all 3 were december 08

property1) mortgage with citigroup for 30k. value is zero, unoccupied
property 2) mortgage with countrywide for 35k. value is zero, unoccupied
property 3) mortgage with wells fargo for 65k. value 29k, currently rented but doesnt cover expenses.

Also, I lost my job in Dec 08, dont have any assets, (only about 7500 in stocks) very minimal balances in bank accounts.

Only started to receive phone calls from Citi.
Only the Wells fargo had equity taken out in a refi in the amount of 20k.

My question is, since the amounts are relatively low, will the lenders spend the money and effort to try to sue me? Will the lenders be willing to settle the debt at a lesser amount?
Would it even be worth it for me to try to settle for less?

Will the lenders sell the debt to collection agencies and if so will it then be easier to settle for a drastically reduced amount?

When in the foreclosure process ahould I expect all this to happen? before during or after the homes are foreclosed on?

Since property 1 and 2 dont have any value, what happens if lenders dont foreclose on them? Can I let them go to unpaid taxes?

Also, if I play the bankruptcy card do you think they will be more prone to listen? And should I play the bankruptcy card with the lenders or wait until it goes to collection agencies?

Lastly, I plan on keeping my homestead. Homestead is with BofA, can the above lenders or collection agencies go after it? What are the chances? (in your opinion?)

Thanks greatly in advance for your time. If anyone else cares to comment, please do so.

Respectfully yours,
Larry

[markmc2000]

Larry,

Sorry those things have gone to zero. that's sounds horrible. Will thosse properties rent at all???? Sounds like your mortages sould be so low that maybe they would cash flow...

[larryb]

markmc2000,
thanks for your response but the problem is property 1) was severlely damaged by fire and the insurance company is denying the claim due to it being unoccupied at the time. (it was for sale) and fire originated from neighboring house that spead to mine.

property 2) is in a bad neighborhood and every time I try to fix it or clean it up theives and squatters steal or damage everything.

I cant afford to throw good money after bad anymore

[The Professor]

Let me deal with your questions one at a time. But I agree with your lawyer's suggestion that you "wait and see."

My question is, since the amounts are relatively low, will the lenders spend the money and effort to try to sue me?
The lenders won't but that doesn't mean they won't sell the debs to collection agencies.

Will the lenders be willing to settle the debt at a lesser amount?
Of course. If you were willing to offer them a substantial amount compared with what they are owed. But you can't afford to do that.

Would it even be worth it for me to try to settle for less?
Probably not at this point.

Will the lenders sell the debt to collection agencies and if so will it then be easier to settle for a drastically reduced amount?
Yes, and it may be easier because the collection agencies will have a better idea of what you can pay (as the result of doing an asset analysis).

When in the foreclosure process ahould I expect all this to happen, before during or after the homes are foreclosed on?
After.

Since property 1 and 2 dont have any value, what happens if lenders dont foreclose on them? Can I let them go to unpaid taxes?
Eventually there will be a tax sale.

Also, if I play the bankruptcy card do you think they will be more prone to listen? And should I play the bankruptcy card with the lenders or wait until it goes to collection agencies?
I'd wait until you hear from collection agencies.

Lastly, I plan on keeping my homestead. Homestead is with BofA, can the above lenders or collection agencies go after it? What are the chances? (in your opinion?)
How much equity (value - loan balance) do you have in the home?

Daniel

[larryb]

Thanks Daniel,

My homestead has a mortgage of 87k and is probably worth 90-120k in todays market.

Lastly, once debts do go to collection, if I can setlle the debts for pennies on the dollar is it even worth it? I mean my credit will already be toast.

What advantage is it to settle the debts?

Thanks again for your time. Talking to people and reading all the stories really helps. I hate to see everyone and myself in these situations. Its crazy how you sacrifice and work your whole life and then to see this happen

Larry

[The Professor]

Michigan's homestead exemption doesn't appear to be that great (see Seizure of Property by Creditor - What property is exempt in Michigan? ).

The clear advantage of settling the debt is getting the issue behind you so you can go ahead and buy that lotto ticket without worrying about what will happen if you win.

Daniel

[larryb]

Thanks Daniel,

I think I will continue to wait and see.

Should I wait until the foreclosure is done and complete before I even consider negotiating a lesser amount?

I just want to make sure this is done correctly. (If there is such a way )

Lastly, if this takes 6 months to a year. Chances are local authorities and the city will issue fines to me for the unkept property etc.etc. Due to being in foreclosure, am I exempt of the fines, or am I still responsible to pay for them?

Thanks again,

LB

[The Professor]

I will wait, and yes, as the property owner you would be liable for fines. I wonder what would happen if you found a guy on skid row, gave him $20 dollars and then "sold" him the two properties for $5 each and recorded the deeds. Heck, you'd no longer own them and they could fine the guy..... Just a thought.....

Daniel

[larryb]

Daniel,


I thought about selling the properties to a man on skid row, giving him a chance to own a property

Can this be recorded with a mortgage on property?

[The Professor]

I don't see why not.