FL foreclosure vs. bankruptcy

[Steeda]

This is long, but please help! My wife and I bought a new mobile home in S.FL.(used Wachovia) in 2005, later decided to buy a new HOUSE in 2006 in Central FL (used a real estate attorney) ref. 2 closings 80/20. We lived there for 10 months but never sold the mobile so we moved back to S. FL to make more money to afford both mortgages (HOUSE has been vacant since). Here is my question. Bills are getting tight and Fore/bank/shortsale soon. I happen to look over my loans for the HOUSE 80/20 loan and read that my mortgage broker checked the box for my 80% as a second home(Wachovia also) and second home rider doc. also and my 20% HELOC as primary. Mort. broker even wrote on both app's that our jobs were in S. Fl at the time. Our reason to purchase the home was to be primary and we moved there instantly/ got jobs/ changed DL's. Is this normal practice to have a primary and secondary loan on the same property? My attorney didn't even find it. Is he liable, mort.broker liable, am I ? Both loans have been purchased already, is it too late for legal action on their part against me since those initial loans are closed? I don't want to go to jail!!!! Bad place.... Thanks, sorry so long.

I have some questions, you put in your profile that your occupation is the Law, however you are requesting legal assistance, which we can not offer here. We are not attorneys....

So...if you could please clarify....these issues, please.

[Steeda]

Law Enforcement

[Andrew]

Yes we can not offer legal assitance, you may want to contact an attorney. Marshall Rosenbach who is on this website is licensed in FL. BTW what type of law enforcement are you in? I'm in law enforcement also.

[Steeda]

Code enforcement. How about we change the title from Need legal assistance to what is everybody's opinion?

[Andrew]

This really is a legal question though. I dont have an answer for you. Did you try contacting an attorney?

Alrighty then....the fact that the loan applications reflected occupancy in a less than forthright fashion is water under the bridge unless these were government loans....FHA or VA. There you will have some significant problems with the purpose and occupancy issues, they are very, very unhappy with the representation of the occupancy and purpose issues being misrepresented. There would be repercussions. By virtue of what you posted I doubt that these are government loans, so then, see below. By the way this is a lender speaking not an attorney.....

Now on the conventional side at this late date.....it is water under the bridge...do I like that it was misrepresented, NO. Was it right, NO. Should the Broker have his knuckles rapped with a large nasty metal edged ruler, YES. What is your exposure at this late date, minimal, could they go after you, yes, but I doubt that you are looking at the gray bar hotel....you did move into the property and as such, second home not withstanding, you were in the property for a period of time.....no harm, no foul.

What the Broker did was mix usages of the property and submit that way for pricing purposes...more $$$ in the pocket and perhaps the 2nd did not allow 2nd home usage...you did move into the property...that made it primary for the intents and purposes of the loan occupancy as stated on the second loan. This was a real FUBAR on the part of the lenders not to get the documentation correct on both loans....do I think as a lender that you are in deep trouble, no, the area that is of issue is going to be the overall deficiency and financial exposure that you may have in the event of the foreclosure with the mixed messages that these documents send. The first I assume is the foreclosing party....as such they have to treat the foreclosure as a Second Home foreclosure....which in the lending world.....oh I know we are really dumb, is considered a quasi primary property....we are not in some shops required to ROR the file on a refinance in others we are, there is a lot of disparity as to how the Second Home is treated, like primary or not....as there are rules under IRS regulations about occupancy by the owner in order to obtain the tax benefits.....

Your major concern....is a worry that you need to put aside and try to just make it work in the every day scheme of life.

The concern that I would have on these loans is the employment issues...were you actually employed in the market and was the employment accurately represented by the Broker? You say that you did work there, so as long as it was adequately represented by the Broker, then again no harm, no foul....as long as the data was correctly represented.

Occupancy since you moved into the home is a non event, employment is the issue, if you were working there and did occupy you met the spirit of the loan application on the second and as to the first, you also occupied the property and as such as a lender I do not think that you have a problem.

Please if you continue to have concerns contact an attorney...but all in all, I am not really going to recommend that you loose sleep over it. The tax issues and deficiency issues....please see an attorney.....

[Steeda]

Thank you very much! I know that took some time.... This was not an FHA/VA loan just a regular one. I even stopped the homestead exemption since I don't live there anymore so I would not get into any trouble. If this can of worms was opened, wouldn't the mort.broker/ lawyer get into trouble and maybe not me??? Thanks again.

Yep they should, really the Broker cause the misrep occurred at that level, but then again the Lender did not catch the mixed usage/occupancy issues and we underwrote those as twoies combos. So if both loans are with Wachovia, then the same underwriter should have approved the first and second simultaneously....her/his bad.....OOOPPPPSSSS....always read the paper guys and gals....the paper tells the story.

[Steeda]

Your awesome with helping people, thanks!!! Actually the S.FL home is Wachovia, where we live now, the C. FL 80% is Wachovia, the 20% is HSBC. So the they were seperate. We closed in Central FL and the mort. broker and lawyer were not present. Only through phone and paperwork, faxed all to lawyer. So I take it no jail time/ criminal charges

If we were to pursue the misrepresentation that existed in these files we would need a prison/jail the size of a medium sized third world country to house the offenders.....

[Steeda]

Thanks again!!!!!!

You are very welcome and come back if you need anything that we can assist with...please.

[Steeda]

Hi, its me again. I'll make it short. Few questions. Reference yesterday about our wacky mortgage broker putting our 80% as vacation home and 20% as primary. Our loans were Wachovia(80%) and Northstar lending(20%) since bought out, the bottom of some papers say fannie mae form 1003.

1) This does not mean these are govt. loans, FHA/VA right?
Because yest. you said they are real strict about occupancy.

These papers from the closing that I have are copies without me/ my wife's signature we received before we signed.
2) Is this normal, why didn't we get the signed ones?

On the Uniform Residential. Loan App. the mort. broker on the 20% put primary residence and on FL Mortgage Brokerage Contract she X'd the box 2nd Mtg.
3)What kind of nonsense is this? Looks like she screwed up a lot. Normal?

You said yest. Now on the conventional side at this late date.....it is water under the bridge...do I like that it was misrepresented, NO. Was it right, NO. Should the Broker have his knuckles rapped with a large nasty metal edged ruler, YES. What is your exposure at this late date, minimal, could they go after you, yes, but I doubt that you are looking at the gray bar hotel....you did move into the property and as such, second home not withstanding, you were in the property for a period of time.....no harm, no foul.

4) What does that mean, they could go after me? To what extent? Why not the broker/ lawyer, since I'm an innocent buyer? Thanks again..

[Andrew]

If they wanted to go after you I guess they could, but they have bigger things to do. They will say you signed the documents, since it says right on the loan papers that you are signing that everyone is correct.

[Andrew]

Also if you are reallly worried, why not contact an attorney? We cant answer any legal questions here.

[Steeda]

That sounds expensive and with $3000 month in mortages its tough

[Steeda]

Where's Poppy?

Please I have to work too......the critters need to eat......so, here is the reality of this situation....a Primary and Second home are both owner occupied issues..having said that this could not have been an FHA or VA loan with the fist as a Second Home since they do not lend on Second Homes....it is a conventional product. That is that....

The fact that you moved in to the property as a primary, absolves you of the issues regarding the Second home and on the Second Mortgage as a Primary Home....

This only would be a problem if you rented the property out and never spent a day in the property.....that would be a problem....but you did move in. There is a mixed message in the purpose of occupancy between the first and the second, that was done by the broker due to $$$ and due to the fact that the Second Loan Guidelines would probably not allow a Second Home usage in their product line at the time of underwriting. A Second Home is common on an 80% First product and not for not they were probably jerking that around due to the other home that you had in Central Florida, without the paper work I can not tell exactly what was going through their pea sized brains.

However, the onus is at this point not on you, you made this a real primary residence, which is in our opinion less of a risk (HAH) than a Second Home...it was underwritten to more stringent guidelines as a Second Home...the whole thing is fairly moot at this point.

Again if Wachovia had both of these loans they underwrote the loans as a package and if they did not pick this up....SHAME ON THEM.

At this point down the road this is water under the bridge....we have people that have claimed occupancy and really bought the properties as rentals...so far unless they were a huge real estate ring, there have been little or no repercussion.

[Steeda]

Thanks again Poppy!

[Steeda]

This was my original questionand was answered however, my new question is at the bottom.

My wife and I bought a new mobile home in S.FL.(used Wachovia) in 2005, later decided to buy a new HOUSE in 2006 in Central FL (used a real estate attorney) ref. 2 closings 80/20. We lived there for 10 months but never sold the mobile so we moved back to S. FL to make more money to afford both mortgages (HOUSE has been vacant since). Here is my question. Bills are getting tight and Fore/bank/shortsale soon. I happen to look over my loans for the HOUSE (not mobile) 80/20 loan and read that my mortgage broker checked the box for my 80% as a second home(Wachovia also) and second home rider doc. also and my 20% HELOC as primary. Mort. broker even wrote on both app's that our jobs were in S. Fl at the time. Our reason to purchase the home was to be primary and we moved there instantly/ got jobs/ changed DL's. Is this normal practice to have a primary and secondary loan on the same property? My attorney didn't even find it. Is he liable, mort.broker liable, am I ? Both loans have been purchased already, is it too late for legal action on their part against me since those initial loans are closed? I don't want to go to jail Bad place.... Thanks, sorry so long.
That was answered by Poppy- very helpful. My new question is: Is this a truth in lending/ Respa issue????Thank you.

[Steeda]

Hi this is my question. My wife and I bought a new mobile home in S.FL in 2005, later decided to buy a new HOUSE in 2006 in Central FL . We lived there for 10 months but never sold the mobile so we moved back to S. FL to make more money to afford both mortgages (HOUSE has been vacant since). Here is my question. Bills are getting tight and Foreclosure/bankruptcy soon.My wife works and I just lost my job and we relied on both jobs to afford both homes (we are doing the responsible thing by not ruining our credit or screw the banks). The new home we bought for $212k, 80/20 loans. Now worth $150k. FORECLOSURE QUESTION: If we foreclosed could they sue us for the diff., take our cars, put a lein on the mobile, take the mobile where we live now. BANKRUPTCY QUESTION: Is it true we have to pay back 90% of our spending money monthly (we have one credit card?) Thanks

[Moe Bedard]

Steeda, there is no for sure answer for you here. Florida is a judicial state and they can pursue a deficiency judgment if they choose to. A deficiency judgment is a judgment against the borrower for the difference between the outstanding balance of the mortgage , plus costs and attorneys fees, and the value of the property foreclosed. The property value is determined on the date of the foreclosure sale.

A foreclosure does not automatically result in a deficiency judgment. Just because you lose a property at foreclosure does not automatically mean they can go after you. To obtain a deficiency judgment, your lender has to file a motion for a deficiency.

I believe all people in your situation need to really consult with an attorney that know what they are doing for an hour or 2. It may be money WELL spent.

Source

the court must hold a separate evidentiary hearing on the lender’s request for deficiency liability. At the evidentiary hearing the mortgage lender has to show the court evidence that the property’s value on the sale date was less than the note balance. The borrower can get his own appraisal or can use the government's tax assessed value as evidence of value. If the property was worth more than note balance on sale date the court will not give the mortgage lender a deficiency judgment against the borrower. The borrower may present evidence of value in the form of a formal appraisal or other less formal opinions of value such as the local government's tax assessed value.

During the recent real estate boom deficiency judgments were uncommon because increasing real estate values brought home values above note balances of defaulting mortgages. Additionally, lenders could take back "upside down" properties and hold them until the rising market made them whole. In the current real estate recession, more lenders may pursue deficiency judgments. Up to this point in the real estate crash few lenders have been pursuing deficienty judgments. Second mortgage lenders and private lenders are more likely than first mortgage holders to go after deficiency judgments. Even in a weak market, if there is still equity in your property when you relinquish the property through foreclosure you can defend a motion for deficiency judgment.

Another problem with mortgage foreclosure is possible income tax consequences. The general rule is that when a lender forgives or cancels a debt the borrower can incur income tax on the amount of debt forgiveness. When you arrange a discount in your mortgage in order to sell house (a so-called "short sale") the mortgage lender will cancel part of your mortgage debt and you will receive a tax form 1099 telling the IRS that you have imputed income for the amount of debt reduction. You will also incur income tax liability for a deed in lieu of foreclosure. The taxable income will be the difference between the property value and the balance of the mortgage loan on the date you surrender the property to the bank.

A foreclosure may result in cancellation of debt income depending on whether the bank pursues a deficiency judgment. If the mortgage lender gets a deficiency judgment for the difference between the property value on foreclosure sale date and the mortgage balance the lender is not forgiving any part of the loan. If the bank chooses not to pursue a deficiency judgment, or pursues the judgment unsuccessfully, the borrower may incur income tax liability for debt foregiveness.
In December, 2007, Congress acted to protect many debtors from income tax liability associated with foreclosure avoidance. The Mortgage Forgiveness Debt Relief Act of 2007 states that homeowners will not be subject to income tax from release from mortgage liability if and to the extent the mortgage proceeds were used to buy or improve their primary residence. There is no income tax shelter from foregiveness of mortgage debts for investment property, vacation homes, or mortgages used for businesses or to pay off credit card balances. The protection expires in December, 2009. You should speak with an attorney or CPA familiier with the new law to see if you qualify for income tax protection.

For those borrowers who do not qualify for protection of the new Act there is an insolvency exception to imputed income from the cancellation of mortgage debt. If a borrower is financially insolvent when he surrenders the mortgaged property to the lender voluntarily or through foreclosure there will be no imputed income. A borrower who files bankruptcy is presumed to be insolvent, so that a bankruptcy debtor cannot suffer imputed income tax liability because the bankruptcy discharges personal liability under a mortgage note. More information is available from IRS Publication 908 and IRS tax form 982. Both can be found at irs.gov.

[Steeda]

Thank you. You guys are great!

[Steeda]

Moe- Could you look at the top of the original articles reference to having a primary/ secondary loan on the same loan, is this a truth in lending/ respa issue?