Confused about Loan Mod or Short Sale

[floridagirl23]

My Lender is US Bank and it is a Freddie Mac Loan. I was just told by my local housing agency that the bank may not allow me to do to a loan mod since I haven't made a payment in 12 months.

Do I need to really make a payment before they might work with me? I honestly don't have the money as I have had to use it. Anyways its just a really long story. I can't seem to get any good advice. Just the general info.

At this point, I am just trying to figure out if it is better just to do a short sale which was my plan but then with some of the guidelines changing I am kinda of holding on for some hope.

I have 2 homes and moved into my smaller one as I thought it was going to be foreclosed on. So my home has sat empty this last year. I am mostly definitely willing to move back in if there is a possibility of a mod but just don't know as I keep getting conflicting info and am waiting on another loan packet from US Bank.

Here's my info:
$2700-$3000 GROSS INCOME ON PAYSTUBS
RENTAL MTG-$770
HELOC ON RENTAL-$200 INTEREST ONLY BUT WILL NEED TO MOVE IT TO A FIXED SOON WHICH WILL PROBABLY BE ABOUT$600/MO
PRIMARY MTG (NO ESCROW)-1464.00 (HOME VALUE UNSURE AS I AM IN FL BUT I THINK ABOUT $140,000. I OWE $225,000.
CAR PYMT-438
UTILITIES-$300
CAR INSURANCE & GAS-200

If I move back into my primary then I can also get an extra $1100/mo in rental income.

do they calculate you modified payment on your total debt or just your mortgage debt?

I think if I could get my payment to around $700-$800 with tax and insurance included I would be ok.

Am I just wishing on a star here?

Also last question, if I end up doing the short sale my mother wants to purchase the home as I think she feels like this is her fault and is upset at all the money that has gone down the drain. can you short sale to family? will the lender be able to tell if she has a different last name?

Please don't judge-just answers & advice. Thanks.

[bficker]

I haven't heard that you can't do a modification because of missed payments, that's a new one (to me at least).

What I kept wondering while reading your story is, why? Why hold on to these properties? If I were in your shoes, I would move in to one, short sale it, then move into the other and short sale that too (as it would then be your principal residence, it may help with the tax situation). Since they obviously aren't coming to take it away (it's been over a year since you made payments, right) I would take that money you save and make sure your other debt is taken care of.

You are not supposed to be able to short sale to family, but if your mother has a different last name, they wouldn't be able to tell. That being said, it is something you are supposed to disclose short sale or not. Good luck!

[floridagirl23]

Thanks for your advice. I would definitely keep one or the other & am mostly leaning towards the smaller of the 2.

I am not too concerned about tax involved with the charge off of the loan difference with the short sale as I pretty much haven't made a profit on these homes since I have owned them and have passive losses that I have rolled over each year.

i don't know if just moving in to one or the other would allow you to claim it as primary anyways since my tax returns shows one as a rental. that is something I am curious about when it comes to the loan mod too as surely when you have to submit your tax paperwork to them it will show if it was previously claimed as a rental even if you have moved into it.

I don't have that much debt to speak of other than these homes and that is also why I could never claim a bankruptcy either.

I guess I just have hopes of somehow having all the effort, aggravation, not to mention money back from what I spent on these homes back.

Not to mention it is really a pride thing since my sister & brother in law left me holding the bag on some of this debt (I had 3 other rentals). I guess that is where my mom comes in. She just feels really bad that I worked so hard to build my credit, do everything I could to keep these properties only to let them go. It has been a long hard struggle for the last 3 years handling this all by myself on one income.

[worrywart1]

You definately have some great questions for a CPA. Since you reported one of the properties as a rental that may or may not count against you as I remember having to fill out a (4506 or something like that) so the lender could request copies of previous tax returns

Also, youre definately not allowed to short sell to family "straw man" even if it's some one your know like a friend and they let you live in the property. They consider that type of sell as fraud. I'd def. tread with caution there.

I do believe that you are allowed to claim investment or rental property as a loss if you sold it and youre upsidedown. Although you can always call the IRS and ask (for free!!) or check out their publications.
Question is do you live in a recourse state? They may be able to come after you for a deficiency...that's why a lawyer or a real estate agent specializing in short sells are important.

From what I understand lenders will only modify your primary residence, not a rental property. I read recently under the new Fannie Mae guidelines that second loan on a property may be modified or something to that effect. Forgive me but I just read the guidelines yesterday and it was 9 pages long. Davephx posted the link as well as a few others.

HUD might have some different agencies/counselors that might be able to assist you. There's always legal aid if you can't afford an attourney. It's just a matter if there's a lawyer in your state specialized in short sales while agreeing to do pro bono work.

Good luck!

[worrywart1]

[QUOTE=floridagirl23;149483]Thanks for your advice. I would definitely keep one or the other & am mostly leaning towards the smaller of the 2.

I am not too concerned about tax involved with the charge off of the loan difference with the short sale as I pretty much haven't made a profit on these homes since I have owned them and have passive losses that I have rolled over each year.


I would refer to the IRS publication on their definition as to what they consider rental property vs personal residence (ref. pages 2 and 3).

http://www.irs.gov/pub/irs-pdf/p936.pdf

Also, for more info on residential and rental property see pub. 527 on www.irs.gov's website (make sure to remove the 's as it's singular).