Hard Money Trap

[canasta5616]

We purchased a home to rehab last year using a hard money lender. They sold the loan to Ameribank. We completed the house renovations and listed the house just before the mortgage brouhaha. The house didn't sell and we've held on to it for a year. We decided that we would sell our main home, pay off all debts except our car payments and refinance the rehab into a 30 year mortgage. Easier said than done. Our main home has sold and will close 6/16 but now Ameribank has called the loan (due 6/23/08). We tried working with Ameribank to no avail. Our main home was with Countrywide but even they won't help as we are behind on the hard money loan payments. We just want to get a conventional mortgage and not be out on the street. Keeping our main home is not an option now. Any advice?

[canasta5616]

to continue our story...we contacted a bankrupcty attorney to see about filing a Chapter 13 and halting the foreclosure of the rehabbed home. It was our intent after selling our primary residence that we would use the proceeds to pay off our revolving credit which would leave us with car loans and the rehabbed house. Then hopefully we could obtain a mortgage and move into the rehabbed home. He informed us that the trustee would take the proceeds from the sale and use them for the rehabbed house's secured loan. Can anyone give me any information as to what we should do now? I am sure that others are feeling the same things we do but it feels like we are the only ones going through what was probably an avoidable situation. Thanks for taking the time to help us out.

[takeastep]

Canasata,
I understand the feeling of a lender breathing down your throat and demanding.
To help us clarify your situation:
How much do you owe?
What is the market value today?
Since you are selling your primary residence, are you planning on occupying this property making it owner occupied and bettering your terms for financing?
How much are you behind?
After selling your primary, can you use your proceeds to pay this loan current instead of paying your credit debt?

[canasta5616]

We owe $189,000 on the property, it appraised last month for $235,000 without the heat pump that is scheduled to be put in. Currently there is a/c and a forced hot air furnace. Were planning on using the proceeds from the sale of our primary residence to pay off all revolving debt, leaving us with the investment home and 2 car payments, as Ameribank is not giving us the choice to pay current. They have demanded the note (which reached maturity on 6/1/08) to be paid in full on 6/23/08. (We are 6 months behind on the "interest only" payments on the investment property.) We were working with Ameribanksolutions for about 3 months before they decided not to go forward due to the fact that the closing of the primary wouldn't be until 6/16/08. We have been living in the investment property for a couple of months so that we could show the other home easily. But we have only moved a few pieces there.

[canasta5616]

To update, we are in the process of filing Chapter 13 to help us save the rehabbed house (that we are living in - due to be taken 6/23/08) and give us some breathing room. Today, the buyer's realtor of our main home has pushed the closing from 6/16/08 to 6/30/08, apparently they don't have all the docs in place with their lender. If we file now, will we have to wait for a judge to grant permission to sell? This could be after the 30th. Is there a chance that the judge won't grant this? Do we take a chance and let the buyers move in on the 30th, then close later? I'm afraid that this news could make them "walk". Should we just walk away from the rehabbed house and let the sale of the main home go through on the 30th and then look for a place to live? I imagine that we will struggle to find a place to live if our credit is pulled. What a mess!! I am trying to keep a positive outlook on this and not go down without a fight but I feel as if we keep taking two steps back and none forward. Any advice?

[canasta5616]

This is my last update. We have exhausted all avenues of help. A company offered to help us with a loan modification, but I couldn't find any information on them and they wanted money up front. We were not able to find anyone that would give us a mortgage or even to purchase the note. The payoff as of 6/23 is $206,000. We will not be filing Chapter 13 at this time. We are now scrambling to find a place to live. God help us if they pull our credit.

[canasta5616]

Well, I lied. I will give an update on our one year hard money loan situation. We sold our primary residence on 6/30/08 and moved into the rehabbed home. We filed Chapter 13 in August and agreed on a monthly amount to pay the bank. They never filed against us and come to find out the bank went into FDIC receivership. On 10/21/08 we received a 1099-C Cancellation of Debt for the full amount of the loan plus interest. On Feb. 17, 2009, we received a letter from the FDIC stating the servicing of our loan would be handled by a new company. I'm confused. I am going to send a request to the FDIC for a lien release and see what happens. Then I will file my taxes. Will I have to claim the forgiven debt as income?? We may have gone from the frying pan straight into the fire. Any advice would be greatly appreciated.

[Moe Bedard]

You would need to check with an accoutant on that one.............I think when you get a 1099-C issued, it would need to be included as income........but check on that to be sure.