This forum was a great help for the past 10 months, so I wanted to share my story. Please excuse the length. I tried to shorten it since this was originally a blog post.
For those people who say that the bank wants your property back, Iím here to tell you that I really doubt it. Wells Fargo has dragged their feet on this for 10 months. The bank, of course, hoped that my property would sell, but with issues with the HOA and a land lease contract that has not been renewed, there isnít a single buyer (if they can even get approved) or investor willing to put their money into this mess.
Iíve read plenty of articles, frustrated tirades, and desperate pleas for help from people trying to move forward with their lives after the market crash. For those wondering how to go about trying to get out of their house and through this ridiculously frustrating process, keep reading. I donít have an attorney, so all correspondence has been from me directly with Wells Fargo/ASC. Keep in mind that I received the acceleration letter, had appraisers come to the property (My condo is now worth about $200K less than I owe.), had random people photographing the outside of my condo, and received countless phone calls and notices of delinquency. The steps below are tips based on what happened on my end of the process.
1. Get organized. Create a folder to keep copies of the many letters and documents you will be submitting to the bank. This begins to get confusing very quickly since you will be sending multiple copies, with different dates or slightly different language throughout the process.
2. Maintain Contact. Throughout the process, I called the bank every two weeks for an update. Expect phone calls every two days from the bank. Many times I would call and be told that my documents had not been received or that they needed something else re-sent. Get any names you can of people who are working on your file and be polite and clear in your requests for information. When calling the bank you will need to give your loan number, name, address, phone numbers, last 4 digits of your social, and the reasons for being delinquent (more on this in bullet #3). Even if you call multiple times that day, you will need to repeat this information. If the bank calls you, you will need to give this information. If you are transferred from one person to another, you will need to repeat this information. Deal with it. Itís their script, and they wonít deviate from it. I found the customer service reps courteous and understanding.
3. Stop paying your mortgage. You have to be delinquent on your mortgage payments. Very delinquent. Wells Fargo will not consider a Deed in Lieu without the homeowner first trying to short-sell the house. In order to do this, you have to be approved for the Short-Sale program. You wonít considered for the Short-Sale program unless you are at least 90 days past due on your mortgage payment. I was basically advised, in not such plain words, to stop paying my mortgage.
4. Prepare for your credit rating to plummet quickly. Once you are 90 days past due on your mortgage, things like interest rates will increase, credit card limits may decrease, and your ability to get new loans will go out the window. As an example, before this process began I was approved for a car loan at 3.5% interest. Three months later, when I finally was ready to buy a car the interest rate was 14.9%.
5. Request a Short-Sale. Call the bank and let them know that you want to be considered for the Short-Sale program. They will ask you to send a financial worksheet and hardship letter. This Short-Sale application packet will also need to include previous 3 months bank statements and pay stubs, and most current tax filing. Your financial worksheet must show that you have a deficit at the end of the month, and the hardship letter must have specific reasons why you can no longer afford the mortgage. The documents you send are only good for 30 days. Even if itís the banks lack of response that drags beyond 30 days, you essentially begin again every 30 day period. Here is a sample of my financial-worksheet-and-harship-letter.pdf.
6. Contract with an experienced realtor. The realtor will need to list your home on the MLS for no less than 90 days before you can submit a request for a Deed in Lieu. My suggestion would be to list the property as soon as you miss your first payment to speed this process along to a snailís pace, as opposed to a crippled snailís pace. Youíll be asked to send proof of the listing, the contract with the realtor, comps, and other stuff that only the realtor can get. A good realtor is essential. My realtor also contacted the bank many times on my behalf, and usually was able to get more concrete information than I could.
7. Request a Deed in Lieu of Foreclosure. Once 90 days has passed, you will need to call the bank and ask to be considered for the Deed in Lieu program. You then need to send a Deed in Lieu application packet. This packet will again include a hardship letter, financial worksheet; three months check stubs and bank statements, and prior year tax filing.
8. Prepare to send documents multiple times. I had to send the entire packet at least two times before I received a denial letter from Wells Fargo. Why was I denied? Because there wasnít enough of a deficit showing on my financial worksheet. Since my situation would be changing financially due to no longer having the tax breaks I had planned on for my tax filing, I filed my taxes and once I had a huge tax bill payable to the IRS and a change in my take-home pay, I re-applied for the Deed In Lieu program. Yes, I had to resubmit all the documents again, multiple times, before I received a response. By this point, you will probably have had your file sent to the foreclosure attorney and that process will have begun. I requested a Deed in Lieu in November, and received the denial in February. I re-applied in February, and received an approval letter in April.
9. Ensure that there are no liens on the property. Ideally no 2nd mortgage either. I had neither. If you have a 2nd, my understanding is you can forget about the Deed in Lieu because the 2nd bank basically gets nothing out of the deal, and they must agree to the Short-Sale or Deed in Lieu.
10. Stay Current on Your HOA and other bills. The approval of a Deed in Lieu is dependent on a clear title. The title is pulled multiple times. You must continue to keep your HOA dues paid and current during this entire process, and not have even the potential for a lien.
Finally, the light at the end of a ten month saga. Exactly 30 days after getting the Deed in Lieu of Foreclosure approval letter, I received the executed paperwork. Today I received an email from the adjusted with Wells Fargo/ASC telling me that I just need to let them know when the property will be vacant and they will rekey. No walk-through. Probably because I was told that they don't offer "cash for keys" or any type of relocation assistance. The adjuster told me that they "trust" I will follow the terms of the DIL, which stated that I must vacate and leave the property "broom clean".
This entire process may have been easier with an attorney. Regardless, I have no doubt that this is the best decision for my family. While the process is extremely discouraging, I would recommend desperate homeowners be patient and keep trying.