Joining the Foreclosure Club; HSBC loan in WI

[tootsiepop]

I am so glad to see that this resource exists, and I am grateful to have found it. I do think it is very sad that it is needed, though, and my heart has broken several times while reading the various stories.
Vital information first:
Current mortgage amount: approx. 92k
Home Value (as assessed by city): 71k
Interest Rate:10.5
Mo. Payment: 877.44
Lender/Mortgage holder: HSBC
State: WI
(I think that covers the usual requested info)

We bought our home in 2002 and it was an adjustable rate at that time. My husband's income was sufficient enough to make the mortgage payment and pay property taxes (not included in the loan). We had 2 children at the time we bought the house, and have added 2 more since, so I have been a stay at home mom. In 2006, we had decided to refinance, and made the not-so-bright choice to also include some debt on the mortgage. Due to various life circumstance, we have accrued mor debt since then and finally made the paindful decision to file for bankruptcy because we knew we would be unable to keep up the debt payments and the mortgage. The same week we we were scheduled to see our attorney in regards to that matter, we got a letter notifying us that a retaining wall on our property was failing and we would need to fix it or let them come in and attach the lien. That may not sound like a big deal, but this is not a cute little landscaping type of deal: the wall stands between 8 and 10 ft. tall and spans over half the length of our property. We were originally told that it would cost us between 20 and 40k to fix it (between labor and materials). The city has since called in various engineers and one came up with a cheaper solution (and also assured me that the wall will not collapse this fall, although it has to be fixed NOW because it will slide come springtime due to thawing snow and improper drainage) and has also agreed to donate his plans. Unfortunately, this will involve losing about four feet of usuable property all the way along the one side (so at least 200 feet of property is gone!), which will decrease the value (retaining walls like this add absolutely no property value even if they are a necessity). Even with the more affordable solution, we do not have the means to fix it ourselves, and the city will be coming in to fix it, thereby attaching a lien. I have been so incredibly physically ill over this (I have lost at least 50 pounds in the last month alone, no exaggeration or joke). Since our mortgage is currently through HSBC, I have little faith that they will do anything more than the 6 month loan mod (that is, after jerking us around a bit first)...We are still undecided if we will try that because I am not sure if any house is worth the stress we have been under to begin with over the whole wall crud, let alone dealing with them. Not only that, this is the first month I have missed a payment. I do have a few questions though, and am wondering if someone may have some sort of inkling as to answers for any of them...

1) What are the chances of them coming after us for any deficiency? I worry that since we are already in the process of filing for bankruptcy, we would be in bigger trouble because we wouldn't be able to discharge that debt for 7 years, and I am wondering if that deficient balance would be dischargable through bankruptcy? I know that in WI, we are both judiciary and non-judiciary, but I don't have a copy of or deed yet, so I don't know what is on it as far as that goes, nor do I know if one type is better than the other.

2) Would we have any tax liabilities on the deficient balance? I was reading in the forum last night about it, but I didn't quite understand. Our total assets (which I have had to work through due to the bankruptcy) are going to be less than 20k. My husband currently makes about 29k/year and we also receive about $725/mo in SSI benefits for my daughter. I would expect that the deficient balance from an auction is going to range from 50k to 70k when all is said and done (with the lien attached and assuming that the house gets 40k at auction). What forms would we need to fill out?

3) When a person goes through a foreclosure, does the lien get paid off first? And, for those who may not know, the lien doesn't get paid until the home is sold (at least that is how it works here)

4) What other options might be out there? A short sale might work, except we have the wall issue. A deed in lieu isn't going to work because of the wall issue. We have looked at the new FHA loans, but again, the wall issue (lien) gets in the way, not to mention we have absolutely nothing for a down payment. After reading the stories here, as well as doing other research online in regards to HSBC, it is doubtful that they will do anything more than the temp. loan mod. I really think that a loan mod in our case is going to be nothing more than a band-aid, stalling the inevitable, and since we have four kids, I would rather not live with that much uncertainty. As it stands, even when the housing market rebounds (and I was reading today that prices are expected to continue to decline through 2009), with a lien attached, we will never be able to come even close to breaking even on this house.

4) How long does a foreclosure typically take? I mean, I know that it often varies greatly on what state you live in, the lender, etc. but is there a rough estimate we could go by? We don't really want to get stuck trying to move in the middle of a Wisconsin winter.

5) Is there anything else we should know? I have learned a lot from reading this site and I have been trying to learn about the laws in our state (they can be confusing though!), but I am just wondering if there are things I am overlooking? I feel it is better to be prepared than to get blind-sided. Any input/thoughts/advice are appreciated.

I thank you for your time, any advice/information, and mostly, I just want to thank you for letting me come here to share our story.

[tootsiepop]

I need to add: even with the more affordable fix, we are still looking at a 10 to 20k lien on the house.

[Moe Bedard]

Hi tootsiepop,

Welcome to the forum and thank you for joining..............

You can also check the "power of sale" clause in the Deed of Trust which you should have received a copy of in your closing package..........

In answer to the questions.....you may be able to take advantage of the Mortgage Forgiveness Debt Relief Act...............but you would need to check that with an accountant or real estate attorney familiar with the foreclosure and tax laws in your state..............

Mortgage Forgiveness Debt Relief Act


Wisconsin Foreclosure Timeline

The state of Wisconsin requires mortgage foreclosures to be handled through the courts, according to a prescribed process. This is referred to as a judicial foreclosure. Any lien holder (not just a mortgage holder) has the right to force a judicial sheriff’s sale.

Approximately 90 days after the seller has defaulted on his or her mortgage, the bank will have its attorneys begin a foreclosure lawsuit. The attorneys will prepare a summons and complaint, which will be served upon the seller and typically all other lien holders.

The seller has 20 days to reply to the complaint with any defenses. In most cases, however, there are no legitimate defenses that can be raised.

After the 20 days, the attorneys will schedule a court appearance and ask the court for a judgment as to the amount due and a subsequent sheriff’s sale.

The Wisconsin Statutes provide for a redemption period that varies in length depending upon the type of property, possible abandonment, whether the bank seeks a deficiency judgment and other factors. At the time the court grants a judgment, the court will ask the bank’s attorneys if they want a deficiency judgment against the seller for any balance left over after a sheriff’s sale. If the bank says “yes,” the court will grant a longer redemption period to the seller. If the bank will accept the high bid at the sheriff’s sale as payment in full, the court will set a shorter redemption period. During the redemption period, the seller has the opportunity to either sell the property, assuming he can pay off the entire mortgage, or refinance the loan.

At the end of the redemption period, the property is sold at a sheriff’s sale to the highest bidder.

Thereafter, anywhere from 10 days to three weeks later, the attorneys for the bank will hold a confirmation hearing regarding the sheriff’s sale before the court. The court will normally approve the high bid and possibly determine the order of payment to the lien holders. It is important to note that the redemption period in Wisconsin runs to this hearing. If the seller is able to redeem the property at the time the sale is confirmed, the seller would save the property and the high bidder would get back his down payment.

One of the purposes of a sheriff’s sale is to cleanse the property of liens. If all lien holders are properly joined in the foreclosure action, their liens as to the property will expire at the time of the confirmation of the sheriff’s sale.


The lien holders “payment order” means that lien holders typically have the right to be paid first, in full, based upon the priority of their lien filings. This means that the person who has filed the first lien is entitled to be paid in full, before any funds are available for the second lien holder. Please note: Unpaid real estate taxes are always given the first lien position.


HSBC Default Resolution
1-888-648-3124

[tootsiepop]

I hav been doing a little more research, and it appears that we could discharge the mortgage through the bankruptcy, which would relieve us of tax liability and the possibility of them coming after us for a deficient balance. Am I understanding that correctly? And, if we were to do that, what happens to the lien already against the house? Or does that count as a seperate debt and therefore, needing to be listed seperately on our debt sheet?

[Moe Bedard]

unfortunately that would be a question for the BK attorney............I don't feel comfortable advising on tax liability and property encumberances that are not related to the purchase of the home.
As far as listing it on the financials.............if you pay it separately as a bill then you might have to list it that way just as you would if you were paying a 1st mortgage and a 2nd mortgage.