Home Loans and Support

Deed in Lieu in NJ

Discussion in 'Deed in Lieu of Foreclosure - Do You Need Help to ' started by Tony Boxacannoli, Oct 21, 2011.

  1. Tony Boxacannoli

    Tony Boxacannoli LoanSafe Member

    I just have a "few" questions regarding a "Deed in Lieu of Foreclosure" in NJ (I do not know if such actions are State specific).

    I appreciate the answer/help.

    Here is the story...

    We bought our home in 2002 for 225k....got a typical 30 yr fixed at 6.25% mortgage...payment w/o escrow roughly $1200/mth.

    Time goes by, various improvements made to property...dormer addition, renov. 2 full baths, replace all windows, new roof, new siding, etc....basically everything is repaired/replaced/renovated interior/exterior w/exception of kitchen.....costs easily exceed 100k - NO ADDITIONAL LOANS incurred....of course some material purchases were done with CC's...total CC debt at this point in under 10K.

    Time goes by...my wife and I both become unemployed....money becomes scarce...loan balance is appx. $170k

    I contact our lender about a loan modification....here is the offer:

    24 months of payments based on a 40 yr term at 5.00% - payment w/o escrows = $828.29
    Balance of term (2033) at existing terms 6.25%, appx 19 yrs = $1256.33
    In addition...."the Borrower will execute a Deed in Lieu of Foreclosure ....for a period of 24 months".

    ...and now comes the questions (in no particular order, as they came into my head):

    1. What if we decide to sell the home BEFORE the 24 month workout agreement expires? (We do not intend to short-sale.)
    2. Are we responsible for any deficiencies?
    3. Will a DIL have ANY effect on our credit/fico scores?
    4. Is it shown as a foreclosure on those reports?
    5. Are there any tax consequences? ie,: When we first got the loan, we didn’t owe taxes on it because we were obligated to pay the loan back (it was not a “giftâ€). However, when we didn’t pay the loan back and the debt was forgiven, the amount that was forgiven became “income†on which we owe tax.The IRS learns of the deficiency when the lender sends it an IRS Form 1099C, which reports the forgiven debt as income to us.
    6. Is this affected by the Mortgage Forgiveness Debt Relief Act of 2007?
    7. To clarify:The lender cannot proceed with any sale/foreclosure activities while payment is current...correct?
    8. Can we refi while the DIL is present/active?
    9. Equity loans?
    10. etc?
    11. Is this Loan Workout Agreement part of Home Affordable Modification Program (HAMP) or Home Affordable Unemployment Program (UP)?
    12. Any other programs we may be eligible for?
    13. Are there any additional costs associated with a Loan Workout Agreement/closing...title search, etc?

    I know its a lot to take in and respond to...but we aren't done yet....

    We are NOT behind on our loan in any way and I do not believe we are underwater in this home either. The house next door to mine - one of 3 in a row built by the same builder in 1950 for one buyer - sold for $335k in April 2009.

    Now the twist...
    "Assuming" we could refinance this home now (w/o getting involved with a DIL process) with a refi from Valley National for 30 years at 4.5%...would this be a better option to preserve our credit rating?

    ...or....in the DIL is not as one-sided as I see it to be...would a more viable option be to accept the 24 month plan with payments calculated at 40 yrs at 5.00% and then refi as that term matures to rate lower than the 6.25% that we essentially obtained in 2002?

    I appreciate your time in reading this long post and welcome responses.

    TIA
  2. judithoo5

    judithoo5 LoanSafe Member

    if i were you i will take their offer.....$828.29.. sounds good... things might get better in 2 years...
  3. Tony Boxacannoli

    Tony Boxacannoli LoanSafe Member

    On the surface, I agree with you 100%.....BUT...

    If the DIL is going to effect my credit score, it's a losing deal - I may not qualify for a refi with a DIL/low credit score.


    Doing some quick calculations.....
    - the "Loan Workout Agreement" (as the lender calls it) results in interest payments totaling $245k over the course of the remaining 21 +/- years on this mortgage

    - a 30 yr refi from Valley National at 4.5% results in $220k in interest payments.
  4. Tony Boxacannoli

    Tony Boxacannoli LoanSafe Member

    So no one can answer any of my questions?
  5. Cat Damiano

    Cat Damiano Mortgage Wars

    If you have a high credit score the Deed in Lieu will have a greater effect.

    How foreclosure impacts your credit score - Apr. 22, 2010

    N.J. is a judicial foreclosure state, and the lender can seek deficiency judgements, but this would be something that you should be able to settle long before that would even happen.

    New Jersey Foreclosure Law

    Any tax questions you would need to address with a Tax Professional in your area that is familiar with the tax codes for N.J.

    There isn't any costs upfront when modifying your loan, any of the past due payments, interest, and taxes will be capitalized into the principal balance of the loan.
  6. Tony Boxacannoli

    Tony Boxacannoli LoanSafe Member

    Thank you for the response Cat. For our situation, a DIL seems to do more bad than good. If we were to refi with a different lender, would we be eligible for any of these other programs? [by "eligible", I mean date wise...I had read some programs include only pre-2009 mortgages]
  7. Cat Damiano

    Cat Damiano Mortgage Wars

    Tony,


    The type of modification that you are receiving is not a HAMP modification. The initial rate on HAMP is for a five year period, however, if it is the UP HAMP program then the payment should be at 31 percent of your gross income.

    There is another program that you may be eligible for, which may be able to help you, since you became unemployed called the Hardest Hit Fund and one of the states that it is available for is N.J.

    Here is the information;

    http://www.treasury.gov/initiatives...rams/hhf/Documents/NJ HomeKeeper Factseet.pdf

    New Jersey Housing and Mortgage FInance Agency | The New Jersey Homekeeper Program

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