Need Advice on Rental Properties in Detroit

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DetroitCity

LoanSafe Member
Aug 30, 2013
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Please move to appropriate forum if this is not the right place.

I had 2 rental properties in Detroit with GMAC mortgage originally. After the first year of having the rental properties 1 of the properties was not being rented out and there was a price hike in the monthly mortgage on both from the 1st year. I could no longer afford paying for the properties as I had started to significantly make less money as well and needed the money I made just for my normal living expenses. I stopped paying both the mortgage and the taxes on the properties as far back as 2010. GMAC would not foreclose on the properties as they are worth basically nothing at this point and the loans on each are for over 50k each. At this point neither property is rented and when that happens it is impossible to keep squatters out of these places and it usually costs between 4-10k just to get the properties in rent condition again which I cannot afford. GMAC transferred the loans for both properties to Freddie Mac. Freddie Mac has now sent the loans to debt collection agencies Dyck O'Neal and LCS Financial solutions. (I believe this means the loans were written-off by GMAC/Freddie Mac? Have yet to receive a 1099) I have been informed that the city of Detroit is going to possibly auction off the properties within the next few months if I don't make right on the back taxes from as far back as 2010. I have been told if this happens from Freddie Mac that I would be in the clear of the mortgage but have been told by the debt collection agency that it would become an unsecured loan but still due. I am also a resident of a state outside of Michigan if this means anything at all. I would like to know what suggestions you guys have for me moving forward to try and avoid any unnecessary ramifications or agreeing to any kind of settlement that would be useless for me.

Thanks in advance for any advice
 

TomEason

LoanSafe Guide
Jun 18, 2009
12,390
85
48
SF Bay Area CA
DetroitCity

Welcome to the community.

If I were you I would try to forget about both properties, and just "move forward", watever that might mean for you.
 

DetroitCity

LoanSafe Member
Aug 30, 2013
5
0
0
Tom,

Thanks for the reply. I recently emailed Dyck-O'Neal back saying I could maybe settle for a few thousand as I can't afford anymore. I got a reply back that said they would settle for 10k, 5k up front and 5k that they would finance at 0 percent interest and would be paid montly over 5 years. I'm sure I could also make a counter offer. I would get a 1099C at the end of the year forgiving the balance and if I settled the following year the tax break wouldn't be there and I would get a 1099 with the additional counted as income as far as taxes are concerned. Any suggestions on this particular property moving forward? Obviously I would need to get everything in writing. Would you pay this off and still walk away from the house in my case? Also what about negotiating regarding having things removed for my credit purposes?

Any suggestions would be appreciated.
 

Evan Bedard

Call 1-800-779-4547
Loan Safe Mortgage
Aug 26, 2007
18,837
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48
San Diego, California
www.LoanSafe.org
I'm sure I could also make a counter offer. I would get a 1099C at the end of the year forgiving the balance and if I settled the following year the tax break wouldn't be there and I would get a 1099 with the additional counted as income as far as taxes are concerned. Any suggestions on this particular property moving forward? Obviously I would need to get everything in writing. Would you pay this off and still walk away from the house in my case? Also what about negotiating regarding having things removed for my credit purposes?
Hello Detroitcity,

I take it you only have one mortgage loan on both properties correct? If so, agreeing to this "short payoff" would be very much like going through a short sale and will likely be reported to the credit bureaus as "settled for less than full amount." Are they offering this agreement to satisfy both properties?
 

TomEason

LoanSafe Guide
Jun 18, 2009
12,390
85
48
SF Bay Area CA
Hi DetroitCity

Thanks for your post. As I stated before, I would forget about both properties. And I definitely wouldn't pay the lenders anything!
 

DetroitCity

LoanSafe Member
Aug 30, 2013
5
0
0
The mortgage was separate for each property and both mortgages were sent to separate collection agencies. If I do just walk away completely like I have up to this point how can I cover myself from being sued in the future? Also I would like to try and repair my credit the best I can so I think possibly settling with the debt collections agencies if I can get in writing that they will mark the accounts as paid in full might not be such a bad idea. Thoughts?
 

Evan Bedard

Call 1-800-779-4547
Loan Safe Mortgage
Aug 26, 2007
18,837
48
48
San Diego, California
www.LoanSafe.org
If I do just walk away completely like I have up to this point how can I cover myself from being sued in the future? Also I would like to try and repair my credit the best I can so I think possibly settling with the debt collections agencies if I can get in writing that they will mark the accounts as paid in full might not be such a bad idea. Thoughts?
Deficiency judgments are rare in any state, but if they agree to report the account as "paid in full" and agree to waive their rights to the deficiency this could be very beneficial on your end.. There will be less damage to your credit rating and you may qualify for future financing much sooner than you would if you let the foreclosure process run its course..
 

TomEason

LoanSafe Guide
Jun 18, 2009
12,390
85
48
SF Bay Area CA
Hi DetroitCity

Thanks for your post. Reference your statement,

Also I would like to try and repair my credit the best I can so I think possibly settling with the debt collections agencies if I can get in writing that they will mark the accounts as paid in full might not be such a bad idea. Thoughts?
I know of no lenders or CAs who "credit bargain." While it can't hurt to ask, those CAs won't report the account "paid in full."
 

DetroitCity

LoanSafe Member
Aug 30, 2013
5
0
0
I have now been told they can accept a one-time payment of around 7k and this will settle the account as paid in full. Wouldn't there be a major benefit to doing that for credit reasons in the future?
 

TomEason

LoanSafe Guide
Jun 18, 2009
12,390
85
48
SF Bay Area CA
DetroitCity

Thanks for your post. Perhaps you didn't read my last post, so I'll say it again. There are no lenders who will "credit bargain" by reporting the account as "paid in full." The lender will report it as "settled for less than amount owing" or words to that effect. Most creditors will view that kind of report as "neutral" at best, a "derog" at worst. In either event the report on that account won't be viewed as favorable.
 

DetroitCity

LoanSafe Member
Aug 30, 2013
5
0
0
"We can accept a onetime payment of $x,xxx.00 to settle this account Paid in full." So they are just flat out lying to me? Or you mean they won't report it to the credit bureaus as paid in full?
 

Jon Maddux

Call 1-800-779-4547
Jan 17, 2010
84
0
0
Carlsbad, CA
Detroit City,

If you receive a letter on the lender or creditors letter head that states account should report as "paid in full" then you should be able to make sure the credit bureaus report it that way. It is imperative that you have a letter in writing that states both 1. Your account is paid in full and 2. That they intend to report it that way to Experian, Equifax and TransUnion. I would make that a non-negotiable part of the deal when paying it off. Otherwise I agree with Tom and wouldn't pay them anything. I have personally seen people get letters from their lenders stating this. So it can be done.