Home Loans and Support

SS vs DIL vs FC Comparison

Discussion in 'Short Sale Outpost' started by TomEason, Sep 20, 2011.

  1. kman-uw

    kman-uw LoanSafe Member

    Recently we initiated SS process with BOA and based on initial HUD settlement statement that my negotiator prepared there is an 20K deficiency compared to my original loan balance with BOA after all the agent commissions,attorney fees..etc. I also have 2nd Heloc loan which is almost 50K under water.

    1st loan (Loan Servicer is BOA & It's owned by Fannie Mae) - 315K
    2nd loan (CreditUnion) - 50K - Recourse HELOC
    Location : NY
    Currently House is in SS contract for 310K.


    If this SS goes thru did 20k deficiency with BOA will be forgiven under MSDR Act?. Any advantages of being the loan owned by Fannie Mae in order to eligible for this Act ?
    Under what circumstance they can file deficiency judgements in recourse states like NY?.

    Any information would be appreciated..
  2. TomEason

    TomEason LoanSafe Guide

    kman-uw

    Thanks for your post. If BOA accepts the buyer's offer, they will release you from the shortage. You need not avail yourself of the provisions of the MDRA. However, your real challenge is dealing with the HELOC lender, as they may require you to pay $$ and/or sign a new promissory note in exchange for the lender allowing the deal to close. And they aren't legally obligated to allow your deal to close. This reason alone is often enough for the homeowner to throw in the towel, blow up the deal, and go to FC. One of the many advangages to doing so is this. You/ll be able to remain in your home for a much longer time (mortgage and property tax payment free), affording you the opportunity to sock away a bunch of Benjamins $$. You might visit the SOJL thread for more info on that topic. Good luck! http://www.loansafe.org/forum/debt-settlement/40758-sold-out-junior-loans-30.html
    Last edited: Feb 11, 2013
  3. cobrajet

    cobrajet LoanSafe Member

    Hello TomEason,

    This is the best BLOG site ever!! Wanted to share my delemia with the group… We purchased an investment property condo in Florida in 2004 and now its worth half the price since then. I did some homework and discovered Green Tree Servicing would allow us to apply for a Loan Modification because of Fannie Mae allowing LMs on Investment Prop. After jumping through all their hoops we were told by the GT rep reviewing our paperwork that we were rejected based on the fact that we had to be 2 months behind on our mortgage payment. We were only one month behind. My GT Service tells me that the Review rep shouldn’t have disclosed the reason of our denial UGH. Needless to say I was put out. Said we could reapply again, but we faced the possibity of our payment going higher… WHAT???
    They told us we could do a DIL (I’ve been reading your thread on SS vs DIL vs FC). After about 4 months of this run around, we’ve decided to just walk away from a bad investment and stop pouring any more money into it or listening to GT’s advice (totally worthless).
    I worry though because we submitted our financials as part of the Loan Mod process. I know now after reading your threads, this was probably not a good idea. Any thoughts??


    1st loan (Green Tree - Fannie Mae) - 117K
    2nd loan (BOA) - 23K - HELOC Loan refinanced and cashed-out 5 yr's back.
    Location : FL
  4. TomEason

    TomEason LoanSafe Guide

    Hi cobrajet

    Welcome to the community, and thanks for your post. I empathize with your frustration in dealing with GT. I wouldn't worry about the disclosure of your financials. In fact, if it were me, I think I'd take another stab at a loan modification before you walk away. Either way (loan mod or FC), I recommend you immediately stop paying GT, property tax, etc. You'll enjoy immediate positive cash flow rental income and will likely enjoy that recurring revenue for many many months. This will allow you to sock away a bunch of $$. Good luck!
  5. desertdawg

    desertdawg LoanSafe Member

    Help with SS vs DIL after BK13 Discharge - Long

    This is my first post, so please bear with the length of this post. If I should be posting in another forum, please direct me there. My husband and I filed a Chapter 13 Bankruptcy in Oct. 2006, and it was discharged in Nov. 2011. We purchased our home in 2004 for $185,000. Our first lien is with Wells Fargo, and our second with a local credit union. Our balance with WF is approx. $128,000, and approx. $34,000 on the second. The house is now worth approx. $110,000. Both lien holders were included in the bankruptcy. As we found out during the bankruptcy, payment history for neither loan appear on our credit report. After we inquired, both lenders advised us that because of the bankruptcy they legally are not allowed to report payments. At the time, it was rather disconcerting, because we were never late with those loan payments. That was not what forced us into bankruptcy. Due to personal health reasons, we are no longer able to stay in the house. We have had it listed for 6 months, but live in a very rural area, and the real estate values will take years to rebound here. In order to set ourselves up for a short sale, we stopped making payments on both loans in December. Our realtor has dropped the price 3 times, but there have been no offers - several lookers, no offers. What is really annoying is that WF is now reporting late payments on our credit report - no other payment history, just the late payments, but only with Equifax - not TransUnion. At least not yet. I filed a dispute with Equifax stating that the debt was included in the the bankruptcy, but they came back saying the lender says it is correct. I have found no way to successfully dispute the Credit Bureaus. Grrrr. The second lien holder still reports no payment history, just that it was included in the bankruptcy. We have received a letter from them, stating that they are not collecting a debt because of the bankruptcy, but will proceed with foreclosure. We have not replied since they are in second place behind WF. I have contacted WF to inquire about a DIL. They said they would be willing to consider it, even with the second, but we need to do a financial interview, and our realtor says we will have to do the same if we do a SS - and he has a possible SS offer coming. My main question is (other than the late payment reporting by WF) are we required to participate in their financial interview since we are no longer responsible for the loan since the BK13 discharge? We have already found a house to rent and will be moving in 3 weeks. So, SS, DIL, or just let the foreclosure happen. I am inclined to try for a DIL if we are not required to participate in the financial interview. It seems both the SS and FC could be very drawn out, and I don't want to be responsible for the electric and water until heaven knows when. Advice would be greatly appreciated. Thanks for your attention and patience. DesertDawg
  6. TomEason

    TomEason LoanSafe Guide

    desertdawg

    Thanks for your post and welcome to the community. You could try for a DIL, but there are several problems with that. 1) First, almost all lenders require the property be listed for sale for at least 90 days before they will consider a DIL application. 2) Youwould be required to submit your financials. 3) Since there is a 2nd, completing a DIL will be virtually impossible. Lenders don't like doing DILs; WF will find any excuse to decline your DIL application. 4) DILs take a long time. Since you're moving to a rental in three weeks, why bother? FC is much simpler. No, you aren't required to do a financial interview with WF. In fact, since the property will be FCed, you're required to do NOTHING. Good luck to you.
  7. desertdawg

    desertdawg LoanSafe Member

    Help with SS vs FC after BK13 Discharge

    Hi Tom, Thank you for your response. Sorry for such a long paragraph. I thought I broke it into several paragraphs, but guess I have not figured out how to do that. 1) The property has been listed for 6 months, so we have satisfied that requirement. 2) If this debt was forgiven in our Ch13 bankruptcy, do we still have to submit financial statements and submit a hardship letter if doing a SS? 3) We have a possible SS on the way, and the only reason we would prefer that to a FC is the ability to buy again sooner than we would with a FC. Thanks again.
  8. TomEason

    TomEason LoanSafe Guide

    Hi desertdawg

    Thanks for your post. Regardless of your BK, yo'ill be required to submit fiancial info in order to be admitted to the lender's DIL program. Has a loan broker told you that you can qualify for another mortgage sooner if you do a SS or DIL as opposed to a FC? From everything I've read, they're all similarly serious derogs.
  9. desertdawg

    desertdawg LoanSafe Member

    No, but from what I have been reading, it is possible to buy 3 years after a SS, but longer with a FC. If you have other information, I would definitely welcome it!
  10. TomEason

    TomEason LoanSafe Guide

    desertdawg

    Thanks for your post. FYI I'm not a loan broker and lending isn't my profession. I recommend you consult with a couple of experienced loan brokers in your locale to see what they say. After all, this is what they do.
  11. desertdawg

    desertdawg LoanSafe Member

    Tom

    Will do, thanks for all your help.
  12. GetOut

    GetOut LoanSafe Member

    Lawyer pushing SS

    Thanks to Tomeason for directing me to this thread.

    Tom, from everything in this thread, I understand that SS is not advisable. We emailed the lawyer and expressed our reluctance to share our financials with the lenders. Her response was - "well, you had no problems sharing your financials when you purchased the loans, why do you balk at sharing the information now ?"

    Needless to say, I am beyond infuriated at her response.

    Anyway, we have a situation that is giving us some worry. Back in 2009, we transferred the property to a living revocable trust, and recorded that transfer with our local county. I then came across the following :

    http://www.calbankers.com/compliance...es-short-sales


    If you scroll down, you see this :



    However there are some circumstances where the borrower was originally the purchaser of the property, and thereafter (as part of estate planning) the borrower transfers the property to a family trust, limited liability company or corporation while remaining the “borrower†under the purchase money loan and remaining the occupant of the property. Under these circumstances if title to the property is transferred to a corporation (which then becomes the trustor), the language of SB 931 would not protect the borrower.


    Under CCP 580b the borrower would retain the protections of CCP 580b.


    This worries me quite a bit, since it seems to imply that CA's anti deficiency statutes would not protect homeowners doing a short sale even on purchase money loans, if the property was transferred to a living revocable trust ? But the anti defiency protection would not be affected for an outright foreclosure ?

    Could you please advise ? Thank you.
  13. TomEason

    TomEason LoanSafe Guide

    GetOut

    Thanks for your post. If you don't do a SS, the financials question becomes irrelevant. If you instead to to FC, you'll be protected under CCP Section 580(b) despite your having deeded title to your revocable living trust. This, as you know, is a very common practice, and the counties and the courts have construed that you, as trustee of that living trust, are still the owner (as though the transfer never occurred).
  14. floater

    floater LoanSafe Member

    Great thread, need a little help...

    I'm in CT, went through sec 7 BK, my mortgage was included and discharged in 2010. I stopped paying last August when they tried to up my mortgage (had had a prior modification) due to circumstances, I could not afford and house under water....

    I played the Hampster game but needed to move and make a change which I have done and been out of the house since June.

    I keep telling the servicer I am out of the house. They just now asked if I'd be willing to do a SS or DIL as opposed to FC.. Being discharged under bankruptcy:

    1) whats' the difference?

    2) I just want this to be over and my name off the title so whats my best route

    3) Do I have any problems with giving my financials given the discharge, etc.
  15. buchanovich

    buchanovich LoanSafe Member

    What a substantial education! ANd, that's just this thread. Thanks. We're about to step into the abyss of the FC/SS/DIL and it still seems to me that the FC is the best option; I might offer a DIL to the lender if they are willing to do it simply; if not, bye. Any realtor says they want the financials for a SS and I am not willing to give those up. The main reason is my spouse is not on the note (was with a former, deceased, spouse) so why make my spouse a target in a deficiency? (we are in Florida, a recourse state). Also, they own real estate, owned before we married, and don't want that attacked. I know that ultimately it can't be but suit could be filed against it just for leverage (my cynical nature suggests this) and we'd have to defend it just to get to the point of a court setting it aside.

    I looked at the thread on the credit effect, and the comment earlier in this one about the Fair-Isaac scoring but the most recent is last year. Have there been any changes to the credit effects in 2013? I'm thinking of this because so many "alternative sales" or foreclosures have occurred and I wondered if some special adjustments to the credit scoring have taken place. Not even worrying about the credit for the purposes of credit - don't use much and am just going down this route because the house is still underwater - but the possible effects of the credit score when it is used by, say, automobile insurance companies for rating.
  16. TomEason

    TomEason LoanSafe Guide

    buchanovich

    Thanks for your post.

    Unfortunately, since I'm not a credit savant, I can't help you with your credit question. I recommend you visit several of the many dedicated credit sites on the net for recent info.
  17. Evan Bedard

    Evan Bedard Call 1-800-779-4547 Loan Safe Mortgage

    Welcome and thanks for joining the LoanSafe community.

    IMO things have not changed as far as credit reporting goes after foreclosure or short sale, I've seen nothing different over the last year.. As you can tell we have thousands of members who have considered walking away from their property, and many whom are in FL as well. You will find everything you need to know about the foreclosure process and can learn from other member's experiences.

    Keep us posted!
  18. buchanovich

    buchanovich LoanSafe Member

    It's been a while since I was last here and I thought I'd drop in and share some experiences and thoughts as we move through the process. Some elements may change very shortly. Also, some detail will be left out since I suspect the banks troll for information and I don';t want them to put together anything identifiable. When it's all signed and sealed, there will be a detailed list and timeline.

    First off, put your ego in your pocket; some of this stuff goes against much of what we believe and the way we were raised. It's a different world out there. If you don't sacrifice yourself and your family to carry a burden which is manipulated, you are BAD. Of course, if the critics or their colleagues do the same thing, they are SMART. So be smart. Know your state's laws. This is paramount. Do your research and/or consult an attorney specializing in real estate/mortgage and bankruptcy law. This may seem obvious and silly to state but one can see all sorts of arguments, even on this site, with people talking about different states' laws.


    Right now, we are into a short-sale process. I don't think it will go through to the end but one can never tell. We are doing it to stretch the time and make it look better until we see what the future legal environment will be. No, we're not talking long term, just for another two months or so.

    We have bought and moved into another home. We qualified without claiming the first one was a rental. Do not include "rental income" if you are not really doing it. If a bank wants to play hardball, that's mortgage fraud (lying on the new bank's mortgage application). Lots of people do it. You may or may not get away with it.

    Another comment on rental (this applies under Florida law; YMMV). An attorney suggested initially that one should rent out the home while all this is going on and keep the income, as has been advised here many times. Here's the problem, it has a swimming pool. As soon as I mentioned that little fact, he said it might not be such a good idea. In Florida, that pool is a liability and if someone is hurt or worse in it, I can be sued. So, beware: know your state law.

    Initially, I was going to just let the home go to foreclosure but, since that will take a while, I was advised to try a short sale, partly for appearance. While the effect on a FICO score is somewhat vague, some creditors may look at the line items and a foreclosure is viewed worse than a short, the idea being you got something for the bank. Again, note that I said "some". YMMV I still think a foreclosure is more convenient but I would have little control over the time line. Then, there's the deficiency.

    Deficiency is another area which is state dependent: some have it some don't (California first/purchase-money mortgage, for example). This will have a bearing on your strategy. If no deficiency is possible short sale or foreclosure is the way, and do it simply. While putting short-sale first may be contrary to some advice on the board, with which I agreed at first, my new mortgage process showed me something. The question was asked on the forms whether I had a Foreclosure, deed-in-lieu or repossession within the last 3 years. Note, they did not ask about a short-sale. Obviously there is some difference in the eyes of lenders. Some of you who need to maintain flexibility, such as moving for a new job, etc, may need to keep that in the back of your minds. I don't know how it's viewed but they didn't ask about it.

    The big problem with a short-sale is the amount of information they ask for. Sure, they need to "be sure you qualify." The reality is it will show them what to attack, that is, free discovery. However, if you have things properly structured, you can protect assets. I am giving them limited information, dollar amounts, etc. but not full account information. For that reason, they may bounce it. OK, so be it. My final option will be the thermonuclear one: bankruptcy. I may allow foreclosure first and try to negotiate deficiency away BUT, if I file bankruptcy I need to do that before any foreclosure sale. There is an elephant in the room.

    The elephant is the Mortgage Debt forgiveness Relief Act, which was enacted for 2007 and renewed through 2013. The current Congress has gone home without renewing it, raising the possibility it may expire. Some financial people are arguing for renewal, others against; I suspect it will be a bargaining chip and we might get thrown under the bus in the process, we'll see. This past year, they renewed it (2012-2013) it on Jan 9, so there's still hope. If they don't, then the "forgiven" debt becomes taxable ordinary income. Note that this will not apply in non-recourse states: no deficiency, no forgiven debt, no taxable income. However, the rest will have to take this into consideration. In many cases, including mine, failure to renew the Act drives one immediately to bankruptcy since the tax would be almost as big a burden as the deficiency. Yeah, I know, a percentage. But, if you don't have a lot of money it doesn't matter if it's only a few thousand beyond your means or a million. If you had money, you wouldn't be reading this.

    Deed-in-lieu has been mentioned a few times and I guess some people have had success in this. By and large it is worthless. In order to get it accepted, you do indeed have to p[rovide every piece of financial information they ask for - essentially you are begging on your knees. There still is the issue of deficiency and it is lumped in the same category as foreclosure.

    Right now, I'm in a holding pattern and will wait until I see whether the Act is renewed, which I think I should know by the middle of Jan. If it is, the short will become a foreclosure and I'll get an attorney to negotiate away the deficiency. If that is unsuccessful or, if the Act is not renewed I will automatically file bankrup[tcy.
  19. tennis

    tennis LoanSafe Member

    Buch - thanks for the great post. There is some real good information listed in here. Knowing the information you posted here, we simply walked away from our house and rented it out for 6-months. I am in Washington where banks have the choice for a judicial or non-judicial and basically always elect a non-judicial on single family homes. With that said, I didn't want to risk sending them out financials and becoming the exception to the rule! Our house was auctioned earlier this month and we are just waiting for the deed to be recorded at this point. The same day we lost the house, I celebrated by buying a hot tub at the new place we purchased as you did. Based on owning 2 houses, not rental income.
  20. cobrajet

    cobrajet LoanSafe Member

    Our FC was final last week. Still courious, has the Mortgage Debt forgiveness Relief Act been renewed?

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