What happens next after walking out oof your mortgage payment?
September 2, 2008 1:07 PM Subscribe
What happens to your credit after walking out of your house?
I cant afford to pay my house anymore. I already found a place to rent, way cheaper. I am behind a month now with my mortgage. I am planning to just move out next month. What happens then? Will I go to jail for this? I dont want to talk to my mortgage company. I know they will just pressure me. I dont even have a job right now. I still owe 200, 000 on the house. I am scared about this. Do people go to jail for this? Please, anyone who has done this before? Anyone who knows what the process is?
I cant afford to pay my house anymore. I already found a place to rent, way cheaper. I am behind a month now with my mortgage. I am planning to just move out next month. What happens then? Will I go to jail for this? I dont want to talk to my mortgage company. I know they will just pressure me. I dont even have a job right now. I still owe 200, 000 on the house. I am scared about this. Do people go to jail for this? Please, anyone who has done this before? Anyone who knows what the process is?
I saw a Consumerist article that the number of people doing exactly what you are talking about is waaaaay on the rise. In California they apparently call it jingle mail, because the owners mail the keys in an envelope.
There is no such thing as debtors prison in the US as far as I know.
posted by ian1977 at 1:19 PM on September 2, 2008
There is no such thing as debtors prison in the US as far as I know.
posted by ian1977 at 1:19 PM on September 2, 2008
What happens to your credit? Some friends of mine haven't paid their mortgages on their multiple properties homes for several months. Their financial advisor told them they wouldn't be able to buy for three years after foreclosure.
Worth noting is that the banks still have not foreclosed on them yet, even though both properties are empty and awaiting approval for short sale.
posted by infinitewindow at 1:25 PM on September 2, 2008
Worth noting is that the banks still have not foreclosed on them yet, even though both properties are empty and awaiting approval for short sale.
posted by infinitewindow at 1:25 PM on September 2, 2008
Don't know what the process is, but it will be very difficult to hide for very long. At the very least, your name will pop up on every "bad bet" list imaginable.
posted by Rykey at 1:27 PM on September 2, 2008
posted by Rykey at 1:27 PM on September 2, 2008
um…i don't understand. you are one month behind. the mortgage company won't start really harassing you until you are a few months behind. and why haven't you at least tried to sell your house? what's preventing you from doing that?
but to answer your question, your credit rating will go to pot. it will be years before anyone will want to give you a mortgage again, or any kind of loan or credit.
posted by violetk at 1:33 PM on September 2, 2008
but to answer your question, your credit rating will go to pot. it will be years before anyone will want to give you a mortgage again, or any kind of loan or credit.
posted by violetk at 1:33 PM on September 2, 2008
Please, please talk to your mortgage company before just walking out. You must be well aware that you are not alone in your situation.
posted by desuetude at 1:36 PM on September 2, 2008 [2 favorites]
posted by desuetude at 1:36 PM on September 2, 2008 [2 favorites]
If you can't afford the mortage, aim for a workout with the bank. It's in their interests to not have to take you to court (forclosure) to get the keys back (deed in lieu (of forclosure) AKA jingle mail).
Depending on locality, if you refinanced your loan, or got money back from it, they might be able to go after you for funds that they can't recoup after selling the house. If you make them forclose, this route is more likely. Reseach deed in lieu for your locality and do it.
As well, I'm under the impression that having the house go back to the lender is less credit damaging than a forclosure.
posted by nobeagle at 1:43 PM on September 2, 2008
Depending on locality, if you refinanced your loan, or got money back from it, they might be able to go after you for funds that they can't recoup after selling the house. If you make them forclose, this route is more likely. Reseach deed in lieu for your locality and do it.
As well, I'm under the impression that having the house go back to the lender is less credit damaging than a forclosure.
posted by nobeagle at 1:43 PM on September 2, 2008
Listen, I completely understand that you're freaked out, in a probably perpetual state of panic and stress and looking to just run for the hills. But before you chuck the keys into the jingle mail, there are some things you should seriously consider. IANAFA and these are very general.
1) You can always declare bankruptcy. It's the option of last resort, but as last resort options go, it's pretty fabulous.
2) Knowing that you have the bankruptcy option means you can relax and explore some other options first.
3) The mortgage company may or may not try to pressure you but you are in the wonderful position of being able to tell them to go fuck themselves because you are 100% willing to mail the keys back. This means it is worth talking to them. It is in their best interests not to foreclose on you and they know this.
4) One month behind is nothing in the world of mortgages. Don't panic. It takes a long time to foreclose on a house, too, so you have time to sort things out to your best advantage.
5) One option is to see if the bank will agree to a short sale:
Another option is what is called a short sale, where you sell the home at a price acceptable to the lender and the lender agrees to accept the sale price as satisfaction of the mortgage loan. Lenders usually only agree to a short sale if the borrower can document some type of financial problem such as job loss, job transfer or illness.
6) Another option is a DIL:
deed-in-lieu of a foreclosure, where the bank accepts the deed of the home in place of paying off the loan.
7) The reason both of these are much better than mailing the keys back is that sending the keys back doesn't terminate your obligation to the lender. When they sell the house, they'll likely come after you for the shortfall and fees, so you'll still have a debt obligation to them.
You feel trapped but you do have both time and options. I'd urge you to calm down and make use of both.
posted by DarlingBri at 1:51 PM on September 2, 2008 [14 favorites]
1) You can always declare bankruptcy. It's the option of last resort, but as last resort options go, it's pretty fabulous.
2) Knowing that you have the bankruptcy option means you can relax and explore some other options first.
3) The mortgage company may or may not try to pressure you but you are in the wonderful position of being able to tell them to go fuck themselves because you are 100% willing to mail the keys back. This means it is worth talking to them. It is in their best interests not to foreclose on you and they know this.
4) One month behind is nothing in the world of mortgages. Don't panic. It takes a long time to foreclose on a house, too, so you have time to sort things out to your best advantage.
5) One option is to see if the bank will agree to a short sale:
Another option is what is called a short sale, where you sell the home at a price acceptable to the lender and the lender agrees to accept the sale price as satisfaction of the mortgage loan. Lenders usually only agree to a short sale if the borrower can document some type of financial problem such as job loss, job transfer or illness.
6) Another option is a DIL:
deed-in-lieu of a foreclosure, where the bank accepts the deed of the home in place of paying off the loan.
7) The reason both of these are much better than mailing the keys back is that sending the keys back doesn't terminate your obligation to the lender. When they sell the house, they'll likely come after you for the shortfall and fees, so you'll still have a debt obligation to them.
You feel trapped but you do have both time and options. I'd urge you to calm down and make use of both.
posted by DarlingBri at 1:51 PM on September 2, 2008 [14 favorites]
There is some interesting information in one of the comments in the Metafilter article linked to by echo target. In particular, a blog points people to You Walk Away as a company providing advice in such circumstances (currently in CA only). If you Google "You Walk Away" you'll find quite a few companies offering legal advice.
My own take (as someone who previously worked with a mortgage lender in a similar market, when I could not sell my house and so had to rent -- then my tenant left with all the furniture and without paying any rent for 4 months) is not to screw up your credit for all eternity by panicking now. Your debt does not go away if you walk away from the mortgage -- you have to come to an arrangement with the lender, or you'll find yourself pursued mercilessly by collection agencies (and the debt will escalate with interest charges). There are many options that can save your credit-worthiness, including refinancing to an affordable mortgage payment (interest rates are low just now), selling the property, coming to some arrangement with the lender, and (possibly) finding a tenant who will pay your mortgage. Corporations will often pay more in rent for a nicely furnished place than an individual - you'll need to go through a reputable agency for this. Remember that it is not just your mortgage credit that gets messed up. You will not be able to borrow money easily for a car, a frig, further education, or healthcare, for a very long time. If you do find someone who will lend you money, it will be at a higher rate to cover the high-risk loan. So explore other options before panicking -- you probably have at least three months before the lender will set a collection agency on you.
posted by Susurration at 2:35 PM on September 2, 2008 [1 favorite]
My own take (as someone who previously worked with a mortgage lender in a similar market, when I could not sell my house and so had to rent -- then my tenant left with all the furniture and without paying any rent for 4 months) is not to screw up your credit for all eternity by panicking now. Your debt does not go away if you walk away from the mortgage -- you have to come to an arrangement with the lender, or you'll find yourself pursued mercilessly by collection agencies (and the debt will escalate with interest charges). There are many options that can save your credit-worthiness, including refinancing to an affordable mortgage payment (interest rates are low just now), selling the property, coming to some arrangement with the lender, and (possibly) finding a tenant who will pay your mortgage. Corporations will often pay more in rent for a nicely furnished place than an individual - you'll need to go through a reputable agency for this. Remember that it is not just your mortgage credit that gets messed up. You will not be able to borrow money easily for a car, a frig, further education, or healthcare, for a very long time. If you do find someone who will lend you money, it will be at a higher rate to cover the high-risk loan. So explore other options before panicking -- you probably have at least three months before the lender will set a collection agency on you.
posted by Susurration at 2:35 PM on September 2, 2008 [1 favorite]
To add to what others have said, there's not a lot of point in moving now to some place where you're going to have to pay rent, when you can probably stay in the house while you work through the process of asking your lender for help, being foreclosed on, etc. It's good to have some place lined up that you can go, but if you have no money, why pay 2-3 months of rent that you don't have to?
posted by jacquilynne at 2:58 PM on September 2, 2008
posted by jacquilynne at 2:58 PM on September 2, 2008
There are thousands upon thousands of others going through the same thing right now, so for your own sake please stop freaking out. There is nothing criminal about your situation and no need to worry about jail. Being 30 days down, its too late to refi so don't waste time pursuing that option.
Since you are jobless at the moment, I would probably not attempt to work out any payment plans with the lender. Those plans tend to help only if you have a steady income and just got behind due to a temporary hardship. If you can't afford your current payments, you probably need to look into selling the house. If you have enough equity you can price it to sell quickly and just get away from it. If not enough equity, look into a short sale as Bri mentioned.
The thing you need to understand is that it will likely take the lender a good 5-6 months to actually foreclose. They will give you 60 days notice. There is still time to get it sold. Don't panic. You can live there "rent free" while waiting for it to sell.
Personally, I would only consider bankruptcy if the lender forecloses AND comes after you for a deficiency judgement. If you have pmi on the loan, then no need to worry about a deficiency.
You won't be able to borrow mortgage money for another 36 months from the date this property is deeded out of your name.
Good luck, I hope everything works out for you.
posted by curlyelk at 2:59 PM on September 2, 2008
Since you are jobless at the moment, I would probably not attempt to work out any payment plans with the lender. Those plans tend to help only if you have a steady income and just got behind due to a temporary hardship. If you can't afford your current payments, you probably need to look into selling the house. If you have enough equity you can price it to sell quickly and just get away from it. If not enough equity, look into a short sale as Bri mentioned.
The thing you need to understand is that it will likely take the lender a good 5-6 months to actually foreclose. They will give you 60 days notice. There is still time to get it sold. Don't panic. You can live there "rent free" while waiting for it to sell.
Personally, I would only consider bankruptcy if the lender forecloses AND comes after you for a deficiency judgement. If you have pmi on the loan, then no need to worry about a deficiency.
You won't be able to borrow mortgage money for another 36 months from the date this property is deeded out of your name.
Good luck, I hope everything works out for you.
posted by curlyelk at 2:59 PM on September 2, 2008
Do people go to jail for this?
No.
Buying a house involves a contract between you and the lender.
The lender gave you money to pay the previous owner in return for a secured interest in the house and you agreeing to pay the lender back over time, with interest.
IT IS NOT ILLEGAL TO BREAK A CONTRACT.
Contracts have clauses in them specifying what happens when either party breaks the terms of the agreement. Since the lender wrote the contract, these clauses are generally about what's going to happen to YOU.
In many states, the initial mortgage you take out to buy a house is considered a "purchase money" loan and is NO RECOURSE, ie. the lender CANNOT hold you liable for the money lost on the house after you bail and they foreclose on you.
(This generally does not apply to refinances or 2nd mortgages).
Also, President Bush and the Congress in late 2007 altered the tax rules to temporarily not tax (for years 2007 through 2009) forgiven loans as income.
My advice would be to live rent free as long as you can while attempting the deed-in-lieu or other workout approach with your lender.
Foreclosures will generally mean a 200-300 hit to your FICO.
posted by troy at 5:12 PM on September 2, 2008 [2 favorites]
No.
Buying a house involves a contract between you and the lender.
The lender gave you money to pay the previous owner in return for a secured interest in the house and you agreeing to pay the lender back over time, with interest.
IT IS NOT ILLEGAL TO BREAK A CONTRACT.
Contracts have clauses in them specifying what happens when either party breaks the terms of the agreement. Since the lender wrote the contract, these clauses are generally about what's going to happen to YOU.
In many states, the initial mortgage you take out to buy a house is considered a "purchase money" loan and is NO RECOURSE, ie. the lender CANNOT hold you liable for the money lost on the house after you bail and they foreclose on you.
(This generally does not apply to refinances or 2nd mortgages).
Also, President Bush and the Congress in late 2007 altered the tax rules to temporarily not tax (for years 2007 through 2009) forgiven loans as income.
My advice would be to live rent free as long as you can while attempting the deed-in-lieu or other workout approach with your lender.
Foreclosures will generally mean a 200-300 hit to your FICO.
posted by troy at 5:12 PM on September 2, 2008 [2 favorites]
There should be a local nonprofit agency that is providing some services to people facing foreclosure (e.g. assistance negotiating with the lenders). I don't know where you live, but one coalition in California is the California Reinvestment Coalition -- CRC doesn't provide direct services, but its member agencies do. You should be able to find the agency near you by googling your state or city plus phrases like "foreclosure assistance." This page has includes several links of state-based programs. If there's a local agency mentioned in this Pew report, I would try calling that agency. I would try to talk to someone before walking out. You can always walk out. But there may be a better solution.
posted by ClaudiaCenter at 6:23 PM on September 2, 2008
posted by ClaudiaCenter at 6:23 PM on September 2, 2008
I would suggest googling non-recourse states to see if yours is among them. In general if you are in a non-recourse state they can't come after (sue) you for any difference between what you owe them and what they eventually sell the property for. Even if you're not in one of those states, there are still plenty of options.
As an anecdote a friend of mine just bought a short-sale (not in one of the aforementioned states.) She got an ok deal on it, but the previous owner lived there for 18 months rent/mortgage-free. That was probably enough time for the previous owner to save up enough to deal with things for awhile, and a good strategy for the situation. I suspect the seller was well advised.
So talk to a non-profit, or speak to a lawyer and figure out what options apply to you. You probably have way more than you think. Good luck.
posted by EmptyK at 8:31 PM on September 2, 2008
As an anecdote a friend of mine just bought a short-sale (not in one of the aforementioned states.) She got an ok deal on it, but the previous owner lived there for 18 months rent/mortgage-free. That was probably enough time for the previous owner to save up enough to deal with things for awhile, and a good strategy for the situation. I suspect the seller was well advised.
So talk to a non-profit, or speak to a lawyer and figure out what options apply to you. You probably have way more than you think. Good luck.
posted by EmptyK at 8:31 PM on September 2, 2008
Second ClaudiaCenter on finding if there are local agencies that will help. I know there are some in Maryland. A quick, anonymous call to your local public library should be able to get you that information. There are scammers out there, but there are also a lot of legitimate agencies and government entities that will help.
posted by QIbHom at 6:26 AM on September 3, 2008
posted by QIbHom at 6:26 AM on September 3, 2008
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posted by echo target at 1:19 PM on September 2, 2008