Cut and run away to maui?
January 3, 2011 5:55 PM Subscribe
What happens in foreclosure and can you recommend resources for me in the seattle area.
My cousins are thinking about cutting their losses and getting out from under their mortgage. I have no advice for them and really don't know where to start. They are in Seattle and have been put into a mortgage assistance program that will end in 20 months if they make all of their inflated payments on time. They are paying way over their monthly payments and have talked to their lender about re-adjusting this, but their lender is unwilling to work with them
They have a mortgage for way more than the house is worth, and are ready to cut their losses and walk away from the house.
Can you please help me to help them weigh all of the options and consequences from doing this.
Also, if you know of any resources in seattle to contact about this, please post them, or me-mail me.
They are thinking about buying a piece of property in maui.
Thank you hive mind.
My cousins are thinking about cutting their losses and getting out from under their mortgage. I have no advice for them and really don't know where to start. They are in Seattle and have been put into a mortgage assistance program that will end in 20 months if they make all of their inflated payments on time. They are paying way over their monthly payments and have talked to their lender about re-adjusting this, but their lender is unwilling to work with them
They have a mortgage for way more than the house is worth, and are ready to cut their losses and walk away from the house.
Can you please help me to help them weigh all of the options and consequences from doing this.
Also, if you know of any resources in seattle to contact about this, please post them, or me-mail me.
They are thinking about buying a piece of property in maui.
Thank you hive mind.
If they have the liquid assets to buy property in Maui with their credit in the toilet the bank they walked out on is going to come after those assets. Walking away and going Chapter 7 they may be able to pull off, if their financial situation is really that bad. Walking away and living a life of luxury? Probably not going to happen.
Although from what I've read, primarily here in other related questions, going Chapter 7 and working out a deal to stay in the house is probably the best option if their outflows exceed their inflows and they can't find a way to get above water on their own.
posted by COD at 7:14 PM on January 3, 2011
Although from what I've read, primarily here in other related questions, going Chapter 7 and working out a deal to stay in the house is probably the best option if their outflows exceed their inflows and they can't find a way to get above water on their own.
posted by COD at 7:14 PM on January 3, 2011
One option might be a deed in lieu of foreclosure, which is an arrangement whereby the lender takes the title of the house without going through the formal foreclosure process.
Normally, in order to get the lender to consider this arrangement, the borrower must default on several payments, enough so that the lender starts the foreclosure process. This, of course, will destroy the borrower's credit rating and, if the deed arrangement isn't done properly, could leave the borrower open to a judgment for the loan amount remaining after the lender sells the property.
So, yeah, if they need the money from their monthly payment in order to buy property in Maui, that's not likely to happen if they go down this road.
posted by LOLAttorney2009 at 7:19 PM on January 3, 2011
Normally, in order to get the lender to consider this arrangement, the borrower must default on several payments, enough so that the lender starts the foreclosure process. This, of course, will destroy the borrower's credit rating and, if the deed arrangement isn't done properly, could leave the borrower open to a judgment for the loan amount remaining after the lender sells the property.
So, yeah, if they need the money from their monthly payment in order to buy property in Maui, that's not likely to happen if they go down this road.
posted by LOLAttorney2009 at 7:19 PM on January 3, 2011
This is called a "strategic default." The benefit is that they stop paying for the house. The cost is that the house will be foreclosed; they're likely personally liable for the remaining balance on the house--check the mortgage papers they've signed--which means that the bank can sue them for the remaining balance; and their credit really takes a hit.
A lot of people have written about making this decision. Google "strategic default" and you'll find various opinions.
posted by lockestockbarrel at 7:22 PM on January 3, 2011
A lot of people have written about making this decision. Google "strategic default" and you'll find various opinions.
posted by lockestockbarrel at 7:22 PM on January 3, 2011
Check out this prior thread on the same topic.
http://ask.metafilter.com/147604/Help-me-default-on-my-mortgage
posted by BrooksCooper at 8:44 PM on January 3, 2011
http://ask.metafilter.com/147604/Help-me-default-on-my-mortgage
posted by BrooksCooper at 8:44 PM on January 3, 2011
The cost is that the house will be foreclosed; they're likely personally liable for the remaining balance on the house--check the mortgage papers they've signed--which means that the bank can sue them for the remaining balance; and their credit really takes a hit.
This may not be true in the state of Washington, which is a "non-recourse" mortgage state.
In a non-recourse state, if a foreclosure sale does cover the remaining balance of the loan, the lender can't sue or put a lien on the borrower, and must eat the loss.
There are exceptions and statutes that could allow the lender to recover some money. Your cousins should consult about options with a real estate lawyer, which should probably be as confidential as any client-attorney relationship goes.
As the answers in this question demonstrate, Metafilter is just the wrong place for specifics about Washington State law. Talk to a professional.
posted by Blazecock Pileon at 9:46 PM on January 3, 2011
This may not be true in the state of Washington, which is a "non-recourse" mortgage state.
In a non-recourse state, if a foreclosure sale does cover the remaining balance of the loan, the lender can't sue or put a lien on the borrower, and must eat the loss.
There are exceptions and statutes that could allow the lender to recover some money. Your cousins should consult about options with a real estate lawyer, which should probably be as confidential as any client-attorney relationship goes.
As the answers in this question demonstrate, Metafilter is just the wrong place for specifics about Washington State law. Talk to a professional.
posted by Blazecock Pileon at 9:46 PM on January 3, 2011
s/does/doesn't/
posted by Blazecock Pileon at 9:46 PM on January 3, 2011
posted by Blazecock Pileon at 9:46 PM on January 3, 2011
I think Washington is a non-recourse state, isn't it? That means, as far as I understand, for the primary mortgage their obligation is met when they turn the keys over to the bank. Not sure how it affects any secondary mortgage, but generally HELOCs and second mortgages are able to be pursued if the house is foreclosed.
This is worth talking to a real estate attorney about for an hour or two.
Their credit will take a hit, but if they're paying cash in Maui and don't have big second-mortgages on the current house, it should be OK. If by "property" you mean "raw land where they hope to get a construction loan" that would seem to be a very, very long shot of happening in the near future.
posted by maxwelton at 9:49 PM on January 3, 2011
This is worth talking to a real estate attorney about for an hour or two.
Their credit will take a hit, but if they're paying cash in Maui and don't have big second-mortgages on the current house, it should be OK. If by "property" you mean "raw land where they hope to get a construction loan" that would seem to be a very, very long shot of happening in the near future.
posted by maxwelton at 9:49 PM on January 3, 2011
It is not directly part of your question, but since you brought up what they are thinking of doing next, maybe it is not a derail. I would encourage them to strongly consider whether moving to Maui is really such a good idea. Help them weigh the pros and cons by checking out previous threads on moving to Hawaii.
posted by asciident at 11:15 PM on January 3, 2011
posted by asciident at 11:15 PM on January 3, 2011
IANAL, but I do work in the legal field and have some experience with this. As others have pointed out, Washington is a non-recourse state, so it is unlikely that the lender would be able to pursue your cousins for a deficiency judgment - that is, the difference between what they owe on the loan (plus the costs of the foreclosure), and the amount the property sells for at the foreclosure sale. However, if they have any guarantors on the loan (like a family member who guaranteed the loan because they didn't qualify otherwise), the lender can pursue a default judgment against them, which would be a terrible situation to be in. A deed in lieu of foreclosure is an option whereby your cousins basically just give the property to the lender - this is cheaper (and faster) for the bank than a foreclosure, so they might go for it. It's probably not as much of a credit hit, but it will show up on their credit report as something like "deed in lieu of foreclosure," so potential new lenders will know that they were unable to keep up on their mortgage, and the bank started the foreclosure process. I imagine that having either that or a foreclosure on their credit report would make it extremely difficult to get another large loan.
The best course of action is for your cousins to discuss their options with an attorney - try to find one who specializes in debtor's rights rather than just real estate. I don't have time to google for legal aid in Seattle, but I'm sure there's programs available. They might try calling the CLEAR hotline at 206-461-3200, which provides referrals to pro bono services for people who meet certain income requirements.
posted by Safiya at 12:51 PM on January 4, 2011
The best course of action is for your cousins to discuss their options with an attorney - try to find one who specializes in debtor's rights rather than just real estate. I don't have time to google for legal aid in Seattle, but I'm sure there's programs available. They might try calling the CLEAR hotline at 206-461-3200, which provides referrals to pro bono services for people who meet certain income requirements.
posted by Safiya at 12:51 PM on January 4, 2011
This thread is closed to new comments.
posted by jz at 6:54 PM on January 3, 2011