Ever gone through foreclosure?

[Chordata]

I don't do real estate, but a guy I know was talking about taking a foreclosure instead of paying his mortgage, since he's upside down.

What are the drawbacks?

Does it affect your credit?

Can you ever buy again?

Do you need to file for bankruptcy to be "eligible" (if that's even an issue)?

Just curious if anyone here has been involved in one.

[Teabaggins]

how far behind are you?

[Chordata]

It's not me, and I didn't ask.

[Deadset]

Tell him to listen to Dave Ramsey. You can find his pod casts online and at http://radiotime.com

[MCT]

try to do a modification. Foreclosure is the very last step. You can do all kinds of shit. Forbearance plans, partial claim (if you have an FHA loan), modification.....lots of options. Just dont go through a 3rd party if you choose to modify your payments. It's a free service your lender provides, and alot of these "firms" are just looking to make a bad situation worse by charging outrageous fees.

[mikejet]

It will wreck your credit and don't expect to buy a house for about 7-10 years when you default on the loan.

Filing Bankruptcy, depending on the kind, might help.

Tip of the day, people that bought houses in the past two years are pretty screwed for a while. Even if you are upside down, if your in a fixed loan and can afford to stay there, just do it. Wait it out. Things will get better.

[MCT]

that would be me. I bought my condo in 07 for $107K....well I was a first time home buyer, so I qualified for a 20K gov't grant, so I really only paid 87 for it. Well, fast foward two years later, and I'm married to a mortgage that I dont want to pay because the same home that initially cost $107K is going for $80K brand new. I could have gotten this place for less than $60K this year if I'd have waited. Now I cant leave my home for another 7 years or else I'll have to pay back the $20K gov't grant in full since that was part of the agreement. It sucks.

[fatediesel]

I've never been through a foreclosure but I've read about it since it's a big news item and here's what I know. First, it will kill your credit rating and you probably won't be able to buy another home for 7 years until it is off your credit report, and if you can get a house you will have to have a large down payment and will pay a horrible interest rate. You don't need to file for bankruptcy, but if you the bank takes your house and sells it for less than they are owned they can sue you for the difference. If you file for bankruptcy it will be on your credit report for 10 years.
You should tell the person you're talking to to talk to the bank and try to renegotiate or try to arrange a short-sale where the bank may take less than they're owned but not report it on his credit report. A friend of mine recently bought a house in Minnesota for $240,000 which was built in 2004 for $420,000 in a short-sale. The bank is reluctant to do these deals but it's better than holding empty real estate.

[Chordata]

Originally Posted by MCT

that would be me. I bought my condo in 07 for $107K....well I was a first time home buyer, so I qualified for a 20K gov't grant, so I really only paid 87 for it. Well, fast foward two years later, and I'm married to a mortgage that I dont want to pay because the same home that initially cost $107K is going for $80K brand new. I could have gotten this place for less than $60K this year if I'd have waited. Now I cant leave my home for another 7 years or else I'll have to pay back the $20K gov't grant in full since that was part of the agreement. It sucks.

I'm in your boat, but I'm not eager to sell yet. If I COULD sell, I WOULD sell, but I'm not dying to do it.

[mikejet]

If you really hate the fact that you(or your friend) is upside down, tell the bank. Ask them what they will do. If they won't work with you, stop paying. Then ask them again.

A coworker of mine did that recently and they rewrote her loan to the fair neighborhood value.

[MCT]

yeah, worst thing you can do is avoid the issue. Be proactive and stay in contact with your servicer. Even if you're in a foreclosure status, you can still work something out to save your home. There's a difference between being in foreclosure, and your home being foreclosed upon. Until <<---- THAT happens, you can normally find a way to stay in the house. Last thing lenders want is your property back.

[nick1091]

Originally Posted by mikejet

If you really hate the fact that you(or your friend) is upside down, tell the bank. Ask them what they will do. If they won't work with you, stop paying. Then ask them again.

A coworker of mine did that recently and they rewrote her loan to the fair neighborhood value.

I'm sorry, but if they could afford the monthly payments and the only thing they had a problem with is that their house is worth less now, that's a pretty lousy thing to do.

I bought my house at the top of the market, and I'm sure I'd probably have to take a loss if I decided to sell. But just because my home is worth less than when I bought it, I don't see any reason why that's the bank's fault or problem. I asked them to front a certain amount for home purchase and I agreed to their payment terms.

Let's say someone asked me to borrow $20 for a Blu-Ray, and I said yes and they purchased it. A week later, it goes on sale somewhere else for $15. Does that mean my friend should only have to repay the $15 cause that's all it's worth now?

[Chordata]

Originally Posted by nick1091

I'm sorry, but if they could afford the monthly payments and the only thing they had a problem with is that their house is worth less now, that's a pretty lousy thing to do.

I bought my house at the top of the market, and I'm sure I'd probably have to take a loss if I decided to sell. But just because my home is worth less than when I bought it, I don't see any reason why that's the bank's fault or problem. I asked them to front a certain amount for home purchase and I agreed to their payment terms.

Let's say someone asked me to borrow $20 for a Blu-Ray, and I said yes and they purchased it. A week later, it goes on sale somewhere else for $15. Does that mean my friend should only have to repay the $15 cause that's all it's worth now?

It depends: was it really only worth $10, and did you know this when you made the loan to him, and did you come up with some creative way for him to repay you?

[mikejet]

Originally Posted by nick1091

I'm sorry, but if they could afford the monthly payments and the only thing they had a problem with is that their house is worth less now, that's a pretty lousy thing to do.

I bought my house at the top of the market, and I'm sure I'd probably have to take a loss if I decided to sell. But just because my home is worth less than when I bought it, I don't see any reason why that's the bank's fault or problem. I asked them to front a certain amount for home purchase and I agreed to their payment terms.

Let's say someone asked me to borrow $20 for a Blu-Ray, and I said yes and they purchased it. A week later, it goes on sale somewhere else for $15. Does that mean my friend should only have to repay the $15 cause that's all it's worth now?

There's a huge difference between $5 and $250,000.

Lets say that you go to buy a house, you have decent credit and purchase the home at a value of 845k. Now two years later the market plumets and your house is worht 600k due to the crash and foreclosures all around you. Interest rates are low so you try to get a better rate, you are denied because after the mandatory appraisal you are upside down with no equity.

You can work with the bank to rewrite the loan and it's in both of your favors because the bank doesn't want ANOTHER property they will have to try and sell and you don't want to lose your house. No one gets hurt. You get a fair deal.

It's a much better alternative than the hundreds of people who are simply walking away from properties.

[Chordata]

Originally Posted by mikejet

It's a much better alternative than the hundreds of people who are simply walking away from properties.

Totally agree. It's not ideal for anyone, but it's better than throwing your hands up and leaving it empty.

[Deadset]

Originally Posted by mikejet

It's a much better alternative than the hundreds of people who are simply walking away from properties.

And just so people know, there is no such thing as walking away. It will haunt you. The bank will take ownership and will most likely short sale it and they could come after you for the difference. Sometimes banks even sell these uncollected debt to collectors who could pester you in 5, 10, 15 yrs from now

I've listened to Dave Ramsey and this is not hearsay, they are real stories happening to people.

Buying a house is risky, it's not an investment it's a lifestyle choice. I've always gone with the idea of a house payment should not be more than 1/4 of my net take home.

[MCT]

Originally Posted by nick1091

I'm sorry, but if they could afford the monthly payments and the only thing they had a problem with is that their house is worth less now, that's a pretty lousy thing to do.

I bought my house at the top of the market, and I'm sure I'd probably have to take a loss if I decided to sell. But just because my home is worth less than when I bought it, I don't see any reason why that's the bank's fault or problem. I asked them to front a certain amount for home purchase and I agreed to their payment terms.

Let's say someone asked me to borrow $20 for a Blu-Ray, and I said yes and they purchased it. A week later, it goes on sale somewhere else for $15. Does that mean my friend should only have to repay the $15 cause that's all it's worth now?

home prices were inflated. Most of these homes that people paid for from 02-06 were not worth the price, not even close. There's a difference between something going on sale and blatant price gouging. I mean, some homes in Miami for example two years ago were worth $250K....now they go for $80K. That, my friend, is exhorbitant. It may not be fair in your eyes for people to renegotiate the terms of their loan, but to me, it was unfair for these unscrupulous lenders and loan officers to dupe people into paying for homes they clearly couldn't afford in the first place.

[nick1091]

Originally Posted by mikejet

You can work with the bank to rewrite the loan and it's in both of your favors because the bank doesn't want ANOTHER property they will have to try and sell and you don't want to lose your house. No one gets hurt. You get a fair deal.

Explain to me how the bank does not get hurt by losing $245,000? That was real money that they paid for that house that they will never see again. No, it doesn't hurt as much as if they had to foreclose and try to resell themselves, but it's still the bank taking it in the shorts.

[Chordata]

Originally Posted by nick1091

Explain to me how the bank does not get hurt by losing $245,000? That was real money that they paid for that house that they will never see again. No, it doesn't hurt as much as if they had to foreclose and try to resell themselves, but it's still the bank taking it in the shorts.

You just answered your own question.

Again, it's not fair to the bank. But it's better than a full-blown foreclosure.

[nick1091]

Originally Posted by MCT

home prices were inflated. Most of these homes that people paid for from 02-06 were not worth the price, not even close. There's a difference between something going on sale and blatant price gouging. I mean, some homes in Miami for example two years ago were worth $250K....now they go for $80K. That, my friend, is exhorbitant.

You'll find no argument on that from me, and I'm someone who bought my home in that time frame.

It may not be fair in your eyes for people to renegotiate the terms of their loan, but to me, it was unfair for these unscrupulous lenders and loan officers to dupe people into paying for homes they clearly couldn't afford in the first place.

Listen, I hold a lot of the banks, mortgage brokers accountable for their share of these problems. But by the same token, that does not mean I'm willing to let all the home buyers completely off the hook. For a situation as grave as this one, there's not just one party you can point your finger at and say "that's the problem."

Yes there were predatory lenders who deceived homebuyers. But there were also people who bought houses they knew (or should have known) they couldn't afford for little or no money down, and they just walked away leaving everyone else holding the bag; not just the banks who financed the loans, but the everyday home owners who've been in their houses for years, who now find their property values plummeting through no fault of their own.