Fresh Foreclosures
tell me about the foreclosing process and how it effects your credit?
We are considering this option. Walking away and starting over. Are mortgage is more the 3x what our home is worth. There are many in the same boat in our community. My husband is making 3 figures and I work full time, paying for the second mortgage. I have recently been out of work recovering from surgery and my family and I have discovered that my time home has been very valuable. I have an 8 year whom struggles with her studies and our son will be entering college at FSU. He has a 4 year scholarship and will be very successful. Our current home mortgaged for way more than it is worth and I need to know from a Christian biblical perspective, if foreclosure is the way to go. A fresh start. What is the down side? How long before we can purchase another home? What could possible go wrong? What is it that seems so scarey? Someone, please give us the good, the bad and the ugly.
First I’ll tell you about the foreclosure process. Then I’ll tell you about pitfalls and issues about foreclosure.
Foreclosure – You fall behind on your monthly mortgage payments. Your bank decides that the way to recover their investment is to foreclose. They will file a notice to foreclose and get a court date. A judge will side with the mortgage company that it is their right to reposses (and sell) the property. The property will be auctioned. You have 3 days to move after the property auction. Since you will be informed about this stuff in advance, you can move out before it actually happens.
Pitfalls and possible issues:
Your credit will be trashed. Your scores will slide while you are missing payments and go 30- 60- and 90- days past due. Any other credit you carry will notice this and credit cards will impose their highest interest rates on you because they see your creditworthiness degrade. Once you actually go through the foreclosure (in court) there will be a record of that on your credit report also. This will essentially prevent you from buying a home for 3-5 years. 3 years if your credit is perfect after that and you have a huge downpayment – more like 5 years for most people.
Credit scores are used by insurance companies to set rates. They have noticed that people with poor credit tend to make more claims (true for homeowner’s, renter’s and automobile insurance). Some jobs require a credit check to get them and can deny employment based on poor credit scores.
Whether your loan is a ‘recourse’ or a ‘non-recourse’ loan is VERY important. If you are lucky and have a non-recourse loan the lender takes the difference between what you owe (which is quite a bit higher than what you owe today because of lawyer’s fees and late fees) and what they eventually sell the property for and issue you a 1099. This is a form that tells the government that this amount of money should be considered income to you. The federal government realized that this would cause thousands of people to declare bankruptcy and have put a pause on that tax for 2008. Most states have not matched the federal government’s offer and it will count as taxable income in your state (FL with no state income tax would be lucky).
If your loan is a recourse loan the bank is allowed to get a deficiency judgement against you for the difference. If you can’t (or choose not to) pay the judgement, the bank can go back to the court to force you to pay by garnishing your wages and making sure that any tax refunds, etc., are sent directly to them. If you have savings and assets, the court can force you to use them to pay the judgement. The only way to get that to stop is to declare bankruptcy. Then getting another house is further out than 5 years.
So, having a recourse loan could force you into bankruptcy or get your wages garnished. Having to move and rent for years is considered scary by many people. It is difficult to find a good place to rent with a poor credit score.
I can’t answer from a Christian biblical perspective, but I can say from a moral point of view letting a house go into foreclosure when you can prevent it isn’t ethical. You agreed to borrow that money at those interest rates and payments (the bank made no guarantee about the value of the underlying asset – if you made a ton of money you wouldn’t be trying to pay the bank a bonus, but when you potentially lose money you are asking the bank to take the loss). By not paying it back, you are not honoring your word. I certainly believe there are moral instances when it is forgivable to do that, but they are few and far between.
These are difficult choices and what you do has a serious impact on your financial health and flexibility over the next decade.
good luck!
Fresh Pre-Foreclosure Leads from MailingList.org
|
|
Fresh Start for Homeowners: Avoid the permanence of Foreclosure and secure your future with a Fresh Start in four steps or less $7.49 If you are reading this now, and find yourself in the all too common situation where: *You owe more on your home than what its worth, *You can no longer afford the payments on the loan(s) you have, and *You don’t know what to do …then you can start feeling comfortable right now. Why? Because, first off: you’re not alone. Second: not knowing what to do is OK because that’s the place to… |
|
|
Fresh Start for Homeowners: Avoid the permanence of Foreclosure and secure your future with a Fresh [Paperback] … |
