Foreclosures

Easy? It means that people are failing to fulfill their legal liability to pay and it totally trashes their credit. As a landlord, I would not even rent to someone who walked away from a mortgage without attempting to pay it.

Walking away basically means that they give their keys to the bank and take the loss of whatever money they have put into their house. Yes their credit history/credit score is affected.

I am a foreclosure consultant. The term to walk away, means to do nothing, and leave your home. It is just like your house and credit went through foreclosure. It will stay with you for 10 years. There are options for people facing foreclosure. There are options for people who are "upside down" as well. Upside down means you owe more than your home is worth. If you or someone you know is facing trouble with your lender--call me, I may be able to help.
E. ###-###-####

People are choosing to go into foreclosure all over the place. Its sad really, "walking away" from a home never used to be an option. It used to be that people would fight to keep their homes. What's happening now is that people owe $350,000 on their house and realize that its now only worth $170,000 (because the other foreclosures/short sales in the area brings the value down dramatically) so they no longer want it. They don't want to make the payments, they'd rather just "walk away" and go rent a house cheaper.
Some people have had their ARMs adjust and aren't able to refinance or make the new inflated payment amounts. That's how this whole mess got started. Unfortunately its turned into people just not wanting to pay for the house they bought since its no longer worth what they bought it for.
What a lot of people don't realize is that once the bank finally sells the house after a foreclosure you are still liable for the remaining amount due. Much like when you have a car repossessed, if you owe $17,000 and they sell it for $5,000 they come after you for the remaining $12,000. Its not free money.
It does destroy your credit and its not easy. You can't just walk away from your responsibilities and expect no consequences.

There are 2 things a person can do if they can no longer afford their home. 1 is a short sale, the bank agrees to sell the house for less then what is owed to the bank. This is hard to accomplish as any offers you get on the house must go through the bank and they accept or decline the offer. Supposedly isn't as bad as a foreclosure, but none the less, hurts your credit. 2nd is foreclosure, I thought foreclosure was the same as walking away. You quit making mortgage pymts and the bank eventually takes the house back & will usually auction the house off. Damages your credit and the bank has some many years to come after you for the amount not paid back on the loan. I know these things as we attempted a short sale and the bank denied all offers, foreclosed teh house & sold it at auction. We eventually filed for bankrupcty because the bank could have came after us for $100k not paid back to them. The above info is from a real estate agent, bankrupcty lawyer & life experience. I don't wish it on any family!

Hi B.,
My husband is a Realtor who does a lot of work for banks on foreclosed homes. It's not the most ideal thing to have happen if you're a homeowner, but it's not the end of the world either. Most of the people who are "walking away" are doing so because: 1) they can't make their payments anymore (either because of a job loss or because their interest rate has increased so the payments are no longer affordable) and 2) they do not have much equity in their home.

You have probably seen a number of homes on the market with a "reduced!" sign out front - well, for people who bought a year or two ago, they probably owe more now than the home is worth. That means that selling it at no loss is impossible. So the home becomes a "short sale" (meaning, the bank must agree to take less for the house than the current loan amount). Even then, sometimes the house still doesn't sell. Short sales are tricky to negotiate for both the buyer and seller since the bank must approve everything, and often these escrows fall apart.

Generally speaking, the bank will start foreclosure proceedings several months after payments become overdue. It usually takes 6+ months for the home to completely foreclose. At that point, the bank will list it with a realtor and will sell it as quickly as they can (usually at a much reduced price, so the bank takes a loss on the sale).

True, this is not a great thing to have on your credit, however since a home loan is a secured loan (meaning the bank takes the house in lieu of further payments on the loan), it is not nearly as bad on your credit as a bankruptcy. My husband has worked with clients who have been able to get an A-paper loan after having a home foreclosed on just 4 years prior. So... although it's not good for your credit, if all of your other finances stay stable, you can be a homeowner again in a very short number of years.

I hope this helps.

You are not imagining things. There are I think about 500 houses a day appprox in CA going into foreclosure! I've heard thru the grapevine that things could get as bad as it was in the great depression of 1929. Plan for hard times ahead. As always, it's a good idea to keep extra food on hand as food shortages happen and gas prices continue to go up (which then affects the trucks that bring in our food from outlying areas). It's disheartening, but for those who are able to plan ahead, it will be easier if and when hard times come.

Hi B.-
I'm an escrow assistant and actually work in the new foreclosure department at work, because there was such a demand for it. Walking away actually means you stop payng your mortgage, and wait for the bank to record a trustees deed against your property. Which means you are in default. After that is recorded you have 30 days to figure something out or leave the house. Then the bank will have your home inspected and try to sale is for whatever is left on the exsiting loan. This is NOT good for your credit. You will not be able to purchase a home for 2-5 years.
Good luck!

B.,
I will explain what walking away means, it means that they are moving away from their house, usually because they can't afford the mortgage payments. Usually, the scenario is that they purchased the house with little or no money down. They received a loan where they interest rates were very low, now the rate has risen to the point where they can't afford to make the payment. The house has lost value there is no equity. So, they walk away. Yes, it hurts their credit, but, they can rent at a lower rate. Basically they gambled that the house would increase in value and they would refinance. But, it did not work out that way. When someone walks away from their house the bank takes over and sell the house at a lower price, the bank loses, the homeowner loses. That is why you see so many foreclosures and repos on the news. It will take some time maybe a year or so longer for the market to balance out. I hope I was helpful.
M. Farley
Realtor
Keller Williams
Carmel

HI B.,

You can "walk away" from the house. There is something called a Deed in Lieu of Foreclosure that is pretty much like handing the house back over instead of having it taken from you. It saves the bank money because they don't have to do a foreclosure sale at the court house steps or assign an attorney to the foreclosure. Instead, they draft the deed in Lieu of foreclosure and you would get it notarized and send it back to them, then they would give you approximately 30 days to vacate the premises, or in some situations they might let you rent back the property. A deed in Lieu of foreclosure has less of an impact on your credit than an actual foreclosure. Banks didn't used to do these but now they are becoming more and more popular. If you have any other questions let me know, I'd be happy to help.
~K~

My mom's a realtor, so I asked her. She said walking away means they let their house go into foreclosure and it does affect your credit history for 10 years or more. It is better to call the lender and give them the deed in lieu of foreclosure, if they'll take it. It's really a sad time, and very difficult for a lot of people. Let me know if you need any other information.

C.

Hi B.,
It is hard to tell from your request if this is something that you are facing personally or if you were just interested in getting information about what is going on. I am a Real Estate Broker and Foreclosures are the mainstay of my buisness right now. "Walking Away" can be detrimental to your credit history, foreclosure should be avoided at all costs if at all possible. Many people are choosing to "walk" away from their homes because the home's values have decreased so significantly and they have found themselves paying a mortgage for a $350,000 house that is now only worth $200,000 or less. It is a very frustrating position to be in, and is even worse if their mortgage payment is adjusting and their payments are getting higher and higher and they can no longer afford to keep up with the payments at all. When home values were stable or appreciating, home owners could refinance the home to a fixed mortgage, but in most cases, that is not possible now, because the home will not appraise for the amount that is owed, and the new lender will not allow the homeowner to borrow more than their house is worth. So a lot of people, are opting to "walk" away from the house and the mortgage, choosing to rent, which in most cases is much less than their current mortgage payment. I advise people to take precaution, checking with the county recorders office even before renting because unfortunately many people are renting out homes that are in the middle of the foreclosure process, and people are paying large deposits and rent, only to find out within months that the house has been foreclosed, and they will have to move again. But, I agree with Ellen, there are a lot of options for people to stay in their homes now, and before waling away, I highly recommend that you exhaust all of these options. Contact your lender and see if you are eligible for a "work out" plan on your home. Some lenders are willing to give a forebareance on past due amounts, or move payments to the end of the loan, to help you to catch up. Some will even do a loan modification, which will give you new terms and payments on your current mortgage so that you can afford to stay. I would also suggest talking to a bankrupcy attorney and a cpa so that you are clear on any possible liabilities you may face as a result of the decision to walk away from the mortgage. There is a non-profit organization called Hope Now, that may also be of some assistance. 1-888-995-HOPE (it is a free service where they have foreclosure counselors that will assist you in negotiating with your lender)
Good luck!

Hi B., I am not an expert, but, I do believe that walking away from your home similar to giving your car back to the finance company befor they repossesse your car. It will affect your credit history, but, it doesn't look or affect it as bad as a forclosure. Walking away from your home can be heartbreaking (for some) but, if you go to the finance company and explain your circumstances (you lost your job, the job you have doesn't pay as much) walking away usually isn't as bad as forclosure. If your situation changes, lets say in 2 or 3 years and now you can afford a home again. A new loan company will be more willing to help you the if you had a forclosure. You should make sure that everything eles in your credit is in good standing. (no late payments, not an excess amount of credit)Some people are walking away due to not being able to sell their home. With the current real estate market there are just no buyers.

B. ~
"Walking away" means that you just stop paying on your mortgage and let the home go into foreclosure. Yes, it affects their credit history for anywhere from 2 to 10 years.(Just imagine how it will be to try to get a cell phone after that ~ it affects everything!) Home values are "correcting" at this time; meaning that they are not going up in value like they used to. They majority of the people that just walk away are the ones that got the subprime loans (requiring little or no documentation, tax returns or pay stubs, etc.)They thought that they could pay low payments for a couple of years on a home that was sold to them at a very high price; and when the payment went up, they thought they could refinance. Not the case, home values are going down or "correcting". Alot of these people were first time home buyers or those who took out a second on their home.

It's like walking away from any other debt - you simply don't pay the mortgage. and yes, it can ruin your credit score and eventually the bank will foreclose and you will be moved out by the sheriff, if necessary. What happened to alot of people is that when house values were so high, people took out interest only loans so they could afford the monthly payment. The loans came due in three years, but the thought was that before the end of the three year period, people would refinance and all would be well. Unfortunately, the bottom dropped out of the market and folks who had a $500,000 interest only loan could not refinance because suddenly their homes were no longer valued at $500,000. the monthly payments on the interest only loan balloon at the end of the third year so they are now in a position where they can't afford the monthly payment and can't refinance. Thus, foreclosure! It's a tragic situation.

Walking Away means the owner could not hold on to the house and lets it go into foreclosure. This is usually a 3 month process where mortgage payments are not made and the owner gets behind and can't catch up, therefore they "Walk Away". This entails going bankrupt and having bad credit for 10 years (Yes. Your credit history will reflect the foreclosure for 10 whole years) and having your house auctioned off on the steps of the Court House. These days with so many foreclosures the mortgage companies are taking longer then 3 months to get people out. And people are also trying to sell their property by short sale. Which means they tell the mortgage company that they have a buyer willing to buy it short, and the mortgage company agrees to take less than the seller owes on the mortgage. The foreclosure process is halted, the people stay in the house till the sale is finalized. This is a long process as the mortgage companies are swamped with foreclosures. It can take 7 months or longer with no guarantee that it will work out and the house may end up on the auction block. (But the owners get to live in it free for this period of time-not that great as the foreclosure has devastated them but they are not being forced as the willing buyer and his agent are in contact with the mortgage company and have become the "recognized negotiator". The mortgage companies do not have the staff to deal with all the foreclosures as many were caused by the negative adjustable mortgages where low initial price is tempting but 3 years down the road or so the new adjusted price is beyond the ability of the owners to pay.
PS If the house is sold short the original owner still owes the state taxes on the whole profit that he would have made if the house sold for the price of the mortgage. It is approx 5%. The FEDs have passed a law where you do not owe federal taxes on a short sale.

Good Luck,
Gale

Hi B.,
We just went throught his because we decided to move to Missouri for my husband's job right before everything crashed. Anyway we tried to short sale and our bank was actually very cooperative and took a short time in responding. The first offer that we got backed out after two weeks and our bank took 4 to respond. The second and third offers we had our bank agreed to the offer but then the buyers loan company didn't offer the loan they were going to use any more so they couldn't buy the house. We were lucky to get that many offers and to have such a cocperative bank others aren't so lucky. Our credit went from 720 to 630 due to missed payments (you have to be missing payments and you have to have a hardship to short sale) and forcloser will be written on our credit for 7 years. We have been told by multiple loan companies because this is the only negative thing on our credit that we will be able to buy a house in 2 years. As for the tax part of short sale you do not have to pay taxes on what gets forgiven anymore there was a law passed recently and California is a debt forgiveness state so the bank can not come after you for the difference if they agree to a short sale. The only damage a short sale does to your credit depends on how many payments you miss. If you are going to short sale find a good realtor who has done them before because there is more paper work and phone calls than other sales. Also from all that we researched and talk to professionals I don't think bankruptcy is better than forecloser. Also someone was saying the bank can go after you for the difference when they forclose if the loan was only to purchase the house not money taken out to spend then they can't come after you.
Good luck,
C.

Hi B., I can't tell from your question if you are considering "walking away" from your home or not. If you are I encourage you to look into bankrupcy. It's not pretty, but it's much better than a forclosure. Good Luck!

Walking away is exactly that, you stop paying and walk away. It usually takes the bank several months before they will evict you. It does reflect poorly on your credit and if you have a 2nd on the house you will still have to pay that unless you declare bankruptcy.

Yes, it does affect your credit! It is like a repo on a car. It is hard rent. You can't buy another house for a while! I do not recommend unless it is the last resort.

This is rampant in our area. Every week there's a new pile of stuff thrown out for the garbage indicating a home's been abandoned.
My husband is a mortgage broker and as we watched our home depreciate, I asked him how we could get out of it. Couldn't we just sell and move further away into a cheaper area? He said we'd end up paying on our new home AND half the mortgage on this home because there's no way we could sell it for what we owe, and nobody would pay rent equal to our mortgage payment.
Despite him having a lot of lenders on his side and knowing the ins and outs, even we have no choice but to keep putting everything we have into our mortgage and praying for values to go up quickly...that, or abandon our house and rent elsewhere w/ at least 4 years worth of destroyed credit to follow. Even with a short sale, we'd end up owing a ton AND have bad credit for several years.
Totally, utterly SUCKS!

I've been keeping up to date by reading the business section in the Sac bee...Best of Luck....But yes walking away does affect your credit. Look into a FHA loan 1st....or another option.

Walking away means that you stop paying your mortgage and allow the bank to take possession of your home, which is a foreclosure. "Walking away" implies that the person has made the decision to no longer support a house as they haven't the funds or desire to do so. This is an option people take when they cannot sell a home for whatever reason. These days it's usually because the house isn't worth what they owe on it. Most people try to support their home for as long as possible and foreclosure comes to them. But, home values are falling, ARMs are coming due and many people see no other option than to walk before every last penny they own is gone. Yes, it absolutely destroys your credit. If you want a more exhaustive answer from real estate folk, then go up to trulia.com, which is a real estate web site and forum.

When a homeowner "walks away" from their home....it simply means that they are moving out of their home and letting the bank have it. Unfortunately, we find ourselves in a real estate market where alot of people owe more on their home than it is worth. They only have a couple of options...one being walking away from their home which will result in a foreclosure ( not the best solution ) or a person could sell their home as a "short sale". This is when the homeowner negotiates with their lender to sell their home for less than they owe the bank. This generally results in the home owner being given a 1099 for the loss. (i.e. owes $500,000 and sells for $400,000. Homeowner gets 1099'd for $100,000). The Feds have given a "1099 relief", but you must qualify for a hardship. Another option that most home owner's are not aware of is "modification of loan". This is where you renegotiate with your lender your loan terms. Banks do not want houses. They are actually working well with homeowner's in our county. Regardless, anyone who finds theirselves in this type of position or find that they might be heading towards the loss of their home, they should alway contact an attorney and/or accountant for tax ramifications. If you would like more info on this, please feel free to contact me at anytime. ____@____.com (realtor, Intero Real Estate )

Hi B.,

Gotcha covered on this one - I am a Realtor and a mortgage loan officer. I understand it's quite tough out there for many homeowners, especially those who bought for the first time in the last 5 years.

'Walking away' means you are leaving your loan and corresponding financial responsibility behind. How badly it will effect your credit is the way you handle it. And, there are ways to avoid it all together.

1) If you know you are no longer going to be able to make your monthly mortgage payment, contact your lender asap. Depending on the lender -and- how much 'under water' you are, they -might- do one of the following; a) lower the amount you owe so you can make the payment, b) extend your current interest rate (vs. adjusting it to a higher one, if you have that kind of loan), c) refinance your loan to terms that you can handle.

2) If you have already missed payments, or the lender is not willing to the any of the above (for a myriad of reasons), contact a Realtor to discuss selling your home. Explain your situation. Then choose a Realtor that knows your area, is willing and able to explain (to your preferred high or low level of detail) what happens in a 'short sale', and you feel you connect with. (Basically, a 'short sale' is when you owe more than you can sell your house for and the lender agrees to be 'shorted' some of the outstanding balance.) This may or may not work out for you depending on your lender's willingness to accept being shorted early in the process (vs. foreclosure later), is able to respond to the Buyers in a timely fashion, your home's 'marketability', etc.

3) If you have tried all of the above, or for whatever reason you decide against trying, you can stay in your home without payments being made until your lender forecloses. This process takes them about 120 days from the first Notice of Default. (If you'd like a detailed schedule of the process, just let me know, I'll email you an article.)

The government is still trying to come up with an equitable balance re: what's fair for all Americans. Do we assist the homeowners and allow them to 'walk away' with their credit in tact (and the bill the lenders have acquired)? Or, do we continue on the track of a bankruptcy requirement and a 7-10 year bad credit rating? Or, the currently proposed compromise of 2 years of bad credit, etc.?

My experience, and the current tightening of loan standards as lenders 'circle the wagons', would suggest no matter what the government does, it will most likely be too late for many, many people, and lenders will still ultimately make their own lending decisions. If a homeowner leaves their previous lender with their last bill, it seems logical the next lender will be unwilling to take their chances. Please note: Creditors in general are also lenders - this means credit cards, installment loans for autos, etc.

However, it is also somewhat logical that if enough people default on their loans, the mortgage lenders -may- be willing to loosen their standards in a few years in order for sales to continue. This is not a scenario I would count on.

I hope this is the information you were looking for, B.. My biggest concern is for people waiting too long to contact their lender. It's good to start right where you have -- asking questions! If you're in too deep, I urge you to act sooner than later.

My best,
K.
P.S. You're also welcome to check out my website: www.NewVintageHome.com re: the above and making your home 'marketable'.

I'm not a real estate expert either but I know what you're asking about and I hope this helps you.
Equity is the amount your home is worth minus the amount you owe. Ex : Your home is worth 50. and you paid 20. your equity would be 30. Using the same scenario, negative equity is when the amount you owe on your home is MORE than your home is worth. Ex: you owe 20. your home now is worth 5. you have 15 in negative equity. That means your chances of refinancing your home are slim because you owe more than your home is worth.

In the late 90's and earlier part of 2000, there was a housing boom and with it came creative financing- interest only loans, first and seconds at the same time, and arms, etc. These loans were created so people could own homes and afford them. The loans had low rates, but the fine print stated in 3 -5 years the payments would be increased significantly, or higher financial demands would be made. That's what you see happening now. The home owners in this situation are now seeing a ridiculous mortgage increase from 800 to 1800, 1000 to 3000., and so on. Some people have been laid off, the cost of living has gone up etc. "Walking away" actually means just that- walking away from negative equity. Any one who does this will have a negative effect on their credit because you still owe the money. In most cases these people become renters. If you never plan to buy a home again or if you plan to rent for many years, your credit won't matter, but if you do then this will impact you greatly.
Believe it or not, most of the people "walking away" haven't even spoke with a financial agency. It's a shame, because there is help out there.
Again, I hope that helps.

Walking away means that you allow the lender to foreclose on your home and YES it does have consequences! It's not easy, it's stressful and To have your home foreclosed on is the worst thing that can happen to your credit. It is a better idea to try and sell the property and negotiate a 'short sale' with your lender. Although there could be some tax implications there -- you should speak with an accountant about that.

FYI-I am a Peninsula Realtor.

Hi B.,

Some homeowners are walking away from properties that have declined significantly in value, especially if they have a low quality loan that is straining their ability to make payments. As a local mortgage consultant, I would advise that a homeowner considering foreclosure to first look at all the other options. If refinancing into a better loan is available, that could be ideal. Or sell the property and scale back to more affordable payments. Or add a family member to the loan. Or contact the lender's "workout" department to find out if they will consider negotiating the terms for something more manageable. Yes a foreclosure will effect the person's credit report for about 5-10 years and make a mortgage much harder to get. Future lending guidelines may change and tighten so it's best to avoid foreclosure unless there is no alternative. The key is to take action quickly to figure out what the options are rather than waiting. G. Work, Adamarc Financial, Menlo Park, CA ###-###-####

"walking away" pretty much means the people in the house stop making the payments and move out. it may be physically easy for them to do this, but they are breaking a contract they made with the lendor to pay back the money they borrowed. the money to buy the house came from somewhere. it didn't just appear. So they borrow money and essentially break the contract by not paying it back. while that is not breaking a law, it will hurt their credit. a foreclosure does go on their record. it can affect their ability to get loans in the future, their ability to get decent interest rates on car loans, future home loans, credit card rates... it's not a good thing. it's not just a simple thing... it will affect all these people.

getting a home loan is a huge thing and not paying the money back that is owed... that's a big thing too. these people are hurting themselves by just walking away and are crazy if they think it's not a big deal.

Having your home's value go down and be worth less than what you owe is not a good reason to "walk away" either. it just means you had bad timing when you bought your house and you still owe the money to the lendor. people just need to keep making the payment and wait for the market to turn around. we know two people who are in this position - but they are plugging along making the payments waiting for the market to get better. luckily they are not in a desperate situation to move. sadly, a lot of people are in a position where they need to move...

Walking away does effect your credit - you basically just leave the house and let the bank take it because you cannot make the payments and you owe more than you could sell it for... Many people are finding they owe thousands more than the house is worth so to try and stay and sell it would in the end not even help them break even, so they just leave - - - the foreclosure will stay on their credit report for many years like a bankruptcy.

No it is not easy. You will not get anything and your cridit will be gone. You will not be able to get credit or even rent a house. I hope you are not in this position.