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Jenn09's avatar

I have some questions about foreclosure.

Asked by Jenn09 (1 points ) December 30th, 2009

I will leave my personal story out of this, but after exhausting all other avenues, my husband and I have decided to let our home go back to the bank.

My question is: how, in general, does the foreclosure process work?

We have not made a payment on our home since August ‘09 and are with Bank of America (Countrywide). Today our neighbor told us that someone claiming to be from BofA stopped by their house to do a ‘residence check’ to see if we in fact lived here. In my research I have not heard of this, or what stage in the process we must be in at this point for that to occur.

Anyway, any help would be much appreciated.

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9 Answers

Darwin's avatar

Have you talked to BofA? That is generally the best idea. That way they don’t come with the sheriff to evict you and all your stuff.

This site describes what happens:

“Few homeowners, though, know exactly what will happen if they just up and leave the home. What will the ultimate fate of the house be? Will the lender go after both spouses’ credit records if only one is on the mortgage? What about being sued or having wages garnished after the foreclosure is over? These are important questions homeowners need to ask themselves before giving up the fight and leaving the house.

If they decide to walk away from the house, the lender will immediately begin trying to collect their money, by making hourly phone calls and sending collection letters. After a few months with no response from the owners, they will hire local attorneys and sue for the foreclosure. Once the foreclosure judgment is awarded to the lender, the house will be sold at a scheduled county sheriff sale. And finally, after the house is sold, ownership will transfer to the high bidder at the auction and the eviction process will start in the courts. Within a few weeks to a couple of months, the county sheriff will be ordered to change the locks and remove any remaining people or property. The house will then be put up for sale by the bank, if they were the winner, or the new owners will move into the house.

Of course, if the homeowners have moved out prior to any of these events, this entire process will go ahead without their involvement or knowledge. The most dangerous part is the eviction, but the foreclosure victims will not be evicted if they have already moved into a new apartment or rental house and are no longer living in the original property anymore.

The bank could possible go after the spouse’s credit because the husband and wife are married and therefore count as one “economic unit,” so to speak. Whether the lender is able to do it or not depends on how much the bank knows about the spouse who is not on the loan. They need to have quite specific information in order to report negative information to the credit bureaus, or else anyone would be able to report unpaid debts about anyone else for any reason at all. Do they have a social security number? A birth date? Is there some document proving the marriage and that the spouse is responsible for the mortgage, even as a community property issue? If this information is not provided to the credit reporting agencies, it may be difficult for the lender to report the late payments and foreclosure.

The lender may be able to go after other assets and income after the foreclosure, if the state in which the property is located allows for deficiency judgments. Not all states allow this, so it is important that homeowners look up the applicable foreclosure laws. But banks almost never sue their former clients after foreclosure; they know that they could not make the mortgage payments to begin with, so there is little reason to assume that they can make payments on a judgment involving the mortgage. And it will cost the mortgage company more time and money to hire attorneys to sue the former owners again, when they have not collected a single cent from the original foreclosure lawsuit. In other words, it is just not worth their time.

Making the decision to give up on a house is never an easy one, and one that we do not ever recommend. There are always various methods that can be used to stop foreclosure, and homeowners should exhaust all of them before admitting defeat. But, not all circumstances allow homeowners to work vigorously on numerous options to save their homes. In these cases, knowing the potential consequences of simply leaving the home is vital for homeowners to make an informed decision and begin the process of starting over with no regrets or worries about the former home.”

Jenn09's avatar

Yes, we have spoken to B of A, quite a few times. At first they offered to refi with almost $10k in closing fees. The next time they said we would qualify for the MHA plan, but we would not be able to start it until we were behind on our payments. So we didn’t make a full payment, and called the next month and they said that since we were late that we may not qualify.

Every time we call it seems like the right hand has no idea what the left just told us. It has been one thing after another and then when we did finally decide on the MHA plan, we were told that because we have a rental home (which is also loaned through them) that that was counted as ‘income’ and only lowered our payment by about $100/mo. So that plan wasn’t really an option either. Our tenants have a year lease, and that will be the home we move back to once this mess is figured out..

JLeslie's avatar

Have you talked to the bank about short selling? Short selling is not near as bad on your credit as foreclosing.

Also, I think legally you are obligated for the taxes on the difference if you short sell, but maybe they have done something about those laws. Not sure if there are tax implications on foreclosure.

JLeslie's avatar

Ugh, I just read your last post. I cannot stand when it feels like the left does not know what the right is doing, and worse when there seems to be no empathy for your situation. I do not mean empathy like they should take pity on you, just that they understand your situation, can put themselves in your shoes, and try to work out a fair solution instead of treating you like just another number.

Jenn09's avatar

Darwin – Thank you very much for your information :)

JLeslie – Yes, as soon as I lost my job last Feb, we listed our home. The bank had said we could do a short sale, but since you have to have it listed “at market value” with no sale for 90 days before you can qualify for a short sale, it wasn’t an option. Because if we listed it at that, and got an offer, we would have to come up with about $15k in difference. We have talked about a deed in lieu.. but had heard it is the same as a foreclosure on your credit so…

Yes, I completely agree. We have had two home loans with them for quite some time, and both have/had perfect credit. I lost my job of 8 years when I went in to talk about my maternity leave (at 8 months pregnant).. they told me the position would be eliminated. So, we listed it immediately… and have gotten the runaround ever since.

Anyway. I know it is terrible thing to do, not only for us, but for the other homeowners in our area, but when it comes to my family vs. a bank that won’t work with us, my family wins.

JLeslie's avatar

@Jenn09 How awful. So now you have a new baby and have to deal with this crap Must be very stressful. Well, thank goodness you can move into your other home. I’m sure you have thought of this, but I’ll ask, can you move into the other home and rent the home in question and cover the mortgage? $15k upside down is not that much, unless you already put down a lot of money to buy it in the first place.

Do you want to work out a deal with the bank so you can stay in that home? Or, are you mentally more inclined to just walk away at this point?

Darwin's avatar

Any chance you can rent it out for enough to cover the payments and move somewhere cheap until you can become employed again?

Judi's avatar

Have you tried to list for a short sale? A short sale looks better on your credit report and it usually only takes 2 years to be able to buy again. A foreclosure hurts a lot more. Talk to a local real estate agent who is trained in short sales. It is much better than a straight out foreclosure.
It might also buy you some time, since B of A is VERY slow about it after you get an offer. They would rather have you living there, taking care of the property and sell it at a loss than have you abandon it and strip it of any valuable fixtures.
What state are you in? Are you sure you got the right info? here in California you don’t have to have it listed for 90 days before a short sale is approved. market value is what someone is willing to pay. If your offers are less than asking price then that IS market value!! B of A is eating the difference, that’s what a short sale is. They are doing it everywhere without the homeowners having to come out of pocket to close the deal. You need to talk to a more experienced Real Estate Agent who will negotiate with the bank for you.

Judi's avatar

@JLeslie just read other responses. Great minds think alike.

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