How would you handle this deal?

Foreclosures, Short Sales, Tax Foreclosures
1

Have HO in bankruptcy with a house worth $230k after $10k of repairs. The 1st is owed $136k and there is a HELOC of $60k. The HO hasn’t made any payments since 11/07 and the BK judge is starting foreclosure proceedings.
I’m asking the 1st to allow me to bring the loan current, prepay 3 months of mortgage payments in exchange for being able to assume the loan for a period of time. I’m asking the HELOC mortgage company to forgive 50% of their balance and I will pay off the remainder.
I know there is perceived equity in this property, but after taking in consideration another 4-5 months of no mortgage payments, foreclosure costs, etc., what are the odds of the HELOC company working with me?
Thanks in advance!
TB

2

Not much.

At best they would transfer the Heloc (or remainder of it) to an unsecured loan which the HO would still owe.

With 24K in equity the first will probably just tell the HO to sell and the proceeds would go to pay off the BK.

The BK on its own makes it all extremely complicated.

This is not legal or financial advice, seek the services of a professional. If your erection lasts for more than four hours, seek immediate medical assistance

3

TB,

A few questions for you.

  1. Are the 1st and the 2nd (HELOC) with different lenders?
  2. Who is foreclosing (1st, 2nd, both)?
  3. Are you talking about CH7 BK?
  4. Did the HO use the entire $60K in the HELOC?

Here’s my 2 cents and how I’ve worked a similar scenario…

I made a deal with the homeowner (I did NOT assume the loan as you mentioned doing…why ask the lender to let you assume it?) and brought the 1st current. Did nothing with the 2nd. I contacted the 2nd approx 3 months later and offered a token amount (ie;$2K as payment in full on a $30K 2nd). They countered and we agreed on $5K. I put the pieces together and ended up with approx $50K in equity as a result.

This worked because the homeowner was not liable for the debt via the CH7 so the 2nd would have had to step up and foreclose to protect their position. Not likely at the time on a $30K HELOC)

Think about it and see if something similar might work for you. Your mileage may vary. :biggrin

~Dan

4

Dan,
Thanks for your comments! Your plan may work for me. I will answer your questions and I have several for you!

A few questions for you.

  1. Are the 1st and the 2nd (HELOC) with different lenders?
    Yes. 1st is with ASC and HELOC is with Wachovia

  2. Who is foreclosing (1st, 2nd, both)?
    BK judge is removing house from BK protection, so foreclosure will happen. Not sure who will actually foreclose

  3. Are you talking about CH7 BK?
    Yes

  4. Did the HO use the entire $60K in the HELOC?
    Yes

  5. How did you take ownership of the house? Deed of Trust, etc

  6. Do you think the HELOC will attempt to foreclose on $60,000 or will they settle for much less

  7. Any other ideas?
    Thanks,
    TB

5

TB,

  1. Warranty Deed (btw, a Deed of Trust doesn’t transfer ownership)
  2. Possibly so, you won’t know until you make contact and ask them.
  3. Not trying to speak in code here but I’d literally lay out all of the pieces in front of you and rearrange them to your advantage to cover different possible scenarios. You may be surprised what you find.

There’s no slam dunk here and the lender could very well say no. Is it worth at least trying? That’s your call.

Happy Hunting,
Dan

6

Dan,
I checked with HO and she is in Chapter 13 instead of 7, so I guess this makes the 2nd not very willing to deal!
Thanks,
TB

7

Yeah, that changes everything and the motivation level to deal for a restructuring of debt BK is typically way down for the lender.

It may still be worth a phone call to test their motivation…stranger things have happened.

The HO could still possibly roll the CH13 into a CH7, no? :biggrin

Best,
Dan

8

Will try!
Thanks,
TB