Trying for SS, or will forclose. 2nd in collections

Foreclosures, Short Sales, Tax Foreclosures
1

No house pmts since july 2010. Paid 225 for house, worth about 95k. Trying to short sale. On our 3rd buyer because bank won’t accept or decline offers (wells Fargo) and the buyer walks. Its another story why they wouldnt take an offer when we are so far behind.

Today, our 2nd mortgage went to collections/chargeoff status. How does that affect a Short sale or forclosure as far as the 2nd being wiped out/zeroed out/us not owing it?

We are in AZ - Anti-deficiency state (and we qualify… all loan money was for house purchase, no money taken out of house, lived there ourselves, house was only 225k, less than an acre)

I thought on a short sale the 1st and 2nd get wiped out together. If short sale, the 1st gives a little chunk to the 2nd and they both sign off. And we get a lawyer to check and see if they are really releasing us or “retaining their rights”

and I thought on a forclosure, the 2nd pretty much gets nothing. But both are wiped out due to anti deficiency

The fact that the 2nd is now in collections freaks me out. How does that change things? DOes it change anything?

THANKA

2

Hi,

You bought this property, live in it today? You have financial hardship which caused you to fail to make your first and second mortgage correct? This was never a rental?

In a short sale you have to prove to the lenders that you have financial hardship in that you lost your job, your wife lost her job, there was an injury to you or your spouse that caused you to lose work, lose job, lose income or there was an illness that caused you or your spouse to lose a job, lose income or lose work?

You should have submitted a short sale package with a financial statement, bank statements and a cover letter with proof of hardship?

Normally you submit this package to the first and second TD lenders, with a HUD1 set up showing the potential buyer, the purchase amount and how much goes to the first and how much to the second, generally you will have to show the second recieving (Being Offered) $2k, $3k, or $5k to prompt them to sign off? Escrow should be open and earnest money deposited to show serious buyer?

The second not being paid has prompted the lender to write it off (IE - Send it collection) which is a precurser to charging / writing it off! However this pretty much means your second TD lender is forcing the property into foreclosure as they will be unable to except an offer for the second TD having sent it to collections / charge off!

Unless you sent your second TD lender anything on paper (Your Hardship Package), your first TD lender has not talked to your second; because by law they can not talk to your second TD lender without your permission!

What this basically does is ends your short sale quest and prompts the property to foreclosure as the next time your first TD lender checks your credit, there going to see the in collections / charge off status on the second and know you can no longer do anything to get the second to approve a short sale, so you have run out of options!

                    GR
3

Thank you for your reply. makes sense

ok, so if it will go to forclosure, how does that affect the second now that it is in collections/chargeoff. Are they still wiped out? As in us not owing?

4

Hi,

If you are an Arizona Resident, bought and lived in this home as an owner occupied resident and have never rented the property then going to collections is the legal requirement prior to the lender charging off / writing off the loan!

If by chance some collector were to call because lets face it most of us have out of state lenders and therefore probable hire out of state collectors so when this happens just tell them Arizona is a anti deficiency state and they are not legally allowed to collect it!!!

If they have questions to call the Arizona state government and please do not call here again because your in violation of Arizona law!

I have a lot of Arizona property so I am well aware of the law here!

                                 GR
5

:shocked

Fast forward to today…I am in quite the situation and would REALLY appreciate help…

Since I last posted, I was fortunate enough to buy another house to move to (new house in my name only… deed on old house in husbands name only) We closed on the house a couple weeks ago and the loan has been funded/recorded. We have keys and are getting ready to move. Thats the good news.

The extremely stressful thing is that we are almost done with the old house one way or another and REALLY don’t like how things are going.

1st mortgage in forclosure, trustee sale date June 16. But 1st Mtg also has approved short sale for 95k with closing date of April 24. 2nd Mtg approved taking $2500 to release their lean, but is demanding they be paid $1700 from us BEFORE CLOSING. We’re not paying that and thought the deal was done. But then the buyer, their lender and their realtor are now all going to chip in and cover the $1700. Buyer really wants the house obviously. Appraisal got scheduled for today. I hope it comes in low.

We’re really worried about getting RELEASED, fully released from the 1st, 2nd, and collections. We don’t know what to look out for on closing docs to make sure we are released. Does collections need to sign off in addition to the 1st and 2nd? As it has been said the 2nd can’t release once it goes to collections. I am guessing that is what this $1700 is for (2nd paying collections to close the accout and give control of it back to the 2nd so they can close?)

We would now rather foreclose because the foreclosure laws seem to offer complete protection against being sued for a deficiency. Short sales are covered under anti deficiency laws too, BUT you really must read the contract with a short sale to make sure the lender is not “retaining their rights” (to sue you years down the road) If we were to miss something in the closing documents and lender is allowed to sue us down the road, they could get a 100k judgement plus fees. Then the only option (IF it were even an option on a judgement) would be bankruptcy for my husband. But by then our debt will be paid down, income will be up and we might not even qualify for bk. To be straddled with 100k debt on a house we no longer have would be the worst case scenario. Not to mention starting 10 years bad credit about the time we are recovering.

What type of attorney should we get to read through the closing docs to make sure we are RELEASED? Any referrals in Phx area?

OH, and by the way, the closing is scheduled for SUNDAY… when no lawyer will likely be available at any kind or reasonasble rate. Convenient.

What to do?

6

Hi,

Arizona is an anti deficiency state! Even if they thought they were retaining there rights they can not collect it under Arizona law, however if your 2nd TD was a credit line, or was cash out, that can still be collected by that lender.

Now the big question is how many 2nd TD lenders actually bother going back and filing a suit to gain a judgement to collect on or garnish wages on the 2nd TD is unknown!

But being in Arizona you have very little to worry about in regards to that home, but the thing that would bother me is what happens if this property is actually foreclosed on and they find out you bought another house in your name when Arizona is a community property state and a debt against your husband can be collected from you, and the law say’s your not supposed to be eligible to buy another home for 3 years after your foreclosure or two years after a short sale!

                             GR
7

THANK YOU for your response!.

The loan was 80/10/10 (80% first, 10% second, and 10% down) No money ever taken out. Primary residence entire time. No refinanace. No cash out, ever. I put about 20k INTO the house in renovations :frowning:

I know on foreclosure you are protected on the anti deficicncy, but I thought short sales were more of a grey area, and that on a short sale, they might be allowed to go after the deficiency if they worded the contract to “protect their rights” at least the one RE lawyer I consulted with said so.

I told my lender (very large bank…See, you’re making me nervous… I don’t want to name the bank) EXACTLY what was going on with the old house when I was looking for a loan. I told her everything. I left nothing out. They qualified me because I qualified on my own without my husband. Also, because I am not on the loan or the deed to husbands house. Because it is a comm prop state, when buying the new house, husband actually had to come in and sign a paper to disclaim all interest in the new house.

Is there actually a LAW that says (I) can’t buy a house for 3 years? or is it just fannie mae/freddie mac guidelines? or just simply what the banks are trying to stick to as a guideline…? I know they are putting a stop to that, but what does that really mean. Loans are still being granted. They knew the FULL situation. I was VERY up front about the situation. Many lenders did say no, but the large bank did approve me and give me a loan, I didn’t approve myself. Do you really think I should worry?

Even if they found out I got another house, what could they possibly do about it? I got a loan for the house and I have posession of the house. Loan is funded and recorded. Its a done deal.

8

Hi,

 Arizona is a anti deficiency state so you can not be collected from within the state of Arizona for the balance of your loans!

Because Arizona is a community property state even though you were not on the loan, you were responsible for the loan!

And if this were in a state where the lender could collect the deficiency they could file suit against you and your husband because you are married, and garnish you and your husbands wages!

Now the loan your husband had on the original in default home, were you on title for that property? It sounds like you were not, however there again since Arizona is a community property state and you were responsible by marriage for the first property and it is in foreclosure, or if your lucky will be a short sale, you probable fall under the premise that you should not yet own another home because you were married to your husband and living in the home that is in default!

Now did you have to sign any papers when you bought the original in default property? If so there is a signature of record within the file on that property!

There are guidelines for Federally mandated mortgage lenders who write loans against HUD, FHA, VA, Fannie Mae, Freddie Mac guidelines which prohibit them from writing the loan for x number of years to someone in default who either short sales or has there home foreclosed on!

The problem is not directly seen as it takes some time for your new loan to be sold / transfered to the Federal Government and for someone to review it, now was there anything in writing stuck in your loan file that actually stated your disclosure in writing? (I am married to a husband who has a property in a community property state in default and is facing foreclosure or best case situation a short sale.)

You see the mortgage person at “Very Large Bank & Trust - Member FDIC” is probable paid in all or in part on commission so she / he wrote the loan but if someone comes asking her / him about your loan, it’s “Oh No, they never said anything to me about the situation with another home being in default in Arizona” and if there is nothing in the file there is no proof you said anything!

Now what could they do, well I don’t know if there is specific law, however if the Federal Government catches the fact the loan was written and refuses to except it into the VA, FHA, HUD, Fannie Mae, Freddie Mac system, they will probable contact the FBI and because there is no disclosure record you could be investigated for Federal loan fraud! (Not disclosing your loan in default to the lender.)

The “Very Large Bank & Trust - Member FDIC” is going to say we did nothing wrong because she / they did not disclose it and if they had we would never have made the loan! Now I am sure your thinking, but my husband was sitting right there, well unfortunately your husband is not a compelling witness because your married it has no weight in the courts!

You are the first married person in a community property state that I have ever heard of doing this, so what the real answer is only time will tell!

It’s not that you can’t buy another home, you just can’t have it financed by the Federal Government!

                       GR