Profile picture for jct2010

What happens to me if I walk away from my home & it goes into forclosure??

  • August 09 2010 - East La Mirada
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Answers (6)

It depends on your loan, if it was purchase money and you didnt refinance then when you walk away, they cant come after you for the difference. But if you refinanced in between,  they may come after you for the "deficiency" Each lender is different.  Yes, there is a cash for keys type program, but again it depends on your lender.  Some give money and some don't.  You will probably get a notice posted on your door for you to move out within a a certain time frame. After this time, (usually 24 hours to 3 days), the local sheriff will escort you out and change the locks.  Now if your home is purchased at the trustee sale auction by a private investor, they will probably work with you on cash for keys cause they want to start to fix up the place and will resell the home on the open market for a profit. 

What you can do is ask the new owner if they are interested in renting the home back to you. Depending on your job and your other credit, they may do it.  

Good Luck with everything. 
  • August 22 2010
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Before walking away (which sadly, many people are being forced to do) have you contacted your lender to discuss a Deed in Lieu? 

DIL's are not that difficult to negotiate however most lenders have specific criteria to meet before agreeing 

I've handled quite a few DIL's and if it's all possible, you should explore this option BEFORE simply walking away to suffer the consequences later 

DIL's, if handled / negotiated correctly can be a "win / win" for both lender and homeowner ..

You may also want to talk to them about a "cash for keys" deal ..

Good luck 

Ed  
  • August 17 2010
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Profile picture for VINTAGEHOME
There's no such thing as just walking away.  You must make a choice between foreclosure & bankruptcy, in my opinion.

Most lenders will not assist with loan modifications (that would help YOU -- only ones that help them) or approve a short sale until you are seriously delinquent in your house payments and by then, all of your credit cards & credit scores have already tanked.  Your phone's ringing 24/7 from harassing bill collectors, and there's no end in sight to this problem.

If they do approve a short sale in a timely manner, you might still get stuck paying for the difference between what the house loan was and what it sold for. And, of course, you have to keep the house clean and make it available for the realtors to come in.   And then there's the taxes based upon that short sale deficiency..... could be counted as income you received that year.

The next avenue, unfortunately, has to be foreclosure.  If you go through with foreclosure, the bank takes the house, your credit sucks, your credit interest rates all jump sky-high, you can't use your credit cards anymore, but you still have to pay for them (at a crazy interest rate!). 

If you file bankruptcy, the bank still forecloses on your house (but you're "insolvent" so you don't have to worry about taxes or deficiencies), your credit sucks, but in the bankruptcy you can also get rid of the high rate credit cards that you can no longer use or afford. 

Either way, you lose the house.  If you're going to lose the house anyway, it's better to have a clean slate and eliminate all of your predatory credit cards & loans & debt at the same time in my opinion.  Then you can start fresh rebuilding your life and your credit over time.
 Good luck!
  • August 17 2010
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Isn't that the question of the day-month-year?  Well, credit damage, possible deficiency judgement, and more which could lead to bankruptcy... Best to get advice from a real estate attorney regarding this -- if it's owner occupied, you have some protections particularly if you attempt a short sale -- also get a modification -- if you have income and want to keep it, you should apply  
  • August 11 2010
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Profile picture for wetdawgs
If you have the ability to pay, the foreclosure may prevent purchase of another house for a full seven years (from a federal ruling of late June 2010).
  
If you don't have the ability to pay, a short sale is far better on your record than foreclosure.
  • August 10 2010
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Your credit will be significantly affected for a period of time until you are able to build it up again.  If you have other accounts that you can keep open and continue paying on time, this will help drastically.

You will not be eligible for an FHA mortgage until three years from the date the foreclosure is recorded.  Conventional mortgage guidelines are a bit more strict requiring five years have passed in which you rebuild your credit.

You may consider contacting a foreclosure expert in your area to see if there are other alternatives with less of an impact such as negotiating a short sale or loan re-modification.

Renting will be your only alternative during this rebuilding stage and many property managers and land lords will want to run your credit prior to leasing to you.  Renting is not impossible, but can sometimes be challenging also.
  • August 10 2010
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