Credit repair

750pts today. 450 tomorrow. Facing foreclosure/short sale

Post reply Start a topic

Author

Message

Options

	Print this topic
	Invite a friend
	Email this topic

Bookmark online

	Add to del.icio.us
	Add to YahooMyWeb

Oakland, CA

Joined: 07 May 2008
OaklandCA's page
Posts: 4

351 Magic Points

Subject: 750pts today. 450 tomorrow. Facing foreclosure/short sale

Wed May 07, 2008 9:40 pm

This is the worst case of poor judgement I have ever experienced. I am in a world of hurt, very concerned, and need advice. This is my first post. And I apologize - I type a lot.

Background:
My wife and I have always been very careful about credit. She is in her late 20s and I am 31 and our credit is at or around 750.

We have a couple of homes in our name in Illinois that we manage as rentals and an owner occupied in Oakland, CA. The price of homes here is shocking and makes monthly payments tolerable at best. It's not easy by any means. But we can make the payments without loosing sleep.

The problem:
We were introduced to a realtor who helped in facilitating the close on our home in Oakland. He and his wife became friends of ours after the deal. He was also an real estate investor (though not entirely successful at it). He lived a mile from us in Oakland, managed several local rental homes, two in Ohio, and two in Oregon.

He and his wife had a baby, became scared of gun shots that occurred near their home, and decided to relocate to Pleasanton, CA.

His credit was suffering slightly for one reason or another. He told us that it was because of his debt to income ratio and that lenders would not allow the purchase of another home.

He found a home in Pleasanton that was "too good to pass up". It allegedly had $100K in built in equity, best home on the block, and lots of potential. It was unlisted and the timing of the deal was crucial. His pitch was that we if he could purchase the home in the short term using our credit (put the home in our name) that he would be able to remedy his credit crisis and deed the home into his name within six months....

[OK, who can see where this is going]

While the market was still showing signs of life, we were able to secure an interest only loan for the entire $699K selling price.

Over a year has passed, we still own the home, and his credit was not improved. His source of income (selling homes, writing loans) trickled to a stop with the collapse of the market and lack of lending availability. He has become depressed and has not put any effort into his career and focuses all attention on coaching volleyball.

We are responsible for making the over $4K/mo payment. We rely on his money to do so. He has been 2-6w late giving us payment for almost a year. Things were getting scary. We were starting to feel as though the positive things he was telling us were not true.

And the atom bomb whistles overhead:
He has not paid us in over one month. We just got word yesterday that he dumped ALL of his personally owned properties into foreclosure. His credit basically does not exist at this point. He likely cannot afford this house either, and will never be able to purchase it.

If he decides to not pay anymore, he will put us into financial ruin.

If there is no money to pay for this home, which is the worst of the two evils - Foreclosure, or Short Sale?

The home is worth between $580K - $650K.
Our concern is the future impact this will have on our credit. Our quality of live depends on good credit when living in with the cost of living we do. We are facing a the maturing of an arm for our home in a few years and are concerned with what our payments will be at that time.

Is there anything we can do?

What are the realities of this situation regarding our credit?

What about the risks associated with a Short Sale? Will we be audited? Could the bank or IRS claim the rest of our property as collateral?

We are very concerned and a bit confused as this is a situation we have tried to stay FAR away from. I cannot believe this his happening. My wife (a Sr. Financial Analyst) is in tears daily over this.

Thank you for taking the time to read all of this.

Any help is greatly appreciated.

Justin

Justin

Joined: 17 Jul 2006
Justin's page
Posts: 149

4739 Magic Points

Fri May 09, 2008 10:41 am

Hi Oakland CA

My question is whether you would like to keep the house or not. If you want to keep the house, then you can give this house on rent. You can then pay the debt by this rent amount. Now if you don't want to keep this house, then you can either go for a foreclosure or a short sale. Short sale is a much better option than foreclosure and in fact short sale does not affect your credit score so badly as foreclosure does. So short sale is no doubt a better option. The biggest problem with short sale is that, it is difficult to make your lender agree to short sale. Short sale should be done the moment you realize that you will not be able to catch up with your payments. The longer you wait and increase your arrears, the more likely your lender will not agree to short sale.
_________________
Best Wishes
Justin

sdchargers_63

Joined: 13 Aug 2007
sdchargers_63's page
Posts: 661

755 Magic Points

Subject: credit

Sat May 10, 2008 12:55 am

Hi..OAKLANDCA. I'm originally from San Diego, CA. I live in PA now. My family STILL lives in SD. I've heard 'horror' stories, about houses, etc. Gosh...it's crazy. I'm sorry I don't have much to add about your 'issue', but, I just wanted to say hello. AND......I'm sure, with the help of many knowlegeable people, on this forum, they can 'point you in the right direction.' JUSTIN.......what is the difference between Forclosure and Shortsale? I never heard of Shortsale.

Justin

Justin

Joined: 17 Jul 2006
Justin's page
Posts: 149

4739 Magic Points

Sat May 10, 2008 5:19 am

Hi sdchargers_63

In foreclosure, the lender repossesses the property from the owner due to non payment of mortgage obligations. This occurs when the owner has failed to comply with the agreement between him and the lender. In short sale both the owner and the lender work together to sell the property before it is foreclosed upon. A short sale occurs when the outstanding loans become greater than the price of the property. Here, the owners are still able to pay off their loan by settling with lender.
_________________
Best Wishes
Justin

Laura

Joined: 21 Jun 2007
Laura's page
Posts: 1409

34090 Magic Points

Sat May 10, 2008 9:20 am

Hi Oakland, CA

I think that if you decide to keep the property, you can speak to your creditor for an alternative repayment plan which may lower your burden.
_________________
Regards,
Laura.

CMBV22

CMBV22

Joined: 08 May 2008
CMBV22's page
Posts: 271

1751 Magic Points

Sun May 11, 2008 6:34 am

can you take that couple to court and get some of the $$ they owe you or a lein on their other properties?

sdchargers_63

Joined: 13 Aug 2007
sdchargers_63's page
Posts: 661

755 Magic Points

Subject: credit

Mon May 12, 2008 3:00 am

So a Short sale would be better than Foreclosure? This makes sense. If this goes on your Credit Report ( the Shortsale, i mean..) it puts LESS of an 'impact' on your CR? Right? The 'less of the 2 evils' thing?

Justin

Justin

Joined: 17 Jul 2006
Justin's page
Posts: 149

4739 Magic Points

Mon May 12, 2008 4:06 am

Hi CMBV22

You are correct to some extent that the couple can be taken to the court. But what if they have no property which can be taken away for lien? Here I think that Laura is correct in the sense that some alternative repayment plan may be made with the creditor if Oakland, CA wants to keep the property.
_________________
Best Wishes
Justin

Guest

Mon May 12, 2008 4:45 pm

Thank you for the responses.

I really don't want either a foreclosure or a short sale if at all possible. I've been such a good creditor since I was 18 for the sole purpose of getting my credit as high as I can. Now all that will be ruined.

I can't put the house up for rent as the rental value is around $2500/mo and the mortgage commitment is $4000/mo plus almost $1000/mo in property taxes. We cannot afford to pay the difference.

There is little use taking the couple to court as they have no liquid assets to their name. All of their other homes are in foreclosure and an ex-wife has taken all remaining cash. (all their other homes? Why the heck didn't they just live in one of those? Good question)

Laura,

What sort of alternative repayment plan would be a likely possibility? The interest rate is already competitive with today's available rates.

Thanks to all for the responses/concern.

Few more questions...Who can accurately describe the credit impact differences between a foreclosure and a short sale. Depending on who I talk to, some say the impact is less and some say the impact is equal.
How long does each stay on your credit repot?
What sort of drop in points can one expect from the two?
Does foreclosure from two or more homes have a compounded impact or is it the same as one home (just out of curiosity)?

Oakland, CA

Joined: 07 May 2008
OaklandCA's page
Posts: 4

351 Magic Points

Mon May 12, 2008 4:47 pm

kevinkev
Guest

Mon May 12, 2008 7:44 pm

I'd put the home on the market ASAP, and make up the difference with savingsa (or other low interest debt) as a "life lesson earned".

Can you do that?

george

george

Joined: 06 Jul 2006
george's page
Posts: 75

2859 Magic Points

Tue May 13, 2008 11:56 am

Hi Oakland, CA

In foreclosure, not only will you lose your house, but also the lender can put judgment against you for the arrears and the cost incurred in the foreclosure action and your credit report will be in a terminal condition for many years. In short sale you sell your house for less than what you owe your lender. The main problem with short sale is what Justin mentioned above is the difficulty to make your lender agree to short sale. The impact of foreclosure is much more than short sale because the black mark of short sale can be corrected more quickly that the that of foreclosure. Foreclosure remains on your credit report for seven years from the date it has entered into public records. Short sale on the other hand can be overcomed more quickly if you try to retain one or two credit cards and keep them current. Foreclosure can bring down your score by 240 - 260 points while short sale brings it down to about 200 points.
_________________
George Miranda

Money does not buy happiness. Happiness is found in being content with who you are and what you have.


Page 1 of 1

*Email:
*Password:
*Display Name:

	* denotes required field

*Email:
*Password:

	Forgot password?

*E-mail: