Attorney recommend I stop making mortgage payments - will this negatively affect my student loans?
- and other loans I have that I’ve never been late on? The house has been unoccupied for a year and I cannot afford payments and need to get a short sale approved as the current price is too high for the market. She said the 99% of approved short sales need to be pre-foreclosure.
It has never been refinanced (purchase money) and is an 80/20 loan with 2 separate lenders.
You have not provided enough information regarding the property to give a good answer. I can only generalize a few things.
If this is your only home, a short sale can only be done if the lender approves it and agrees to permit you to do a short sale–thus, they certainly will not agree to a short sale if they intend to seek a deficiency from you. This is a complex area, but generally, a lender cannot seek a deficiency judgment against a borrower if the loan was a "purchase money" loan and secured by a residence. Please note, if the loan was originally made at the time of purchase but was later refinanced, it LOSES its purchase money character, and also, if there is any misrepresentation in the loan documents signed by the borrower (i.e., income was inflated, borrower said he was going to occupy home but did not intend to, etc.), then the lender may seek a deficiency.
Thus the reason for your attorney to tell you to stop making the mortgage payments, it’s a quicker way but could cost you more in the end due to the following area of possible threat. Even if the lender cannot get a deficiency judgment because your loan is purchase-money or because it elects the speedier and cheaper route of foreclosing by trustee sale, it may be able to sue you for something unconnected with the loan obligation per se, such as falsifying your income on a credit application or for trashing the property and thus unfairly reducing the collateral value.
As to your other debts, as long as you pay them as agreed, they should not be affected but your score will go down due to the forclosure on the house.
Hope this answers your question
LEGAL DISCLAIMER: The advice contained herein is for informational purposes only. It is not to be construed as Legal Counsel nor Legal Advice.
March 13th, 2010 at 9:37 am
It sure will!
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March 13th, 2010 at 9:56 am
since your attorney is giving out advice why don’t you ask her?
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March 13th, 2010 at 10:21 am
Yes of course it will. Late payments are late payments. She is essentially saying your house needs to go borderline foreclosure before you can short sell it. The only way to do that is to suspend payments. I understand the logic but it’s still an unsavory tactic as it will destroy your credit. There has to be another option.
References :
March 13th, 2010 at 10:43 am
You have not provided enough information regarding the property to give a good answer. I can only generalize a few things.
If this is your only home, a short sale can only be done if the lender approves it and agrees to permit you to do a short sale–thus, they certainly will not agree to a short sale if they intend to seek a deficiency from you. This is a complex area, but generally, a lender cannot seek a deficiency judgment against a borrower if the loan was a "purchase money" loan and secured by a residence. Please note, if the loan was originally made at the time of purchase but was later refinanced, it LOSES its purchase money character, and also, if there is any misrepresentation in the loan documents signed by the borrower (i.e., income was inflated, borrower said he was going to occupy home but did not intend to, etc.), then the lender may seek a deficiency.
Thus the reason for your attorney to tell you to stop making the mortgage payments, it’s a quicker way but could cost you more in the end due to the following area of possible threat. Even if the lender cannot get a deficiency judgment because your loan is purchase-money or because it elects the speedier and cheaper route of foreclosing by trustee sale, it may be able to sue you for something unconnected with the loan obligation per se, such as falsifying your income on a credit application or for trashing the property and thus unfairly reducing the collateral value.
As to your other debts, as long as you pay them as agreed, they should not be affected but your score will go down due to the forclosure on the house.
Hope this answers your question
LEGAL DISCLAIMER: The advice contained herein is for informational purposes only. It is not to be construed as Legal Counsel nor Legal Advice.
References :
http://www.lawguru.com/cgi/bbs/mesg.cgi?l=all&c=17
March 13th, 2010 at 10:50 am
Did she tell you that only about 15% of attempted short sales ever succeed? The rest wind up as foreclosures.
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July 18th, 2010 at 9:43 pm
Mortgage refinancing is a step that all interested people need to take seriously, because once little mistake could bring very big and bad consequences.
March 11th, 2011 at 5:34 am
Definitely agree with exactly what you wrote, perhaps others can learn from this. It was a pleasure visiting your site and I will add http://www.stopping-home-foreclosure.com to my favorites right now.