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How do you get forclosed on?

My sister can't pay her mortgage. Her plan is to call the bank and say she can't pay any longer. Then she's immediatly moving out, and walking away from the home. She has zero (actually negative) equity. She's only lived there 6 months. She's in the middle of a divorce and simply can't afford it another month. Does anyone have experience with walking away from a home?

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DaphneMae

Asked by DaphneMae at 2:50 PM on Jan. 10, 2010 in Money & Work

Level 3 (15 Credits)
Answers (8)
  • The bank can come after her for the money they lose on the house. Also if they do a quick sell, she can be taxed on the money the bank lost. (ie house is 100k and sells for 60k he income will have 40k of extra taxable income.)

    Now does the banks always do this, no, but they can
    dakotaNrye

    Answer by dakotaNrye at 2:54 PM on Jan. 10, 2010

  • Just because she walks away doesn't mean she isn't responsible for the loan. She needs to contact her bank and ask how she can voluntarily surrender the home. Whoever else is on the loan needs to be on board too. If not they will both be held responsible for it. If she is behind on payments or has been late many times they will be less likely to work with her. Many banks begin forclosure when the 3rd payment is missed.
    GrnEyedGrandma

    Answer by GrnEyedGrandma at 2:55 PM on Jan. 10, 2010

  • She is the only one on the loan. She has not missed a payment yet. "Voluntarily surrender" sounds like what she needs to do.
    DaphneMae

    Answer by DaphneMae at 5:10 PM on Jan. 10, 2010

  • If she isn't even late yet she def. is in a better position to talk to the bank. She needs to get it put up for sale immediately. If she notifies the bank before she misses any payments they may be much more willing to work with her. Some states and or banks allow voluntary surrender..some do not. Even in VS if the home is sold for less than the balance of the loan you sister will be responsible for the balance. I wish her luck
    GrnEyedGrandma

    Answer by GrnEyedGrandma at 5:22 PM on Jan. 10, 2010

  • she should stay and see if they will allow her to pay half the mortgage instead of moving out. banks now are allowing people to stay and pay MUCH less than what they are owed until the person CAN pay what they owe especially if they will lose money on the home. and she can probably do a deed in lieu, i did, all i had to do was prove income and sign some papers. they allowed me to walk away with no penalties.
    angevil53

    Answer by angevil53 at 5:35 PM on Jan. 10, 2010

  • It will take the bank about six months before they start to foreclose on the home. If she's strapped for cash, I would definitely live there until they foreclose on her.

    She should try to get a Deed in Lieu of a foreclosure with no recourse. Meaning that if the home sells for less than she owes the bank won't come after her for the difference. That is assuming that she doesn't have any money to pay the difference with. If she's got money, the bank will most likely come after her for the difference.
    Anonymous

    Answer by Anonymous at 6:15 PM on Jan. 10, 2010

  • DO NOT let her move out. Tell her to stay in it and just not pay the bills if she is going to let them foreclose anyway. The bank would rather her be in there so it doesn't get broken into. My friend is being foreclosed on and the bank said stay put. It might be up to a year so that way she can save up.
    admckenzie

    Answer by admckenzie at 8:38 PM on Jan. 10, 2010

  • She can always make interest only payments for a few months if she wants to keep the house.
    admckenzie

    Answer by admckenzie at 8:39 PM on Jan. 10, 2010

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