How to Get Out??

[kingfisher]

My husband and I have to move to another city in Michigan for him to start his job. We have been doing a ride-through on the house [which is way underwater] that was included in our CH7 in 2008. We are current on the payments. My question is:

What's the best way to leave this house?

Can we call the lender and offer them a deed in lieu? Or do we have to be behind on payments to do that?

Should we just walk away? Should we tell them we're leaving?

Should we stop paying and just put it on the market?

ALSO--should we keep paying taxes or insurance to avoid being liable for taxes or damage?

Many thanks for your help!

KF

[HHM]

First, try Deed in Lieu. Since the debt was included in BK, the bank may be more willing (however, if there is a 2nd mortage, forget it).
If bank won't do DIL, then simply walk away. (your chapter 7 will protect you from any financial consequence of defaulting on the mortgage). Trying to sell will be a big headache with no benefit to you.

It's an open question on the insurance and prop. taxes. The most conservative, least hassle approach is to keep paying. The prop taxes are post BK liabilities. But in most states, the foreclosing lender must ultimately satisfy the unpaid taxes. But in the mean time, the county will be trying to contact you. Insurance: the issue is whether post BK forced placed insurance (the bank will put insurance on the house if you do not maintain insurance) is a new debt not subject to bK. Again, least hassle way, keep paying.

[kingfisher]

The taxes and insurance are included in the payment. I can call my insurance company to remove the insurance payment, I think, and keep paying them directly, but what about the taxes? The escrow just paid out the Winter taxes. Should I just start a side account?

Thank you,

KF

[JoePlumber]

Stop making payments ASAP and live there until you leave for your next state, its already been discharged and since your not staying you have already been cleared of all debt. Save your money and keep it for your next rental.

Enjoy the free rent on your home until you move and save that cash.

Good Luck to you on new beginnings.

[debee]

Don't throw your money away.

If the taxes go unpaid, the tax assessor will put a lien on the property. It's the most cost-effective way for the county to get their money back. They'll get paid first when the property sells at the foreclosure auction.

When the insurance expires, the lender will get some crazy expensive policy from one of their sister companies, pay themselves an outrageous commission on the transaction, and then stick the investors with the the bill for it. It's one of the expected costs of foreclosure. There was a lot of press on this topic in the Autumn of '10. Google to see.

If you can maintain a policy to protect yourself against any slip/fall type scenarios, you'd be covered.

[LSUTiger32]

Yeah, I would be piling up cash like crazy from now until you move. The mortgage debt was discharged and I defintely would not worry about the property taxes. The county can take that up with the bank when they foreclose. I would consider continuing to make the payments on the insurance if you can and they will let you. It's just the right thing to do incase something happens in the next couple of months (not sure when you have to leave) while you live there rent free. Plus, as mentioned.....it keeps you safe from a liability standpoint.

Remember though, they will foreclose on this house and that means that the three year clock to buy another home will not start until the act of foreclosure is recorded.

[Snax]

I just checked with Citibank this morning regarding my tax and insurance payments. The woman I spoke with was as non-committal as could be about them, only stating that if we continue to make our regular payment, they should be applied as per the original agreement.

I've been exploring the option of a quitclaim deed to a revokable living trust as a means to avoid the foreclosure hit on credit. I've not seen or heard that it would not work, but I've not seen evidence that it would. Any thoughts?

[downsized]

A foreclosure on credit shouldn't be an issue since the house was IIB. The one thing that was brought to my attention in another thread was not to assume the foreclosure process will work the same for you as it does for a homeowner who has not BK'd their home. Having BK'd it might give the lender the ability to expedite your eviction, so don't stop paying thinking you'll have a lot of time to save until you do some homework on that. One thing you didn't mention which I think would help determine the best course of action is what your plans are for your next home. Are you going to be renting or buying? How you deal with the home your in now could be a deciding factor on whether or not a lender will do business with you.

Good luck! We're right behind you in leaving a *pay and stay* home in Michigan. It's hard to know what the right way to leave is.

[LadyInTheRed]

I've been exploring the option of a quitclaim deed to a revokable living trust as a means to avoid the foreclosure hit on credit. I've not seen or heard that it would not work, but I've not seen evidence that it would. Any thoughts?

That won't work. A revocable living trust doesn't provide protection from your creditors. It provides an easy way for a successor trustee to step in and handle your affairs if you become incapacitated during your life and avoids probate at your death.

[Snax]

The sense I am getting is that post BK/IIB for the mortgage, as far as credit reports are concerned, the issue is closed unless a pay to stay agreement includes authority to continue reporting payments. Allowing foreclosure or a deed in-lieu however does not necessarily create a credit report entry, but it is something future lenders can and will likely ask about as part of a loan application. So I guess my question really boils down to whether such a disclosure is considered necessary if the foreclosed property was held in the trust vs. one's name directly? I.e., can a person legally profess to not have a foreclosure against them if it was against a legal entity they control?

[LadyInTheRed]

can a person legally profess to not have a foreclosure against them if it was against a legal entity they control?

No. A revocable trust is not a separate legal entity from yourself while you are living because you have full control over the assets through your right to revoke the trust at any time. A foreclosure against your revocable trust would be the same as a foreclosure against you. A revocable trust does not even have a separate tax identification number and would use your social security number whenever a Tax ID is needed.

Even if you could legally say you are not the owner of the property when it was foreclosed on, I'm not sure that would make any difference since you were the borrower under the mortgage.

[debee]

Exactly. Quit claim will transfer your ownership interest to another party, but it does nothing about the deed of trust/mortgage, and when the lender goes to foreclose they will name (public record) all the borrowers on the original deed of trust/mortgage. Sale that satisfies the note, paying off the note, short sale, deed-in-lieu are the only options.

[upward]

We are in a similar situation here in California. We were discharged 2/2008 , have been paying up until a few months ago when we found out our loan was going up almost 700.00 a month. We have a second that we stopped paying on over a year ago. They have never contacted us. We owe 343K on first, 75K on second. House is worth maybe 250K. We have decided to leave it. We have found a home in our current neighborhood, we have lived here 16 years. We can move in Aug. 1st. We are thinking about all of the same questions that you bring up here. Should we try to short sale? We currently put in paperwork for loan mod, just to stall the process. I would really like to just do a DIL and be done with it! We have also thought about quit claiming me off the deed back to the bank, thinking foreclosure would then just go on hubby's credit so we could get credit in my name. I have also heard conflicting information about whether or not we will get hit with foreclosure judgement on credit since mortgage was IIB. How does a DIL work if you have a second? Regarding insurance I was told to get a renter's policy, since that is basically what we are doing at this point.
Thanks for all of the your thoughts and updates on this topic!

[debee]

We have also thought about quit claiming me off the deed back to the bank, thinking foreclosure would then just go on hubby's credit so we could get credit in my name. I have also heard conflicting information about whether or not we will get hit with foreclosure judgement on credit since mortgage was IIB.

There's a difference between a deed and a "deed of trust". You can quit claim yourself off a deed (the thing that is recorded at your county office and reflects property ownership), but you can't quit claim yourself off the "deed of trust". When the bank forecloses, they will name whoever is on the deed of trust.

There are some recent threads on foreclosure after bk. People are reporting that their foreclosures post-bk don't appear on their credit reports.

[jmanford]

upward, were both of your mortgages discharged?