Short Sale after Ch 7

[utahguy]

Here is my situation. I filed a Ch7 (discharged in October 2009). I have two homes, which I did NOT reaffirm. Both have had loan modifications on the first mortgages since the BK. Both have second mortgages which I have not paid on for years, but the values are so upside down they are not looking to foreclose, yet. One is my primary home, one is a rental. The rental is becoming a problem.

The rental homes payment will adjust up each year for 5 years, and then remain fixed. My tenants are moving out, and I really don't see a point of keeping a rental that is barely cashflowing as it is, is upside down by about $50,000, and has a payment that will be going up soon.

Here is the first question. If I stop making the payments, will the bank file a Notice of Default against me? My credit is mostly recovered since the BK and I REALLY don't want a notice of default getting filed as they are treated the same as a foreclosure (can't buy real estate for 2 years with 20% down, for 3 years with 5% down).

Second question. I am a real estate agent, and have a lot of experience doing short sales. I am wondering if I could manage my own short sale, and recieve a commission since I am not the "borrower" anymore. Banks all have you sign an affidavit saying that the borrower will not profit from the sale, since I am not the borrower will they let me profit? I may need to call and ask the bank, but I am hoping someone has some real life experience on this second issue. They may say that it is not an arm's length if I do it myself, I don't know.

Thanks.

[newbie2]

Yes, if you stop making payments the lender can foreclose. As far as going through all of the hoops for a short sale, you should really talk to a mortgage lender that you trust. I don't think there is much difference in the hit on your credit report for a short sale vs a foreclosure. (At least not from what I am hearing in my state.) Also, it doesn't matter that you aren't the "borrower" anymore, you are still the owner of the home, therefore you can't collect a dime at closing from a short sale.

[utahguy]

Thanks for the reply.

There won't be any hit to my credit because I am not personally liable. I am wondering if they will file a notice of default or not...

[newbie2]

They have to follow the foreclosure laws of your state. If a notice of default is required, then they have to file it.

[HHM]

The issue is not your credit score per se...if you go get another mortgage, they ask (find out) what was the disposition of your prior property, if it was short sold or foreclosed, you will be subject to the waiting periods from the date the property was short sold or foreclosed.

The other issue regarding reporting a foreclosure...If you stop making payments, the bank will foreclose, that is how the bank regains title and that is what will happen (I suppose you could offer a deed in lieu but banks rarely accept). Whether the foreclosure goes on your credit report is a gray area. Since the note was discharged, some argue no. Others argue that the foreclosure is a true public record and can be reported as such.

[utahguy]

Right. I guess what I should have asked is if they will put my name on the notice of default. I guess that they would because I am the property owner...

[utahguy]

Whether the foreclosure goes on your credit report is a gray area. Since the note was discharged, some argue no. Others argue that the foreclosure is a true public record and can be reported as such.

Right. The actual foreclosure wouldn't, but lenders do look for NOD's in public records. So I think the answer to my first question would be yes a notice of default will be filed (if I went late). Yes it would have my name on it, because I am the owner, even though I am not credit liable.