can we try to settle with bank?

[Drazil65]

Now that we are discharged and our house is on market, is there a way we could try to settle for a lesser amount of what is owed? Is this done with mortgages? We know the debt was discharged but we are trying to sell it and are wondering what the options are without doing a short sale deal.

If it is something that we could possibly try how does one go about making an offer to settle?

[daytona]

Are you trying to buy your own home? If so, it's possible but you'd have to come up with the cash to settle somehow. Otherwise your only options are probably only some sort of "short sale" or a Deed in lieu...

[Drazil65]

No, we are expecting an offer to come in soon on our house and with closing costs, taxes and what the payoff is we think the bottom line will be short. We are not going to the table with a check in hand for discharged debt, under these circumstances we were wondering if the bank would settle for less than the payoff amount. We thought about asking them to waive the late fees and interest they added in since January to payoff the principal amount. Is this crazy? Seems like the bank would be happy not to have to go through foreclosure right?

[keepmine]

Why worry about it? It's been discharged in your bk and you don't want it. Let the bank deal with it and you move on with your life.

[btbeme]

While it is possible in theory to get a loan modification that includes a principle reduction (your goal), there are rare indeed. Very recently, a handful of banks have announced plans to do just that, with BofA leading the charge. They are doing so in a limited number of cases. And, in very limited markets, BofA is offering to have the house surrendered with a deed-in-lieu and then rent it back to the (former) owners at below market rent averages for 3 years. These are new plans, so try your bank to see what they say.

It never hurts to ask, but if you have a short sale already going, it will derail that effort. The good news is that if the bank is willing to attempt a loan mod, that gives you more rent-free time in the house. If that effort fails, attempt a short sale and spend even more time in the house for free.

You cannot buy your own house back in a short sale, by the way.

[btbeme]

we were wondering if the bank would settle for less than the payoff amount. We thought about asking them to waive the late fees and interest they added in since January to payoff the principal amount. Is this crazy?

This is called a "short sale" and the bank will refuse the deal unless they have given you and your realtor explicit permission to do so. Even then, the bank makes the final choice as to accept the deal or not.

In a short sale, you get none of the proceeds, so fees and late charges are a non-issue. You can, however, get a federal subsidy called a HAFA settlement of up to $3000 upon completion of a short sale - ask your realtor.

[Drazil65]

Thanks for the replies. We put it on the market as a way to buy time to make sure the bank did not move too fast on the foreclosure and as it turns out we get an offer (in 7 days at that)! Did not think we would even have to think about an offer. The offer is enough to pay off the principal balance. So the bank gets the loan paid off if we take the offer and we get our name off the title without going through the foreclosure, seems nice and neat. Problem is that there is not enough money to add in the late fees and interest that has been added to the balance since January. We are not in a position to go to closing with a check to pay that stuff off and as it is discharged debt we do not want to at this point, so I guess we will not accept the offer and let the time run out and bank will foreclose like normal. That is what we thought, thanks!

[btbeme]

Before you reject the offer, contact the bank and tell them the situation. They might authorize a short sale and allow it to go through. If so, you have done yourself a favor by qualifying for the HAFA grant (make sure that is part of the short sale agreement with the bank).

[daytona]

Drazil65, you have to change your mentality.... YOU are no longer responsible for anything! The bank should worship the ground you walk on to actually bring them a potential buyer that is offering anything close to the principal balance. Don't worry about the late fees, etc...it is NOT your problem. If it's "short" who cares? The bank will have to make a business decision...I know it sounds epic and it might be....but again, they should thank you for "helping" them with a potential buyer. I just about guarntee the bank will accept this offer and they know they can't come after you for anything. BTW you will not have to go to the closing with anything...they take it or they foreclose, eventually. Cheers!