Me again - Bank walked from foreclosure...

[florida]

Hopefully you remember my case:
House is empty we left awhile ago. Did a bk7 in 2010.

Etrade is my first and walked away from foreclosure - they don't want the house back.
3rd Federal is my second - they obviously have done nothing - as so underwater.

So yesterday, called Etrade to see if any changes - nope.
We have considered renting out the home....but now are thinking we should move back in, here's why - Etrade wanted to know if we would want to "settle".

I have not heard of settling with a 1st mortgage. And if I do - doesn't that open up the possiblity of the 2nd starting foreclosure?

Should we try to settle with our 2nd mortgage first, then do the 1st?

Should we do anything??? Etrade said they haven't paid property taxes so it will go to auction for that eventually. They said that is the only way to get our names off the property - they will NOT foreclose.

This is all so strange I'm not sure what we should do...
Any advice?

[HHM]

Yes, very strange.

Your concerns have merit. If you actually settled with the first and released the lien, the 2nd mortgage would be in a prime position to foreclose.

However, no guarantee you can afford a settlement with the 1st, what would that settlement look like? As such, why spend any money settling.

In your heart of hearts, do you really want to move back in?

[florida]

...no....I really don't want to move back in...but...is it silly not to? I think of college funds, retirement, etc.
Etrade said the settlement would be around 25k.
If we move back in, we could pay that in 2 years, just by not paying rent.

I'm so confused.

[laurannm]

I am a little confused as to why you would settle a mortgage that was included in a BK 7 (unless I am misreading this)? Personally I would let it go to a tax lien sale for the unpaid property taxes

[HHM]

Let it go.

[florida]

The reason to settle would be to get a house for next to nothing - an investment that I could sell if I choose because the lien would be gone.

[HHM]

Okay, let's look at for a moment

1. What is the outstanding property tax...you will need to pay that (no settlement there)
1a. Need to get any utilities and HOA caught up.
2. 25K on 1st mortgage, how would you pay it...will E-trade even accept payments over time (this is a practical question, can you even do it).
3. Need to get settlement on 2nd mortgage before settling with 1st. Again, where is the money going to come from.
4. As of right now, what could you "realistically" sell the place for. (if etrade is not even going to foreclose, is there really any value in the property, get a CMA)

Most settlements are for lump sum cash. Maybe they will accept a payment plan, but even then, most payment plans are less than 6 months (otherwise, defeats the purpose of settling, from the lenders perspective).

Are you prepared for the income tax consequences of settling? This is probably why it makes more sense to settle with the 2nd mortgage first...insolvency exception applies at the "moment" of settlement. If you settle with the 1st, first, you have instant equity and would probably not be insolvent, as such, would minimally pay income tax on the forgiven debt of the 2nd.

Is it really worth it, and as a practical matter, even if all the pieces fell into place (1) can you afford it, and (2) is that where you want to live. Don't look at it as an investment, odds are, it really isn't.

[florida]

HHM - thank you - you are really making me think this through.

The outstanding property tax is approx. 2k. Utilities are now current and luckily, there is no HOA.

Currently I'm paying $1400 a month for rent. If we move back in the home, that money could be saved to pay the settlements.

Right now, the house could probably sell for 80k.

You aked if I was prepared for the income tax consequences of settling - oh my. I assumed that because it was dischared in my bk7 there weren't any tax consequences.

I guess I really don't know if any of this is worth it...

[HHM]

I honestly don't think you have 2 years to make it happen. The plan only makes sense if you are in a position to settle now, e.g. have the money ready to go, otherwise, it is a gamble, and probably not worth taking.

[Flamingo]

On top of all this, since you have been out of the house for a while you can bet there are major repair and upkeep items that will need attention....have people broken in and done damage? There must be major reasoning for the bank not to want the house...There may be thousands and thousands of dollars worth of things to be done with the house to bring it to live in condition again. Best of luck to you...

[avery89]

what did you decide to do? Why couldn't you just pay the property tax and just live in the house indefinitely? If after saving 25k, it was still worth it to you, you then have more options.

[florida]

My husband has spent the last month fixing the property up - it wasn't in too bad of shape. We are getting ready to move in the next couple of weeks.

Avery89, we are actually going to do just as you said. We have already paid 1 year of back property taxes so it doesn't get auctioned off. We don't want to get all the way caught up - just in case.

It is all so weird. They never even started the process. We never received the lis pendens or anything. Their words were : they are moving it to the dead file and are walking away from it. Just as they said - they did not purchase homeowner's ins for 2012. We are once again responsible for it.

We will take day by day and see what happens...

[avery89]

And just stating the obvious, if you do decide to get homeowner's insurance...make sure NOT to list them as a loss payee.

[HHM]

And just stating the obvious, if you do decide to get homeowner's insurance...make sure NOT to list them as a loss payee.

They may have no choice, assuming the mortgage is recorded, the insurer may require it.

[avery89]

The only reason a mortgage company is listed as a loss payee is at the request of the insured because it is required by the mortgage company. Insurer's don't check mortgage records, it is the responsibility of the mortgage company to make sure that their interests are protected, which they do by asking for proof of insurance listing them as loss payee, and if they don't get that, they place forced placed insurance at the homeowner's expense. But since this is past that point and forced placed insurance is not an issue, there is no reason to list them.