Best ways to extend the foreclosure?

[Sweetpea3829]

Hi everyone! We are potentially going to be walking away from our property (a loan that is 100K underwater but discharged in a 2007 Chapter 7). We are waiting to see if Citi will modify the loan after we go into default. If not...BUHBYE!

We want to extend the time we have for as long as possible so that we can save. If we can extend it long enough (2 years), we'll have enough cash to buy a property pretty darn close to outright.

So...what can we do to extend? Any thoughts?

[researchnerd]

It depends a lot on where you live -- some jurisdictions have a lot of protections built into the foreclosure process. Check your local laws to see how long you might be able to go. If your state requires judicial foreclosure and has a long waiting period, I think this is your best bet.

Since you filed Ch7 so recently, I don't think you can file again, even if it's just to stall foreclosure with the automatic stay.

Don't count on Citi to help you delay things. Despite having multiple modification attempts in the works, we got exactly 90 days after we stopped paying our Citimortgage before they sent it to an attorney to begin foreclosure. Ironically, we got a last-ditch "contact us to see if we can help, but we make no promises" letter the day before we got the attorney letter. You MAY be able to stall it with modification attempts, but as you probably know, they won't even consider it until you are 60 days late. We had zero luck with our Citi mod but hopefully it will work out for you.

[Sweetpea3829]

Thanks for that page...seems as though it depends on our actualy mortgage contract. I hate to dig that thing out...it's buried. No matter to me though...truthfully...I kind of hope they won't work with us. It would be such a release to cut strings from this house.

Nevertheless...the longer we can stay, the better our financial picture looks.

[Sweetpea3829]

Quick question...correct me if I'm wrong but the lenders do not have ultimate say in whether or not you qualify for HAMP...shouldn't you guys have been able to get that program?

We were denied HAMP on the basis that we had three months worth of liquid assets (which is baloney...they were looking at statements that included funds for the mortgage payment that had not yet been sent) and also because we were not in default.

Well come the 1st, we'll officially be a month behind (and I think as the 15th rolls by, I think I might just have hives not paying that bill...I hate not paying on time). We'll see how hard they want to play after Oct. and Nov. roll around.

[biotechsolution]

I think your biggest question is whether you have the protections of the mortgage contact now. Remember you mortgage contract and your obligation disappeared when you received your discharge for the loan in your chapter 7.

The process may be different on a discharged loan, I'm not sure if they even have to wait the 3 month period of being late to start the foreclosure process.

[HHM]

If its been going on for 2 years, I would imagine you must be pretty much near the end of the line. The fact that you made it this far is pretty good.

Most of the "elaborate" ways to delay foreclosure will usually cost money as it involves going to court and to even have a viable shot, you would need to pay an attorney, so those avenues defeat the goal of saving money.

The only other option is to put it on the market and receive a short sale offer. The banks will almost always stop a foreclosure process if a legitimate offer is submitted.

[Sweetpea3829]

HHM, just saw your response. The foreclosure hasn't even started yet. We JUST missed our first payment with Citi...ever.

We want to extend our time here...so we can save as much as possible. And then buy a single family property either right before or just after (if possible).

We've even talked about the possibility of buying this house back after it forecloses (if possible and nobody seems to really know the answer to that one).

We're just looking to buy time. :-)

[HHM]

Unless you are in a super hard hit area for real estate

Buying 2 years is unrealistic.

The basic ways to delay foreclosure is to participate in the modification rat race. Most banks will delay foreclosure for a time while that process works itself out. Other than that, there isn't whole lot that the homeowner can do to delay it, short of going to court to contest the foreclosure.

As for buying it back after foreclosure...generally, you won't be able to buy it at the foreclosure auction. Once the property becomes owned by the bank and puts it on the market, you "could" buy it at that point. But that begs the question of how you would get financing with a fresh foreclosure.

[Sweetpea3829]

That's another question that I've had a hard time getting an answer to. Our bankruptcy was in 2007 (April). Our credit scores are right around 700 as of this past Spring (and nothing has happened to bring them down). I know that in some states, you have to wait a seasoning period after the foreclosure itself but that in some states, the seasoning period is actually the period of time after the bankruptcy.

As the loan for this property was discharged in 2007, does the foreclosure actually show up on our credit report when it happens in say, 2011? Does the seasoning period begin in 2007 or when it actually forecloses?

If we can't buy this house back because of the fresh foreclosure...that's fine with us. That does tell me that we would need to purchase our new home BEFORE the foreclosure actually happens.

[HHM]

The foreclosure shows up as a public record. Also, the LOAN app is going to ask you if you ever had a foreclosure. So, no matter what, no bank will lend to you until 3 years from the DATE of foreclosure (this issue has NOTHING to do with states, it is lending policy of the banks and underwriting policies of FHA, Fannie and Freddie) unless you can prove a hardship (which is rare).

Also, you will have a hard time doing a "buy and bail." The lenders have really cracked down on that tactic (e.g. buy a 2nd house and allow the current house to foreclose). It's not impossible to do, but it will be very hard.

[Sweetpea3829]

Hmmm, that's good to know. What is it about "buy and bail" that is difficult? How would the new lender even know that we were in the middle of losing the first property, particularly if we buy before we actually foreclose?

If we could extend the process for up to two years...we could save between 25 to 50K in cash (depending on whether or not Citi has the right to collect rents from our tenants and if they do, if they exercise that right to do so).

The goal would be to finance very little...perhaps another 50K in a state where real estate is real cheap...upstate NY. We're in RI, btw.

If I understand this whole process correctly, our impending missed payments with Citi shouldn't even report on our credit report. So it stands to reason that by then (two years from now and five years out of Chapt 7) that our credit should be pretty stellar.

Sounds too good to be true...lol, so set me straight, please. :-)

[HHM]

How the banks limit buy and bail.

1. Unless your income is such that you can afford both mortgage payments, they simply won't approve the loan.
2. Unless you have a valid lease agreement with a renter for the current home, they won't approve.
3. Unless you have a good faith offer on the current home, they won't approve the loan.

I applaud your efforts, but I think you are being unrealistic. You will probably not be able to extend foreclosure for 2 years, and it will be hard to do buy and bail, especially if you need to save the money by defaulting on the current mortgage.

Keep in mind, just because the payment history is not reported on the credit report, the underwriters will want to see PROOF that you have been making payments (just like they do with renters), so they will ask you for 3-6-9-12 months of bank statements that show you were making the mortgage. Its a bit of a pipe dream that you could stop making payments for 2 years, buy a house before "actual" foreclosure, and get a mortgage on another home. It won't happen.

[Sweetpea3829]

Again, good information. Does it change things if I tell you the property is a multifamily? We live on the first but rent out the 2nd and 3rd.

Would the potential lender even know that we still had the current property being as how it's been discharged in 2007? Do we HAVE to disclose that loan? It technically no longer exists, right? When we bought this property in 2003, we were renting at the time and I don't recall the lender asking us to provide documentation that we were paying monthly rent...then again, that was 2003 and they weren't really asking for much in the way of documentation back then, now were they?

Walking away is kind of a last ditch thing for us. Right now, the goal is to force Citi to modify the loan (preferably with a principal reduction). But I'm hearing that Citi isn't known to be too amenable and thus far, my experience with them has been horrid.

If it does come down to walking away in the hopes of buying a single family home, perhaps we could attempt a short sale just before foreclosure. Or even a deed in lieu.

[HHM]

You're over-simplifying. The "security interest" still exists (its on file with the county). Also, the loan will actually "be on your credit report", albeit as IBB. Presumably, the property is in your name now. Just because a bank has a security interest in the property, you still "own" it. The Deed is in your name.

Also, on a technical point, bankruptcy does not "eliminate" the debt or extinguish it. A bankruptcy discharge is simply a permanent injunction against anyone from taking action to "collect" the debt.

You will still have the same problems with a short sale or deed in lieu. The lending guidelines are the same as foreclosure (assuming you defaulted on the payments during the run up to short sale).

There really is no way around this...underwriters are very particular and there are MANY more information sources than just your credit report.

[Sweetpea3829]

Ok...thanks for this information. This is really good to know. It seems as though we might be able to pull off a buy and bail on the presumption that it's a multifamily and we have tenants in the property (and therefore income to support the mortgage). That said, clearly, we wouldn't have been paying monthly payments on the mortgage in the months leading up to the foreclosure and attempt at buying the new property. So, my final question (and again, I thank you immensely for your help with this), if we can provide the rental agreements for the property we are walking away from, in the process of applying for a new loan, would the potential new lender still ask for payment histories from Citi? Or do they not care as long as we're providing those rental agreements proving we have income to back up the mortgage.