Negotiate with Bank before foreclosure

[fredjulen]

Hi,

I own in my house more than is worth in this market, I have an 80/20 loan, I do not want to go to foreclosure I would like either for the bank to pospone my payments for a few months or them to reposses the house without going to foreclosure. I have not been late in a payment yet. DOes the bank negotiate these type of terms? or do they prefer go to foreclosure?

[aprazma]

You have every chance to negotiate with the bank, since banks do not like going into foreclosure at all. Foreclosure is very costly for a bank, takes time, and does not typically produce a good return on the investment.

One option you listed was a postponing of payments. This method would probably require you to show that you would soon have a probable future increase in income that would enable you to start making payments again.

Another option you listed was a 'deed in lieu of foreclosure'. This option has the benefit that you do not have a foreclosure recorded on your credit report, and that the lender does not have to spend money on a foreclosure.

Finally, a word on the negotiation: this process may not be easy, since banks are institutions, not people, and they rarely respond to negotiations quickly - but if you prepare yourself mentally for the process, and provide ample documentation to support your desired outcome (and how it benefits the bank compared to foreclosure), you will probably succeed.

[fredjulen]

My 80/20 is with different banks (originally were the same, but got sold to different banks) who do you deal with that if you are negotiating?

[aprazma]

My 80/20 is with different banks (originally were the same, but got sold to different banks) who do you deal with that if you are negotiating?

I am sorry I cannot be more helpful here, but you are probably going to want specific advice from an attorney on all your options. The rationale for using a deed-in-lieu is to avoid the damage to creditworthiness from a foreclosure. Since the holder of the second may be in an unsecured position, they may not be willing to take a deed-in-lieu and the holder of the first may not since by accepting it they would take the property subject to the second.

What state are you in? According to Broker Banker, fourty-four of the 50 states allow a lender to receive a deficiency judgment against a borrower for any loss they suffer from the results of funding a loan on their home. The 6 states that do not allow deficiency judgments are: California, Minnesota, Montana, North Dakota, and West Virginia.

Perhaps a better option would be a short sale. In that case, you use the threat of foreclosure as a negotiating tool with the second (junior) lienholder to accept a fraction of the amount owed.

[fredjulen]

Thre house is in New York, I will consult with an attorney, thank you so much for your information, it was very helpful! One more question, if I refinance with the company that has my first mortgage, consolidating both mortgages, and then I do what you told me, would I be in a better position to negotiate?

[fredjulen]

The house is in Long Island, NY, I live in Coral Springs, Florida, do youknow any good attorney that could help me in resolving this?

[roofline]

Hello,

I have had this problem through my life on several occasions. Make sure that you contact the bank/s, IN WRITING, this is a must, ask them for a few things:

A payoff total - In case you find another lender to purchase the loan, or a private investor, you will already have this, you can request those from online with your lender.

You can always look for an investor too, that might see potential in being the bank for you, and you pay the investor the payments/int. Personal investor, this is a discussion I recently had with someone on my property, older gentlemen so he can continue to make an income.

Ask if you can have a grace period, if never asked before they may let you do this and place the late payment/s on the back end of the loan.

Ask them to work with you on doing your updated financials, but make sure when you do this, your income, even income that you make on the side in cash is shown, in this way, they can RE-STRUCTURE the loan if your debt does not exceed your income.

Modification of loan, this takes them some time, but they will work on this for you too, if your income will withstand, but you must also have them do the Re-payment at the same time, because the modification is never guaranteed and a foreclosure sale date could already be set.

See if there is any extra escrow that can be applied to any of the payments.

Get them to give you a repayment schedule, this puts the foreclosure on HOLD, but if you miss or are late with a payment, then it is sent to the court again for processing the foreclosure.

Bankruptcy - this will also possibly stop a foreclosure on your primary residence, but consult with attorney

Above all put everything in writing, fax them, call them to verify, take names, id numbers, and also fax copies of this stuff to their attorneys if you were served.

I have always handled all of these things myself, I am a paralegal too by trade, but biggest most important thing, let the bank/s know where you stand, and do not sound like you cannot take care of it, because you know you can. By all means, get an attorney if you feel you cannot handle this, but it all costs money.

I am in South Florida too, it is crazy here with increased everything, I never ever thought, I would owe so much on my property, reason, I had the insurance/taxes increased so much for reasons, and then had to put that into the back end of the loan, and my interest rate is killing me. Answer for me, is to work extremely hard in next year to payoff at least half of the house principal.

Please view my profile and visit my site in the future.