Years after Loan Default, Homeowners May Still Owe
Friday, March 26, 2010
Homeowners defaulting on mortgages today may be surprised to learn years from now that they still owe thousands of dollars - and a collection agency is coming after them to get it.
“How is that possible?” you ask. Because lenders have been quietly selling second mortgages and home equity lines left unpaid after foreclosures and short sales. The buyers: collection agencies!
But what makes matters even scarier… these agencies can wait however long the term of the loan is to sue (15 years, 30 years, etc. whatever the term is) plus an additional 6 years after that.
Once obtained, a judgment is good for 7 years and can be renewed twice for up to a total of 21 years. So, if you have 20 years left on a second mortgage, the holder of that note could, theoretically, sue you on it 26 years from now (20 plus 6) in the year 2036. The judgment would then be good for up to 21 years from then, which brings us to the year 2057. (I would be 101 years old by then…)
Now, I don’t know that anyone would wait around that long to do this, but they could per current laws.
People who only had a first mortgage on the house in which they lived generally have little to worry about. But borrowers who defaulted not only on their first mortgage but also on a home equity loan or second mortgage are in peril. So, unless something changes, this may cause an ominous, looming echo of today’s real estate meltdown for decades.
This is a lucrative business and investors are coming out of the woodwork. Real estate insiders and financial players are calling it “scratch and dent.”
Owners are generally, but not always, on the hook for the second loans left over from a foreclosure or short sale. Most investor mortgages, too, leave the borrower liable for potential unpaid debt. In many short sales, experienced short sale specialists who have a mortgage license or attorneys can negotiate away debt obligations for the second mortgage. But many inexperienced borrowers don’t know that, and sign final-hour agreements giving lenders the right to pursue them later.
As you may have heard, currently it is a Federal crime for non-mortgage licensees to negotiate with Lenders. So, it is in an agent’s best interest to refer them to a real estate attorney or a mortgage mitigation specialist for advice and to negotiate with the Seller’s mortgage holders. And let the agent do what we do best - sell homes.
Finally - Government forces have moved to limit potential damage to millions now struggling with home loans. A new short sale program aims to prevent banks that hold second-lien loans from pursuing collections from homeowners after the short sale. It goes into effect April 5, 2010 and works this way: Sellers will receive notice that their servicer has steered part of the sales proceeds to secondary lien holders “in exchange for release and full satisfaction of their liens.” However, this release would apply only to short sales done through the administration’s Home Affordable Foreclosure Alternatives program. Lenders could not seek court judgments to collect from these borrowers in the event of foreclosure or short sales.
- Scott Askew
Posted in: Intown Atlanta Real Estate News
Tax Credits Expire April 30th… No Fooling.
Friday, March 19, 2010
We cannot emphasize enough the importance to seriously consider buying NOW if you think a home purchase is in your plans for 2010. The tax credits currently in place WILL NOT BE EXTENDED. AND, as interest rates and home values, rise, your ‘buying power’ will be diminished.
For the ‘once-in-a-lifetime’ tax credits for buying a home, April 30, 2010 is the deadline for being Under Contract
Question: How much is the credit?
Answer: Up to $8,000 for first time Buyers ($4,000 if married and filing separately), with a $75,000 income limit for a single person and $150,000 for a married couple. For a ‘repeat Buyer’ the credit is up to $6,500 ($3,250 if married and filing separately). Additionally, the income limit is $125,000 for a single person and $225,000 for a married couple. For both, there is a $20,000 ‘phase-out’. (Your actual Tax Credit, as long as income parameters are met can be calculated by taking 10% of the Purchase Price.)
Question: I am an existing homeowner and am looking to move soon. Must the home I buy cost more than the old home I will be selling?
Answer: No.
Question: I am an eligible existing homeowner. I have a fair amount of equity in my home. I have found a home where the Seller will not agree to a price lower than $825,000. Will I be able to use any of the $6500 tax credit?
Answer: No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any amount above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an absolute ceiling.
Question: I owned my home for 10 years, but sold it two years ago and have been renting since. If I buy now, will I be eligible for the $6500 tax credit if I meet the other eligibility tests?
Answer: Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6500 credit. For example, Say John and his wife bought a home in 2000 and lived there until 2007 when they got a divorce. It would not matter if John has been renting since the divorce; he would be eligible for the credit because he owned a home and occupied it as his principal residence for 5 consecutive years out of the last 8 years. The keyword here is “consecutive”.
- Scott Askew
Posted in: Intown Atlanta Real Estate News
It’s Time!.. For Spring Cleaning and Yard Prep!
Friday, March 05, 2010
If you haven’t made a plan for your spring cleaning and fix-up projects already, now’s your chance. Winter is basically over!
* Now is the time to do spring yard clean up. Edge beds and put out fresh mulch before plants sprout through.
* Top dress and reseed lawns. Mow when grass gets to be 4 inches high. Don’t mow it too short as this only encourages weed growth.
* Fertilize almost everything.
* Time to start transplanting cool season veggies to the garden.
* Build arbors and trellises before transplanting or sowing seeds for vines and gourds.
* Cut back herbs.
* Organize your paper life. Root out and recycle old magazines, newspapers, and assorted mementos. Build a new file system or clear out old files that are past being useful.
* Prepare taxes or have them done, if you haven’t already. File electronically this year. But, if you owe, write the check and prepare to mail…on April 15 and not a minute sooner.
* As Spring starts, check your basement for cracks or leaks. If you see moisture, call a professional to check it out. Many homeowner’s insurance policies no longer cover fungus or mildew damage, so sealing basements is more important than ever!
* Clothes dryer vents should be checked at least once a quarter to make sure they are clear of any lint buildup that could cause a fire.
- Scott Askew
Posted in: Intown Atlanta Real Estate News
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