Foreclosure or short sale or deed in lieu

[tampagirl23]

I was discharged from Chapter 7 July 31, 2009. I never reaffirmed my mortgages. I have a first for 87K (chase) and a second for 63K (credit union), the properties in my area are going for maybe 75K. I live in a townhouse that after having a child have really outgrown. I have decided it is time to walk away from this. I wish I would have surrendered in the BK, but didn't have the money to move and didn't want to go through moving with a 5 mos old baby. But now I need to do something. I am not making my January mortgage payment, and I'm not sure if I sure try and do a short sale or let it go into foreclosure. I'm also not sure if doing a deed in lieu is an option considering the situation.

I pulled my credit report recently and both my mortgages show as IIB and don't have any recent activity. I can't seem to find a solid answer, but if I let it go to foreclosure will it show as a foreclosure on the credit report? I've read that they can't report anything more on the loans once it is IIB, but then I've seen other people say it does report. My plan is to rent a house for a couple years and hopefully find a lease/option to buy or owner financing. I am going to bank all my mtg payments until I move so I'll have $$ down when the time comes.

I'm just real torn if I should let it foreclose or try and do the other options, my credit is already not great from the BK, I want to do whatever option will tank it the least (and staying here until the mkt rebounds isn't an option).

[BCA2009]

You may get some other opinions on this, but I would quit making payments and stay in the house until the bank forecloses. Save as much as you can by not making payments and you will save enough to put down a deposit on your new place when you finally are forced out. Based on the experiences of those on this forum, you may be able to stay in the house for a long time before the bank decides to foreclose.

I can't see how having the foreclosure after bankruptcy could do much more damage to your credit. Someone, please correct me if I'm wrong.

As far as the shortsale route, I think that will just be alot of hassle on your part and you will get no benefit. You would just be helping the bank sale the house.

Good Luck!

[PoorGrammyinBK7]

I agree. And the short sale is a major hassle for you, the buyer and the realtor - probably only helps the bank. I don't know why anyone would do a short sale, unless it would be to avoid BK if you can afford to pay taxes on a deficiency.

[HakunaMatata]

A foreclosure won't trump your loans listed as IIB (they will remain IIB). However, it will show up on Public Record (perhaps this is what you've read?). You surrendered your loan obligations in BK by not reaffirming. If payments cease, you surrender your right to the property.

Post-BK, some select the short sale process to accelerate deed transfer (in an effort to accelerate future buying power) and free themselves of HOA obligations more quickly (of course, this is weighed against the foreclosure timeline in your State). Unfortunately, due to market conditions, short sales aren't always successful and commonly involve a considerable amount of time. DIL is an option as well; however, most lenders aren't receptive to such.

If you're basing your decision on your credit report, you don't need to worry. Your loans are IIB. If I were you, I'd remain in the property throughout the bulk of the foreclosure process and build a nice nest egg. Keep in mind, HOA fees remain your responsibility (if you have them) and insurance is highly recommended (liability is tied to you until the deed is transferred).

[tampagirl23]

As of this month I am going to stop paying my mortgages. I plan on staying at least until the end-of-the-year and bank as much money as I can. The only reason I was going to do a short sale was if I was ready to move and it wasn't close to foreclosure sale yet. I guess renting something for a couple years won't be the worst thing. I am doing a little more research on the HOA fees, I think they are tied to the property, but I need an attorney to look at the doc's before I do anything.

I wasn't aware a foreclosure would show up under the Public Record section, I thought it would just show on the actual loan section of the credit report.

[bkbirdie]

I'm in the same situation. My bankruptcy is still open though. I was on the fence about keeping my house at the time I filed, and didn't have the money to move anyway, but I recently changed my mind. I still don't have the money to move at this point, but I'm going to bank my mortgage payments and stay in my home as long as possible also. I'm stopping my automatic payments tomorrow. I've read that it's possible to qualify for a low-down FHA home loan as soon as 3 years after foreclosure, but someone correct me if I'm wrong. I have found a few apartments that are willing to work with my situation, but some aren't. Renting isn't the worst thing in the world, although I thought it was when I was a renter. Oh well, live and learn.