Think they'll bite?

[wonkettegirl]

I am in a chapter 7, awaiting discharge (in the 60 day club) and the bankruptcy court just lifted the stay so that my bank can begin foreclosure proceedings. The same bank owns my 1st & 2d mortgages; I am upside down on teh house and letting it go.

My attorney is writing them a letter, asking them to NOT initiate foreclosure proceedings against me in exchange for me being out of the house by march 31, 2009. The way I see it, we both have something of value to offer: I won't have my name searchable in our public records database as having been foreclosed on (that's important to me, if I can avoid it), and in exchange they won't have to incur the expense of a foreclosure proceeding AND they'll get the house back months earlier than they would via foreclosure.

I have a place to move into on March 31, if this goes through. The downside for me is that I'd lose a few months of rent-free living, but keeping my name out of our state's database is important to me, too.

Anyone have experience with this? Did your bank go for it? At this point, insisting on a foreclosure proceeding when I am willing and able to simply sign the deed over to them seems punitive.

[StartingOver08]

What you are describing is a Deed in Lieu (of foreclosure). Here the banks accept them very, very RARELY. If it works, great for you. But don't hold your breath.

[HHM]

Basically, your attorney is asking them for a Deed in Lieu. (note, those still get counted as foreclosures, there is really no way of avoiding having a foreclosure on your credit report when you surrender a home).

Even if they initiate foreclosure today, you can still live in the house easily until March 31 or longer.

As for the odds, they are not good, but since the 1st and 2nd are with the same company, your odds are better than they might otherwise be. Basically, I wouldn't count on it, but if it happens, great.

[wonkettegirl]

Thanks for the responses. I'm not really worried about what will appear on my credit report - the bankruptcy pretty much took care of that. My credit is in the crapper already. I am more concerned about our highly-used, easily-accessible public records database.

According to our state law, even if teh bank initiated bankruptcy proceedings today, I'd have until July or August to leave the house. So why wouldn't they want to get me out early AND save the costs of foreclosure? I dont understand why banks are so reluctant to do a deed in lieu, when the end result is the same for them and they'd save $$.

[StartingOver08]

That is a valid question! But, the banks are not interested in saving costs or doing the right thing - even if it benefits them financially. Who knows how they got to this spot, but what you are trying to do is a logical, practical, economical process and the banks/financial institutions do not work that way!

[HHM]

That is a valid question! But, the banks are not interested in saving costs or doing the right thing - even if it benefits them financially. Who knows how they got to this spot, but what you are trying to do is a logical, practical, economical process and the banks/financial institutions do not work that way!

Lazyness and risk.

Risk: becuase foreclosure is the only legal mechanism to take legal right to the house and extinquish all other potential claims, a DIL can't accomplish that. Thus, the bank must be CERTAIN that there are no other claimants on the property to accept a DIL.
Lazyness, because the bank is not willing to do the title/record search to see if there are any other claims against the house.