Deed-in-leau........

[loser104]

My mortgage lender, Green Tree, is really pushing me to NOT let a foreclosure happen. They have convinced me to make one more payment to allow enough time to put my townhome up for sale for 60 days. Then if no bites or short-sale, that they will consider a deed-in-leau of foreclosure. They claim they will not pursue a deficiency and that I will not be getting a 1099 at the end of the year.

I'm unemployed right now, 2+ months behind, in michigan, owe $150,000 on my first, owe $25,000 on my second. Other units similar to mine have been auctioned off for between 25,000 and 50,000. Not sure how many have been sold on a short-sale.......

I meet with a real estate agent tomorrow. Does this sound like a good idea? What are the odds of a good outcome? Is the mortgage company just blowing smoke up my wazoo? I do not want to fork over $1300 chasing this pipe dream, while it just delays the inevitable........

Need some advice, you guys and gals have been invaluable over the last month or two. Thanks in advance.

[Dannmcg357]

Well Michigan is a NO RECOURSE state so they can't sue for deficiency any way, so they are yankin yer chain as far as that goes. Not sure if NO RECOURSE means you wont still get a 1099. But if a short sale keeps you out of BK or Foreclosure sounds like a good idea to me.

[loser104]

I thought that michigan WAS a deficiency state, and that they COULD go after me if they so choose.........

And I would much rather just foreclose and declare BK and walk away with a completely fresh start (with, of course, bad credit), than to worry about the bank coming after me a year or two from now, or having to worry about owing the IRS a large chunk of change.

[BCA2009]

Ask for the agreement in writing - which they won't give you. No way to be absolutely sure, but my bet would be on :blowing smoke up the wazoo". They will tell you anything they can to get more money out of you, then later say that the person who said that was "mistaken" or didn't have the authority, or that you misunderstood what was said.

As far as the 1099 goes, the bank doesn't get to pick and choose who they send one to. If they forgive debt, the IRS requires them to send the 1099. that lie alone would make me assume they are lieing about the payment.

[Dannmcg357]

I searched google and got misinformation about Michigan being a no recourse state. I apologize, wont make an assumption like that with little research.
I tried to negotiate a deed in leau with a promise of no recourse. My lendor got pissed when I requested everything to be in writing and he tried the old "gotta run it by my boss first" Then he told me to "go ahead and file ch7" so I did.

[HakunaMatata]

Is Green Tree your lender or the servicer? Do they service both loans? Did you refi your first or is it the original purchase money loan?

Yes, Michigan is a recourse/deficiency state.

When there is smoke, there's fire. You may be able to extinguish the fire. What is your pipedream?

Given your set of circumstances (underwater, unemployed, no desire to retain the property), I would stay the foreclosure course (and potentially file BK contingent upon other factors). I wouldn't pay the $1300 or waste my time on a short sale (which will likely have an equally negative impact as foreclosure on your credit score -note: credit scores should be of little concern right now...survival and sound business decisions trump silly scores). A short sale and DIL may be challenging to negotiate if you're dealing with different lenders.

The odds of a good outcome depend on your goals. Typically, "good outcome" from a lender's perspective will have no benefit to you.

We have rather generous redemption periods in Michigan. We also have newer Public Acts that delay the foreclosure process. I stopped paying my mortgage in July 09, filed for BK in September 09, was discharged in Jan 10, and received my NOD this month. I surrendered my property; however, I've engaged in modification negotiations with my lender's attorney. This is mandatory provided the borrower requests such (and it delays foreclosure by three months). The standard redemption period in Michigan is six months following the Sheriff Sale (this doesn't include pre-foreclosure time or publication). The foreclosure process typically grants the borrower more "rent free" time in the property when compared to short sale and DIL.

[freshstartmi]

Hakuna Matata -- we are also in MI - our BK discharged today -- did not reaffirm mtg -- tried everything for modification -- decided we will just let house go -- silly us, we've been making payments all along - at least partial ones and sometimes full ones - ugh -- attorney sent letter to bank last week letting them know we are surrendering house -- have new house to move into for rental in a couple months -- should we be worried about the timeframe? It sounds like many have stayed in their homes for months and months....

[HakunaMatata]

First...congrats on your discharge!

It depends on how you define worried and your individual set of circumstances. If the foreclosure process hasn't finalized (which appears to be your case), you are responsible for the property until the deed is transferred. BK and foreclosure are distinct (although, they seem to overlap). BK discharged personal liability (to the loan), it doesn't automatically adjust ownership (this occurs with foreclosure). Insurance, HOA fees, lawn maintenance, etc. are concerns for some (contingent upon circumstances, city codes, escrow). Property taxes are NOT a concern since these attach to the property, not the individual. You're free to move; although, you need to make sure you satisfy obligations until the deed has been transferred.

There are various reasons individuals move quickly or remain in properties through the foreclosure process. There aren't set standards for this. Job relocation often prompts a quick move. The desire/need to save often delays a move. The foreclosure process can be confusing and frustrating. Some wish to be relieved of properties quickly while others hope for delays.

Regardless of past attempts at modifications, you're entitled to explore options once your NOD has been received (this will be outlined in the attorney's paperwork). There are no guarantees a modification will be achieved; however, this process delays foreclosure by three months and can potentially transform a non-judicial foreclosure into a judicial foreclosure (which doubles the redemption period).

Wishing you a happy fresh start!

[loser104]

Thanks for the good info. Just put the house up for sale a few days ago and I already have a possible buyer. Owe about $170,000 total, with Green Tree holding my first and second. House is up for sale for $35,000. Lets say a short sale happens for $30,000 and I CAN get something in writing from Green Tree about not being responsible for the balance I owe. Now I think I am free and clear, right???

Then I get a 1099 next year around tax time. Do I then have to treat the above deficiency that was waived of $140,000 as income??? So then I end up owing the government $30,000 or so??? Is that how it works? And is that one of the reasons why I should consider a ch. 7 filing so this WON'T happen or play out this way?

[freshstartmi]

Here is the situation we are in now -- what should we do??

We just discharged a few days ago -- we just told the mortgage company that we are surrendering the property - I spoke with them last week about DIL and they stated that they sent in for a relief of stay and were waiting to hear back from the trustee - they told me to call back in a month regarding the DIL that they should have the relief of stay by then (first question - do they still need a relief of stay even though we are discharged?) We have a home that we are going to rent; we have already signed the lease agreement; we were to move in April; the owner called asking if we could wait til June in order to allow the current tenant time to move out - my first thought is YAY that would save us mortgage payments for that time - as we were so stupid to continue payments or at least partial payments this whole time -- my second thought is YIKES will we be ok to stay in the home that long?? We really would like to work out a DIL with our mortgage company vs a foreclosure has anyone had luck doing that?

If I have read everything right I am seeing this; April 1st (ish) they have the relief of stay; put the notice in the paper (puts us to May 1st ish); then what? We need another month in there..... What do you think?

[loser104]

Nevermind, I found my answer about the 1099 tax liability. No, I will not have to pay taxes on any amount (that qualifies, of course) forgiven due to this:

The Mortgage Forgiveness Debt Relief Act and Debt Cancellation