Deed in lieu procedure?

[pamaris]

Hi,

DH and I will be moving overseas in 6 months. Until that time, we can afford our mortgage. However, when we move, we will be unemployed and will not be able to afford our mortgage from overseas. I am trying to decide ahead of time what to do about the house. We do not plan to ever come back to the US.

We are not that concerned about our good credit going down the tubes, as our credit report here will not transfer to our new country. We do not want to defraud anyone, but we know that when we move we will not be able to afford the mortgage, AND we absolutely will not be able to sell for what we owe (with all the fees). We did an 80/20 (both mortgages with the same mortgage company) 9 months ago, and our house has not appreciated. We owe 142k; Could probably sell for 139k.

I thought of a short sale, but I heard there are mountains of paperwork in which you must prove your insolvency. Technically we will not be insolvent, but any money we have will go for our moving expenses. Also, I am sure that they will not appreciate the fact that we are voluntarily moving and becoming unemployed.

We may try to FSBO... but I doubt the home will sell.

I have read as much as I can about doing a deed in lieu. However, I read that they are reluctant to do it if you are not already past due and they will only do it if they think foreclosure is the only alternative.

How should I go about this? I thought of simply staying current until we move, then sending them keys and a letter. However, I think they will resist if we are not already past due. I do not wish to correspond with them overseas after we move, and I hope to resolve the mess before we go.

Basically, we have to move in 6 months. I foresee a problem disentangling myself from the mortgage. I want to resolve it in the most expedient and efficient manner.

What should be my plan of action?

[miss puff]

My sound advice would be to try and sell on your own first and avoid any DIL/foreclosure.

However, and this is for sure not going to be the most responsible of advice, but if you are going to hand over the keys anyways, why not just stop paying on the mortgage and go into foreclosure? You could save that 6 months of monies and bring it overseas with you. Then before you leave offer the DIL.

How come your credit won't be following you? I guess I didn't know this happened.

[pamaris]

Well...

I honestly and truly do not want to defraud anyone, but I had the same thoughts as you about saving the mortgage payment. Primarily after reading that mtg companies will only do a DIL if they see foreclosure as the only alternative. That would tell them that yes, foreclosure is the only alternative. After we leave the country, they will essentially be wasting their time. If they are going to get the house anyway.... well... it is in both our best interests to avoid foreclosure. If they want to foreclose anyway, fine, but it will only be costing them money.

Credit history can only follow you if the country you are going to has a "reciprocal agreement" with your expat country. In the US, as you know, your credit report is linked to your SS#. Since other countries do not use that system, it is extremely difficult for them first to find the person in default, and then to verify that this person is actually the same person who owes the money. Also, civil judgments are not enforceable in other countries (without reciprocal agreements), and even if they were enforceable, it would be cost prohibitive for them to pursue collection of the debt.

Most European countries (I don't know about the rest of the world) do not want reciprocal agreements with the US because they see us as too litigation happy.

We are not "skipping town" in order to buck the system. We are moving to my DH's home country for deeply personal reasons. However, we can foresee that there will be consequences to us leaving and bridges burnt.

We have maintained "good credit" in my husband's home country.

ETA: We will not be getting an 80/20 mortgage again, and would advise anyone considering it not to do it! You never know when you have to go!

[SinkingFast]

If you try to do "Short Sale" generally, the Lender wants you to have tried at least 90 days of marketing before they will agree. Also, the same information you give them to prove the insolvency can be used against you to prove that you defrauded them to get the loans in the first place.

When you "Short Sale" you have to write a letter of Hardship about why you can no longer afford the payments. If you had a job loss or huge medical bills, that would be an unforseen circumstance. Simply moving out of the country would probably be enough to push the Lender to go after you.

Offering a DIL is gonna be the same sort of deal. The Lender is gonna want you to have tried marketing your home for a period of time before they will agree to accept a DIL. You'll probably have to explain why you're offering the DIL as well. The Lender will have to agree to accept a DIL. Legal docs will be drawn up that both you and the Lender will have to sign. Most probably, you'll have to agree to be held responsible for the deficit balance as well.

A lot of what might happen in Foreclosure depends on the State you live in. Say you wanna leave in 6 months and you live in a Quick Foreclosure State. Your house could be sold in as little as 4 months leaving you "homeless" for a couple of months before you leave. If you live in a Judicial Foreclosure State, where it takes 18 months to proceed thru the steps, you could continue to be responsible for liability on the property well beyond the time you plan to leave.

What State is the property located in so we can research and help you best decide what to do payments wise.

[pamaris]

I live in Oklahoma. They do primarily judicial, but also do non judicial. They can do a non judicial if it is stated in the mortgage. I will go check now to see whether that is stated in ours.

We did not try to obtain the mortgage by fraud. We don't want to defraud anyone. However, we are not willing to stick around for however many years it will take for our equity to catch up with us. All we know is we have no equity, and we need to move. Renting is not practical from out of the country.

[pamaris]

Wanted to add, that in OK if they do non judicial, and you are homesteaded, they are not allowed to sue you for deficiency.

Secondary question: Can you be sued if you can't be found?

Obviously all these questions are hypothetical. We are just looking for a way out of a no equity situation.

[pamaris]

OK, I just found out that the lender has the power of sale option (non judicial foreclosure). Apparently if the home is homesteaded, they cannot obtain a deficiency judgment in a non judicial foreclosure. They can in a judicial, but it would take longer.

[SinkingFast]

We did not try to obtain the mortgage by fraud. We don't want to defraud anyone. However, we are not willing to stick around for however many years it will take for our equity to catch up with us. All we know is we have no equity, and we need to move. Renting is not practical from out of the country.

I didn't mean to make it sound like you did obtain your current mortgage under fraudulent pretense. But that's the risk you take if you try to get the Lender to approve a "Short Sale".

With Short Sale, you have to provide much of the same types of information you did to get the loan in the first place. Last year's income taxes, monthly income and expenses, and such. If you've recently refi'd and had a change in plans for your life, that's legit. BUT, the Lender could make a case that you obtained the mortgages under false pretenses and claim fraud. It's a risk you run trying to get the Lender to agree to a Short Sale.

Since you have a "right of sale" clause in your mortgage, under OK law your Foreclosure could go really quick. Once you're in default, the Lender has to give you 35 days to Cure. That's pay up. If you don't pay, the Lender has to file a notice of intent to sell with the Court at least 10 days before the actual auction. According to several websites I looked at, Foreclosure can proceed in as little as 3 months/90 days. That's pretty quick!

Most likely, if you were to happen to return to the US, you'd have a Judgement recorded against you in the county the property is located in. The Judgement would most likely show on your Credit Reports as well. If you don't plan to obtain Credit in the US again, then a Judgement probably won't be an issue with you coming and going into or out of the country.

[pamaris]

Do they have to wait a certain amount of time before they initiate the foreclosure? I mean, if I am 30 days late, then they could send me a letter telling me that they will be taking back the property in 35 days?I would think they would wait till 60 days past due.

I actually would rather them pursue the right of sale clause, as in Oklahoma by doing that, they waive their right to receive a deficiency judgement.

This is why I think a DIL would be the best solution if we are unable to sell the home. If they pursue a judicial foreclosure, and obtain a judgment, they will never be able to collect on it. It is just a matter of getting them to understand that.

I wish there was an easier answer to all this.

So, hypothetically, if we are to leave the country February 15 2007... Mortgage payment is due on the 1st of each month. If we did not pay December 1 2006, then it would be 30 days past due January 2006. Then the mortgage co could send us the letter telling us we have 35 days... then another 10 days for the auction. Then it would be time to go.

I guess I'll try to FSBO, and try my best for the DIL. I don't like the sound of any of this, but we will have to go, and must find some solution.

Do mortgage companies generally foreclose at 30 days late? 60 days?

ETA: both mortgages are with Wells Fargo, if anyone is familiar with their practices.

[SinkingFast]

We were with Countrywide and the property was located in Missouri. Hubby lost his job. Found a new job outa state, and we had to move. House had been on the market for months and we hadn't been able to sell.

MO is another Quick Foreclosure State. We also had a "right to sale" clause in our mortgage. Our payments were due on the 1st of the month with a 15 day "Grace" period.

IMMEDIATELY after our 2nd payment was late, on Feb 16th, CW sent us a letter to Cure by Mar 18th. We had received a contingent offer to purchase our home, so we sent CW a "Hardship" letter along with a copy of the offer asking for time to close the deal. That bought us a little bit of time. About 6 weeks.

End of April, CW decided to proceed with Foreclosure and set the date of the Sale for May 30th. Literally 1 week before the Foreclosure Sale date, we had an offer come in. CW gave us a 30 day grace period to get the deal "Sold and Closed". We were able to sell our house ourselves.

That was our experience. It varies Lender to Lender. AND,.......... It also depends on how much REO property the Lender already has on the balance sheet. Real Estate Owned is Foreclosed properties. If they already have a lot on their balance sheets, it doesn't look good to investors to take on more. A Lender may wait to Foreclose until they move some properties off their balance sheet.

Also, you have another fly in the ointment we didn't have. You have a 2nd. Even tho it's the same Lender, it may be a totally different division. Your 2nd could push a Foreclosure much more quickly than the 1st would.

Lots of variables come into play.

[pamaris]

OK, so you missed your payment on Jan 1, and on Feb 1, and received your letter giving you notice on Feb 16.

The second mortgage has the same terms and verbiage as the first, as far as the remedies for default.

You've given me lots of good information. Thanks! I still don't know what to do though. Will keep researching and thinking.