Random Thoughts by MommaSquid

Wednesday, August 19, 2009

The End is Near

After two months of paperwork and phone calls, we finally heard from the credit union regarding our short sale request.

Yesterday the loss mitigation manager advised me that Fannie Mae (our mortgage lender) is requiring a $10,000 note at 0% interest for 60 months be carried by us in order to move forward with the short sale.

Today the loss mitigation manager called again to inform me that the private mortgage insurance company, Genworth Financial, requires a $5,000 note to be carried in order to approve the short sale. So between the two companies they want $15,000 in order to approve the short sale purchase or our house. I thought it was very convenient that we have that exact amount in a savings CD (our emergency fund).

I was also told that even though he stated yesterday that we had five days to decide what we were going to do, pre-foreclosure procedures had already begun. (Whatever that means.)

The loss mitigation manager went on to insist that we are not really a hardship case and that is the reason for the penalty. I was told that according to federal guidelines, my husband’s income is more than sufficient to continue paying the mortgage. I told him it may look that way on paper but in reality we are spending more money every month than we have coming in; thus the need to get out of our mortgage. We can rent an identical house in our neighborhood for 1/3 less than our mortgage; and renters have the added benefit of not spending money on repairs.

He also advised me that the state of Arizona is modifying the anti-deficiency law. (I was already aware of the change and have read the new statute; we are still protected.) He stated that the change places us at risk of being sued by the lender for the full loss amount. He stated that we may also find ourselves with a 1099 for the loss amount as well, meaning that we would be liable to pay federal taxes on the loss.

He continued, saying that if we foreclose it will ruin our credit for 7 years and there is an 8 year statute of limitations on law suits. Since we have no debt and adequate income (according to his guidelines) he urged us to do the moral thing and become current on our loan and continue paying the mortgage for at least 2 years, at which time the situation may look different. He stressed that this advice was coming from him “as a person” and that it was not legal advice. He talked about how foreclosure takes tax dollars away from every American since our lender is Fannie Mae.

If we still want the short sale, he said the only way to avoid being sued and taxed was to carry $15K worth of debt to the lender and private mortgage insurer.

My realtor and her broker, who have been processing short sales for the past year, have never heard of this situation from any lender. They have never before had a client faced with the prospect of carrying a note with their lender in order to be approved for the short sale. She said they are probably trying to scare me and that they were successful in scaring her. (She owns several rental properties and may find herself in a similar situation if the economy continues to slide.)

Like I said, I’ve read the changes to the foreclosure law and we are still protected. I am meeting with our real estate attorney later this week to confirm that I am interpreting the new law correctly.

With every phone call, the loss mitigation manager is sounding less and less like a banking professional and more and more like a debt collector. Foreclosure is something I had hoped to avoid but it is a legally available remedy to our situation. I am not going to let this guy scare me.

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1 Comments:

  • Did a bank employee actually use the word "moral?" Oh brother!

    I have one rule regarding things like this: do what you have to do. If you can't pay your debts, fuck 'em. I try to pay mine, but I ain't gonna starve or drive myself insane because of it. It's not like borrowing money from a friend.

    Banks etc. are trying to make money off of you. If they gambled that you would be able to pay off a debt with interest and you couldn't, then it sucks being them. I don't loan money when I know I ain't getting it back.

    I've had my credit ruined, and probably will again. It sucks, but it's not the end of the world; not even close.

    By Blogger Fredrick Stevens, At 7:05 AM  

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