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We're at the end of our rope financially and our lender won't consider refinancing. Should we consider foreclosing?
Q: My husband and I are in the midst of filing bankruptcy and we have just listed our house for sale. I am unemployed, his overtime has been cut, we have three children and we are no longer able to meet all of our bills, including the mortgage. We are not in default yet, but we have borrowed money from our families to continue making the mortgage payments.
We are at the end of our rope and will not be able to continue making the payments starting next month. We have already contacted the lender to see if they can help us but they won't even consider our "request" since we are not 90 days past due. We are going to rent since we won't be able to purchase right away because of the bankruptcy. My question is this: If we have found a place to rent, they don't care about our credit, and they are willing to give us a long-term lease, why wouldn't we just let the house go into foreclosure? We could be out of here in a month, the rental is in a great location, it's beautiful and the property is very accommodating.
A: The loan may not be owned by the "lender." Instead, it may be part of a package of mortgages used to back securities sold on Wall Street. The rules associated with the securities may prevent the lender from acting faster.
That said, more and more parties in the mortgage industry are beginning to figure out that it's much cheaper to modify a loan then to have a foreclosure. By some estimates, a foreclosure produces a $40,000 loss per unit, even with insurance.
As you are in bankruptcy, this matter may be out of your hands. A judge may be required to approve of any sale or other action relating to the property. Since foreclosures create big losses for lenders and investors, perhaps they would reconsider modifying your loan if such a proposal was presented to them by your bankruptcy attorney as the option which is likely to produce the smallest loss.
Q: I am purchasing a new mobile home for my son's use. I am 80 and my son is 60. He has to have the mobile home in his name to live in the park. I would like to have a promissory note for this home as he is not well and would like to carry the loan. Would I have to go to a real estate attorney or someone who specializes in mobile homes?
A: You and your son both need wills and living wills. You also need to be certain that you are meeting the standards of the mobile home park. A local legal clinic or attorney can provide independent, reliable advice.
Q: I have a rental home that I showed to a prospect three times, the last time with his family. They decided to rent so we met, signed a lease and three days later they changed their minds. The lease was for $950 a month and I have a $1,426 deposit.
I purchased and installed blinds that they requested ($200) and they did offer to reimburse me for those. I also put in a microwave ($150) they requested. Am I entitled to any other compensation such as loss of rent since I took the sign down and will have the expense and time of showing the house, taking out another ad, etc? I want to be fair, but I put a lot of time and energy to rent out this house.
A: You have $350 in actual costs for the blinds and microwave. Most leases also say that the tenant owes you $11,400 ($950 x 12). In practice, a court would likely rule that you have an obligation to quickly re-let the property and that the damages owed by the tenant are limited to lost rent
If it was me, I would charge $350 for actual costs plus a reasonable allowance to advertise the property for a month. I would return the balance of the deposit -- but only with a receipt showing the return of the money was in settlement of all claims related to the lease.
In court, a landlord would likely get a bigger award. But the time and energy to sue for a minimal amount is not worth it.
Be aware that rules governing deposits are strict in most jurisdictions. Before touching any of the money, speak with a local attorney or legal clinic. Their bill, to me, would also be a reasonable cost in this matter.