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Taribor · Feb 28, 2008, 09:22 PM

Hi everyone,

Sorr if this has been covered, but here is my question:

We bought a house in Florida in '06 for almost $400k with 100% financing (80/20 loans). Both loans were from SunTrust, but they subsequently sold the second to EMC mortgage. A year later, I switched jobs and got transferred to California, and we had a baby... income went from 150/year to $70k. Our payments/expenses on the house are @ $1900 per month net (we have it rented for $1600/month. I believe the house is now worth around $330k.

We have to borrow $1200 per month from my mother in law just to break even, and this is just not sustainable.

My question/concern: If we foreclose on the house, can SunTrust and/or EMC mortgage sue me for the balance of the loan? Foreclosing does nothing for us if we have a $80k lien on my credit with no asset to show for it. If Suntrust/EMC is allowed to come after me, how likely is that to actually happen?

Thanks in advance for your comments...

DAVLOAN · Feb 29, 2008, 12:14 AM

What Might Happened Is A Couple Of Things One Is If The House Is Action Below The Current Note Value /they Might Come After You On The Balance Of The Lost .example If They Action The Property At 300k They Will Come After You For The Balance.. note: Also Check With Your Accountant Regarding Taxes On This Lost... call Your Lender And Ask Them How They Oparate.. not All Of Them Go After This Lost..

ScottGem · Feb 29, 2008, 08:04 AM

I think, under new laws passed to help with the current crisis, that they cannot come after you for any shortfall.

tb7677 · Mar 1, 2008, 04:56 PM

So who eats the 100K if the house is sold for 300K? I am in a very similar situation and only wish I knew what will happen

ScottGem · Mar 1, 2008, 05:57 PM

The bank does.

tb7677 · Mar 2, 2008, 06:43 AM

Ok I did some reading and there was law passed that states the IRS will not tax you on Phantom income or the difference in what you owe the bank and what your house was sold for in Foreclosure. So what should someone do facing foreclosure?? Allow the home to go into foreclosure or Deed the property back to the bank??

mommyof2monkeysandprinces · Mar 3, 2008, 08:53 PM

Originally Posted by ScottGem

I think, under new laws passed to help with the current crisis, that they cannot come after you for any shortfall.

Where have you gotten this?? The banks can come after people in Florida. The new law has allowed 1099s not to count as income for the debt banks forgive people of. It states nothing of not being able to go after a judgment.

Tammy

ScottGem · Mar 4, 2008, 06:49 AM

Thanks for that correction. It was my understanding that the new fed laws required that any shortfall be forgiven, but I guess I misunderstood.

Dr D · Mar 4, 2008, 09:34 AM

In Florida the note is secured by a Realty Mortgage, rather than a Deed of Trust. A Realty Mortgage foreclosure is done through a "Judicial Foreclosure", which has provision for a deficiency judgment against the borrower, whereas a "Trustee Sale", (used on a D of T) does not. It may be that some states have different rules in their statutes, but this is the practice in AZ.

mommyof2monkeysandprinces · Mar 4, 2008, 11:22 AM

JudyKayTee disagrees: No need to be so confrontational - please post where 1099 income is no longer considered when repaying a debt. (I thought that the new law addressed shortfalls; perhaps it hasn't passed yet? This has been posted before.)

I was not being confrontational... I was asking where he got the information from. I just went through my own foreclosure in MI and had a lawyer as we went through BK due to the loss of the house. It was worth about $150K-200K less than what we owed on it.

We did look at deed in leui of foreclosure which is where you sign your house back to the bank in return generally they agree to not come after you for the shortfall of the house. Generally speaking you get a 1099 for the difference of what the bank has forgiven you on. Before the new law this would have been counted as income on your tax return even though you did not make a dime. Our 1099 we were estimating to be $100K if I remember right which would have led to a tax liability for $15K-17K in addition to our normal taxes. The new law did away with the 1099 counting as income for a certain time I forget the exact period but it would have covered us if we had done a deed in leui but we had already went the BK route as our 2nd loan was saying they had the ability to covert to a personal loan and come after us.

The law to my little knowledge of just what I was going through personally does nothing to protect you from judgements which is what a mortgage company gets if they take you to court for the shortfall. The mortgage companies in a state that allows them can and do come after you. Once they get a judgement through the courts they then will collect on that judgement which what legal ways they can.

Good luck! It is hard dealing with a home when it is worth so little. We actually had a buyer for a short sale on our home and the bank tried to talk them a little higher and they walked SIGH.

Tammy

mommyof2monkeysandprinces · Mar 4, 2008, 11:28 AM

OK I did a search and found this

Tax Law Changes | Mortgage Forgiveness Debt Relief Act of 2007 | H&R Block

It goes even further to say only the discharge of qualified principal residence indebtedness is excluded from gross income meaning if you got a big equity amount all that is still counted on your tax return.

Tammy

mommyof2monkeysandprinces · Mar 4, 2008, 11:37 AM

Originally Posted by Taribor

hi everyone,

Sorr if this has been covered, but here is my question:

We bought a house in Florida in '06 for almost $400k with 100% financing (80/20 loans). Both loans were from SunTrust, but they subsequently sold the second to EMC mortgage. A year later, I switched jobs and got transferred to california, and we had a baby....income went from 150/year to $70k. Our payments/expenses on the house are @ $1900 per month net (we have it rented for $1600/month. I believe the house is now worth around $330k.

We have to borrow $1200 per month from my mother in law just to break even, and this is just not sustainable.

My question/concern: If we foreclose on the house, can SunTrust and/or EMC mortgage sue me for the balance of the loan? Foreclosing does nothing for us if we have a $80k lien on my credit with no asset to show for it. If Suntrust/EMC is allowed to come after me, how likely is that to actually happen?

Thanks in advance for your comments...

OP - Have you talked with the lost mitigation department? Don't talk to customer service ask for the lost mitigation department. Have you tried to short sale the house? This is where you sell the house for less than what you owe on it. In the short rabbit trail of the new law this is where you benefit as before the new law you would have to pay taxes on the difference of the short sale for now you don't so if you short sale it with bank approval then you are on even terms. Then there is deed in leui of foreclosure where you sign the house over to the bank and skip all the court stuff basically usually the bank then agrees to not come after you for the difference. If they give this as an option I highly recommend having an attorney read over it to make sure they will not come after you. The plus side for them is they don't have the added time,court and lawyer cost to go through the foreclosure.

Get the communication open to your mortgage company!

Good luck!
Tammy

ScottGem · Mar 4, 2008, 11:39 AM

The only thing about that is the site is from H&R Block. So it might only include provisions that affect one's tax return. Not allowing the lender to sue over a shortfall, would not affect the tax code. However, I haven't been able to find anything that says they can't sue.