[rnfowl]

My husband is 38 and I am 31 with 2 good jobs. We bought a mobile home 11 years ago and now have a house. We were unable to sell our mobile home in 1999 when we bought our house d/t depreciated value. We now rent it out. Our renter is 3 months past due and we are considering a voluntary surrender. We live in NY and are not sure how this works. If we surrender will the bank seek the difference from what they sell it for vs the balance? If we do not pay the balance what will happen? I have heard to not pay the balance and after 7 years this is removed from your credit report and no longer visible. Is this true? Also, is it recommended for a short sale to be done and ask for a pay to delete (from credit report). This home is in a mobile home park. We just can't keep up two homes at our age. Thanks :confused:

[ScottGem]

Have you tried evicting the renter and getting a new tenant?

If you surrender the home or allow a foreclosure, both will go on your credit report as a loan default and will remain there for at least 7 years affecting your future ability to obtain credit. You will also stillb e responsible for the balance due on the loan after they auction it off.

If the bank will agree to a short sale, that would be your best option.

[rnfowl]

We thought about eviction except that then we continue the trend of renting and again worrying about maintenance of two homes. We are at the point we want the one home for our family.

Short sale... we sell the mobile home and they accept the amount... Do I understand this correctly? Are we still responsible for the difference? Any other info you can provide regarding short sales would be of help. Thanks

[ScottGem]

Yes, in a short sale (If the lender agrees to it), they accept an amount below the balance due. They then "forgive" the difference as a gift to you, which they write off. They then send you a 1099 for that amount which you have to declare as income and pay taxes on.

You will probably have to evict the tenants before you sell. You really should evict now. Letting tenants sit there for that long without paying is not a good idea.

[rnfowl]

Thanks so much for your help! I contacted our mortgage bank whom we have our house through and they will do a recast on our current mortgage to satisfy our mobile home bank. Of course, if this bank will do a short sale. (I am pretty sure they will.) Any thoughts on a recast?

[ScottGem]

I'm not sure what they mean by recast. Does that mean fold the balnace into your current mortgage? While that may help you make the payments easier, it doesn't relieve you of the responsibility.

[Dr D]

Since you mentioned that the MH was in a park, I would guess that it sits on a rented lot, not on its own piece of real estate. If that is the case, the MH does not have a mortgage, but a debt just like a car loan. If the bank does a repo on the MH, they will sell it at auction, probably for less than the debt, and pursue you for the deficiency. What the lender on your current real property is suggesting is a cash out refinance to pay off the MH. Depending on the current rate of your home mortgage compared to prevailing rates, and the amount needed to pay off the MH, a refinance may or may not make sense. Check out a Home Equity Line Of Credit (HELOC) with your bank or CU. The advantage of a HELOC from your bank is that they usually pay ALL the closing costs.

[rnfowl]

By what I understand, they will give us the amount of money needed for the short sale. In the meantime I can sell our mobile home and apply the proceeds to our regular mortgage. They did not suggest a home equity but instead a recast. We would try to sell for roughly the amount needed to pay off what we will be adding to our mortgage except for closing costs of about $5500. As far as taxes... we offered 25,000 for short sale. If taken then we will owe taxes on $12,000. However, there is a $6,000 depreciation value. So taxed amount would be roughly on $6000 instead of the $12,000 and we would pay about $1200. If it is repossessed we lose about $18,000 plus taxes on it ($3,500) if they get 19,000 for it. So that would be about $21,500 loss. We are in the 20% bracket. If we did a short sale of $25000 and sold it for $23000. We would lose out on the $5500 closing costs and the $2000 difference. Taxes would change because of the $6000 depreciation value and $2000 loss. So now I would be taxed on 4000 instead of 6000 because of the 2000 selling loss. So paying taxes of $800 vs. $1200. Right?? This is sooooo confusing. We still owe $37,000 on a 1997 single wide mobile home. Crazy I know. What you do when you are young...

Did I confuse you... well... the next question is how many times can you make an offer? If they turn down the $25000 can I make another offer and at what point do they accept?

[rnfowl]

Our current rate is 6.3%. They are telling me I can get a rate of 6.5%.

[Dr D]

The question that you failed to answer was: Is the MH on its own land or not. If it is not on its own land, it is personal rather than real property, and does not have a mortgage. A short sale is only applicable to real property. With a short sale, a home is put on the market. If a buyer submits a purchase contract to buy the home at a price insufficient to pay off the mortgage, then the lender can agree to accept less than the full pay off. The bottom line is that you owe $37,000 on a MH that is worth perhaps $23,000, which means that you will have to come up with about $14,000 out of your pocket to sell the MH. You can ask the bank if they will give you a personal loan to cover the $14,000 shortfall. If they won't then get a HELOC from your bank to cover the $14,000. You might even consider getting one for a higher amount, because the rate will be better. DO NOT REFINANCE your home. It makes NO sense to spend to spend $5,500 to get $14,000, and increase the rate on your loan. A HELOC is best, even if it were at 10%.

[rnfowl]

Thank you very much Dr D. Our mobile home is in a park and we pay lot rent. We do not own the land. Sorry I did not answer that. We have been contemplating on refinancing and especially after your advice we will not do that. My husband was not exactly agreeable to this but it was a possible option. Your comments have been very helpful and appreciative. What if we cannot get a HELOC approved loan due to income debt ratio at this point? Do you think we would still be better off letting it repo and serving out the 7 yrs. When we rent this out we do not get enough to cover both the loan on the mobile home and lot rent. We pay $77 out of our pockets every month. We have done this for 7 years now. We unfortunately took this loan out over 30 years. Thanks

[Dr D]

Do what you must to evict the present tenant. Get a judgement against them for the unpaid rent. Clean the place up and put it on the market for sale. Make sure that a new buyer of the unit will be able to leave it on the same lot. I hope that you have not damaged your credit during this time, where it could prevent you from getting a HELOC. If your total debt ratio is too high, see if you could get enough cash from the HELOC to pay off some other debts also. When you talk to the bank for the HELOC, base your debt ratio on the basis that the MH loan is gone. Do what you can to prevent a repo. If that happens, you will trash your credit, and still pay the difference. I know it is not fun, but hang in there.

[Fr_Chuck]

I will address the rental issue, if they are more than 30 days late and you did not already evict them, you are a bad landlord, Normally after 15 days late, they are getting their first notice of payment and eviction though court at 30 days.

[rnfowl]

Yes we are bad landlords... too lenient and nieve you could say. We are generally good people that try to help others out too and unfortunately it bit us... I am filing for eviction finally. Thanks

[bella57]

What ever happened with your home? Did you sell it? What park was it in?