[lilbidnezlady]

Anyone have experience with banks calling loans due early on investment real estate? Avoiding Bankruptcy because of foreclosure with Deficiency Judgments? Lil Landlady here needs some help and creative suggestions/ideas.

In 2005, took out five loans with a small, local bank secured by real estate (rental properties). I have been paying faithfully. The balloon notes are due in 2012. Bank called all five of them due two weeks ago.

After calling the bank's lawyer expressing my confusion and surprise because I am current on all loans, he referred me to the bank's special assets manager (risk manager, I guess). Apparently, I'm on their credit risk list because I called the bank last December and asked for forbearance, renegotiating, or deed in lieu as my husband lost his job and rental income was slow. Didn't get restructure as I already restructured in 2007, but got a change of due date, which helped a little. But then they showed me late on one note because it didn't get rolled over to the new due date. I put this error in writing. Also, they may have figured out that one of the Loans (Loan #5) has a serious loss of collateral issue as that one loan secures five pieces of property which are upside down in value.) The other four loans have a decent LTV and are current as well.

I'm also on the risk manager's hit list because he doesn't have current tax returns or financial statements on us. I offered to give them to him now, but he said it wouldn't help. He is still calling the loans due. Now if they ask for them today, I'm reluctant to give them to him because it would show him all too quickly my other assets – so I don’t felt that is in my best interest.

I have stayed in touch with risk mngr to report that I am working with two tenants who want to buy their rentals. I have found a private investor who is possibly interested in becoming 1st mortgagor on a couple of other properties. Risk Mngr is not impressed, as he wants me to find financing at another bank. To tell you the truth, no bank would loan to a self-employed landlady whose husband is unemployed in these days and times. And my credit score isn’t great even though I paid off all my debt except the mortgages in the last year, but it shows me with way too much credit in the way of 13 mortgages. And as I paid stuff off, my scores went DOWN. Crazy. Can’t get more consumer credit to boost my scores because hubby is laid off and we’re self-employed and being landlords who just show a lot of expenses and not impressive income. But we pay all mortgages on time.

I would LOVE to give a DEED IN LIEU for Loan #5 ($148K on five small properties), but am certain there would be a deficiency judgment which might force me into BANKRUPTCY.

I need to PROTECT MY ASSETS. But to sell them now would be at a sacrifice price and eliminate my monthly income and only retirement strategy. To transfer title to another LLC would make it subject to clawback (for how long? A year? Longer?) I’m worried sick. I’m worried about bankruptcy; losing my other properties not financed at this bank; even losing my own house in bankruptcy because my homestead exemption isn’t enough in this state to cover my equity.

I’m going to talk to bank’s asset mngr tomorrow and try to buy more time. If I could buy a year or two, I could restructure ownership of properties by putting them in separate LLCs, and find new financing for their notes that would have each property stand on its own, which would also help with liability issues (I was just always worried about the due on sale clause because I must keep existing financing). I have talked to a bankruptcy attorney and I’m not encouraged by the news. They only talk bankruptcy, but I want a more creative strategy. I don’t see how I could declare bankruptcy and hold on to my rental properties and home.

I’m thinking of telling bank tomorrow that we have two options: Me keep paying the notes, or me giving them back the properties and forcing me into bankruptcy. Anybody out there have creative strategies? Anybody know about asset managers/bank’s thinking these days? What bank in their right mind would call on performing assets? H

[ForeclosureHelp]

Whatever you do don't walk away... before you give the properties back on a deed-in-lieu do a short sale!

Actually someone I know had this done where the banks called the loans on a couple of buildings... they took the properties to Sheriff Sale since he was unable to get financing for them.

[ScottGem]

Don't you have an attorney? If you are investing in real estate to the extent you arre, you should have an attorney. Also, you really should be doing business as an LLC from the get go.

I'm not sure how paying the balances would reveal your specific assets. But the bottomline is the bank has the right to call the loans under the circumstances. So your option is to refinance, pay the balances or walk away.