I'm not sure I understand the question, so, I will just provide some general information on possible options for folks who are behind on mortgage payments and can't cure the default.
1. Talk to your lender about loan modification options. Many loans are eligible for HARP and HAMP programs. Even if you have a good interest rate, sometimes you can add mortgage arrears to principal and avoid foreclosure, without losing your rate . . . and sometimes you can get even a better rate or longer repayment term (or both) to make the payments more affordable. Even if HARP or HAMP programs are not available, many lenders offer "in-house" modification programs.
If the reason for getting behind on payments has subsided, you can also try a loan forbearance agreement. This is where the lender accepts your regular payment going forward, plus a portion of the arrearage, so that over time, you get caught up. For example, if you did a 6 month forbearance, you would pay your regular payment, plus 1/6 of the arrearage.
2. Chapter 13 bankruptcy. With respect to catching up mortgage arrears, Chapter 13 bankruptcy allows you, in essence, to do up to a 60 month forbearance. That is, you make your regular mortgage payment, plus 1/60th of the arrearage, through a Chapter 13 Plan of Reorganization. You also may be able to discharge all or a significant portion of other debt through bankruptcy, which would make it easier to afford your mortgage payments.
3. Selling the property. Although Zillow is not an accurate source for property value, so I would recommend getting a comparative market analysis from a real estate agent who "farms" your neighborhood, in your case (and in most where there is such a large mortgage arrearage), there is often no equity in the property. I understand that you would like to make a profit on the property. Who wouldn't? But the reality of the situation may be that you will need to get your lender to agree to a short sale. A short sale is where the lender will take less than what is owed and still release the mortgage so that the buyer can take title to the property free and clear of your lender's lien. This allows the buyer to get his or her own new financing to purchase the property.
Now be careful. Just because your lender may agree to a short sale, doesn't mean that you don't owe the balance between what your lender received from sale proceeds and what was owed (this is called a deficiency balance and it will include all that accrued interest, plus attorney fees, late fees, drive-by inspection fees, closing costs, commissions, etc,,,). Lenders also often issue a 1099-C for "debt forgiveness" if they do, in fact, agree that you do not owe any deficiency balance, and this could create a serious tax liability. [Note: if they do wish to issue a 1099-C, consult IRS Publication 4681 to determine whether the amounts reported on the 1099 may be excepted or excluded from income].
On a brighter note, lenders sometime offer "cash for keys" in conjunction with short sale programs, where they actually give you money to move if you leave the place clean, with all of the appliances (instead of living there for months and months without paying the mortgage and then trashing it, pulling out all the copper pipes and electric wire for scrap, and selling the built in kitchen cabinets, countertops, stove, dishwasher, ceiling fans, and light fixtures on craigslist).
In all cases -- as you can see -- this stuff is complex and there are many, many, options and considerations which should be discussed in detail with competent legal counsel.
Best of luck,
Feel free to visit our website for more tax and bankruptcy related information and contact us if we may be of further assistance. www.ScottPaulLaw.com Colorado practice limited to bankruptcy, federal tax law and related laws under U.S. statutes before the United States Bankruptcy and District Courts for the District of Colorado. We are a federally designated debt relief agency and help people and companies file for bankruptcy protection under the U.S. Bankruptcy Code.
I assume that you mean "zillow," not willow? It's values are close to random numbers, but it can be useful for finding other recent sales.
Given when you bought the house, it is unlikely that you can sell it for enough to cover closing costs and put money in your pocket.
A chapter 13 would allow you to bring it current over five years, or you could try to modify it (at least if you live there), or you could short-sell it (possibly putting some "Cash for keys" money into your pocket.
My office handles all three options.
You more than likely would be qualified for a loan modification under HAMP. You need to talk directly to your lender and ask their requirements for such loan modification. However, since the process is very long and it may exhaust you, be patient. I suggest hire a reputalbe loan modification company. Again, HAMP is income based and you need to be working and let the bank realize that you would cooperate with them. Your interest rate is very good. However, the delinquent amount can be placed at the end of the loan, and reamortize which may make your monthly payments go up. www.lasvegaslawgroup.com
Only see a licensed attorney before you make any decision. This answer may not be perfect in any given situation. However, more fact may be required by your local attorney. If you are in Las Vegas, you are welcome to send your questions regarding Chapter 7, or 13 to Attorney Malik Ahmad at Malik@lasvegaslawgroup.com or www.fastbankruptcynevada.com or by calling (702) 270-9100. In many cases, we do not charge initial consultation fee.
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