Lake Living

Im in the midst of a possible foreclosure, wondering if this type of mark on my credit report could affect my ability to attain high level security employment? Ive heard some of the better positions require credit checks; could a foreclosure be considered unethical and degrading to ones character when being considered as a candidate for a position as a security director or similar corporate position?

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Lets say the owner cannot pay the mortgage and house goes on foreclosure and there is a tax lien on the property. The property is worth less than what is owed, no equity. What happens to the tax lien?
You mean the person that purchases the home is the one paying for the pending lien?

the law is specific about what are called PRIORITIES in payoffs-
when buying a foreclosure–

a; IRS liens
b; tax liens
c; mortgage liens

in that order

How much would the foreclosure of a $150,000 mortgage affect a credit score, and for how long? Let’s say the mortgage is about a quarter paid off, and the credit score is relatively good (~650).
7-10 years?
That sounds more like a bankruptcy.
Please note: this is purely theoretical. I am not going through a foreclosure, and I likely won’t, so please don’t sympathize with me. I, however, sympathize with you; it must be incredibly tough to go through one.

Foreclosure, bankruptcy and repossessions all affect credit scores about the same, between 100-150 points as soon as they hit your report.

They will show for 7-years but you can re-establish your credit score in the first 24-months if you work at it.

Credit scores are 90% based on the last 24-months of history so if you pay everything else as agreed for the next 2-years your score will jump back up, the foreclosure will still show but you will have re-established your score.

Also can you help me understand what a tax lien property is and it’s buying process and foreclosure’s buying process, which is better?

High level version of the cycle.

1. People become behind in their bills.
2. At some point the lender decides that it is time to file a formal notice of default. They publicly declare that they are going to take action to seize the house (starting foreclosure).
3. Up until some point before the auction the borrower has the option of catching up and stopping the foreclosure action.
4. An auction is held and anyone can bid. The borrower/owner looses the property to the winning bidder. That bidder might be the lender as they enter the first bid.
5. If the lender is not outbid and ‘wins’ they get the property. They will then proceed to list it with an agent or otherwise work to get it sold off.

You can buy from the borrower in default before the auction. You might even try a short sale where the lender agrees to take less than they are owed.

You can bid at the auction. You need to have ready to hand over the winning amount right then and there if you win. No time to line up a loan secured by the property.

You can buy from the bank after the auction if the bank ends up with the property.

For trust deed sales in CA there is no right of redemption after an auction.

As to your other question about tax liens. You are bidding on a lien held by the county. It is not the same as bidding on the property. You buy the lien and get to collect from the county when the person pays the taxes owed. You earn a rate of return. If they do not pay then you an trigger the next step to force payment.

It is rare for a tax lien to convert into title to the property if the property has a house on it and there are no defects that makes the property worthless. Someone will step forward (the owner or the lender) to pay off the tax lien first.

I modified my mortgage a few months ago and still struggling. I owe $315 and it’s worth about $200. So, after thinking about it I am considering just letting it go into foreclosure. Since I have already been thru this process with them and re-negotiated my mortgage, is the foreclosure process quicker? Will they start the forclosure process after I have missed only one payment? How long do I have to try and save money and find somewhere to live? Has anyone been thru this?

Okay – real answer: You’ve modified your loan and that brought it to current. Now you start the process over before it goes to Foreclosure: 30, 60, 90, 120 150 days past due, pre-foreclosure, foreclosure and eviction. It’s all investor driven.

You can possibly expedite by vacating the property, calling the servicer to let them know that you’ve moved out and left the keys somewhere on the property. They’ll go in and change the locks.

My curiosity is: Why aren’t you listing the property for sale? Why not get rid of it the right way as opposed to letting the investor eat the entire loss? You should be able to list it for fair market value. If you can get an offer at fair market value you can present to your investor and request a Short Sale. This would show as a ’settlement’ on your credit vs. a foreclosure. The negative impact wouldn’t be nearly as great.

Also consider that if you let the property go to foreclosure and say it auctions off in November, is sold back to the lender and not a 3rd party – in January you will get a 1099 and have to claim the investor/bank loss as your income and pay taxes on all of it? You’re saying your loan is $315K? Can you really afford to pay taxes on that amount of money? At least with a short sale you would only be paying taxes on the difference.

You really need to look at all your options and not just the ‘easy’ one. If you let the property go not only will you have to pay taxes on it, your credit will be impacted by 200-300 points, your car insurance is likely to go up, when your credit card companies pull your FICO your interest is likely to go up. If you ever lose your job and the next job you apply for pulls your credit – it will be there for all to see. If you need a new car, you won’t be eligible. You won’t be able to buy another house for a minimum of 2 years unless you can come up with 20%+ down.

Again – I suggest you review all your options and think long term. Do not just do what you think it easiest because the reality is – it’s not as easy as you think.

Does a bank have to wait until your 30 , 60 90 days late to begin foreclosure proceedings or can they begin as soon as 10 days. I live in Kentucky. My loan is due on the 1st I have a 10 day grace period. Could they begin as soon as the 11th if I don’t pay?

Legally they could but most banks will wait about 90 days. You will probably receive many warnings in the mail before they follow through with foreclosure. Keep in contact with your bank and let them know what is going on. If you cannot make the payments you need to start planning for the future. Maybe re-finance? or sell before things get worse.

I’ve been looking up foreclosures at the county office to buy a foreclosure (the ones about to be auctioned). Someone said I should be looking at REO foreclosures. What’s the difference, and how do I buy one and or get info on these?

Step 3 ~ REO = Bank has already foreclosed on the home

Step 2 ~ County Foreclosure Auctions = Could be tax foreclosure or home that bank will be there to be the highest bidder on a home loan default.

Step 1 ~ Short Sale = Pre-foreclosure (Buy from Seller where their bank approves a short payoff on their home loan)

Foreclosure auctions are the absolute riskiest way to buy a home. You are not provided with clear title unless you pay for one prior to attending the auction. Could also have tax liens, utility (water & sewer) liens, materialmen/mechanic liens (contractor), unpaid HOA fees, etc.

Also, you may not be afforded the opportunity to inspect a home prior to bidding on it at auction. Could be a big nasty bucket of worms.

Buy at Step 1 or 3, never Step 2 unless you are an experienced and seasoned foreclosure investor.

We rent out the house and live in another state. We are concerned about what the mortgage company would be able to take from us other than the house if a foreclosure happens?
For example: bank accounts, paychecks, future annuity payments, or any thing else owned?
We are not financially able to continue making payments long term but are current with payments at this time. We have also tried selling but with no luck.
We are a married couple but only one of us on the deed, if this makes any difference.

You can only find out once the foreclosure has already gone through. You can’t find out before the sheriff sale of the property, because the bank and county do not know how much the property will sell for.

They know how much the judgment is against the you, which is why they are selling the house. But if it sells for more than enough to cover the amount of the mortgage, then the bank has absolutely nothing to sue you for.

So you have to wait for the sheriff sale of the house to find out if a deficiency judgment is even a possibility. If the home sells for less than the total amount that you owed, which is entirely probable, then you will have slightly more to worry about. The bank may be able to sue you after the foreclosure for the difference between what they were owed and how much the house sold for.

But why would they bother to sue you again? You didn’t pay the monthly mortgage, you didn’t sell or refinance to get out of the foreclosure judgment, and the county government had to force your home to be auctioned off. Those aren’t the actions of a person who has the financial ability to pay tens of thousands of dollars in further judgments after foreclosure.

Don’t take that as a personal judgment against you — foreclosure happens because people run into financial hardships all the time. But from the bank’s perspective, that hardship protects you from them trying to go after even more of your resources. They will have to hire local attorneys again to initiate another lawsuit against you for the deficiency, then they’ll have to try to collect on it, and you didn’t pay them back the loan and judgment they had to begin with.

For that reason, nearly all banks do not bother with deficiency judgments. Takes too long and costs too much to collect too little. They almost never sue for another judgment after foreclosure. Not even on second homes in other states.

Hope that helps.
ForeclosureFish