home equity loans/second mortgage and foreclosure?
Does anyone know the actual laws about this? If you lose your home to foreclosure, and you have a home equity loan, I mean obviously you should still continue to pay. But I've gotten mixed opinions on this and just wondering... are you completely and legally still obligated to pay that off or since they have lost their security can you safely/legally just let it go? This is not in my nature but well we're about to lose our home, and money is insanely tight (that loan was to do work on the house we're losing) so as HORRIBLE as it sounds I'm wondering if we have an option to let that go with the home so we can start to build up an emergency savings account (as we have 0 in savings right now.)
no we have no options, we are way too far behind, and we do not have the means to pay for a mortgage and rent in another place (we're Military) our only luck would be it selling, but well clearly that isn't happening. we accepted a long time ago that this could happen I just want to know about that other loan.
yep but we can't pay back money we don't have. we do have it listed for sale, it has been for almost a year! We've lowered the asking price drastically. All I want to know is what happens leagally if we decide to let the second loan go with the foreclosure? I haven't decided 100% if we'd do that but I just w
yep but we can't pay back money we don't have. we do have it listed for sale, it has been for almost a year! We've lowered the asking price drastically. All I want to know is what happens leagally if we decide to let the second loan go with the foreclosure? I haven't decided 100% if we'd do that but I just want to know what our options are and what our obligations would be legally. re: taxes, laws, anything.
- slinkiesLv 61 decade agoBest Answer
if you have PMI, then get your house on the market and start talks with the second mortgage company ... (they usually won't work with you unless you are trying to sell it)
your best bet is to try and do a deed in lieu with the second mortgage company, then they get the proceeds from the foreclosure sale and the primary company gets the money from the PMI
if you do not have private mortgage insurance on the first loan and you cannot sell the home for what you have in it, then you should consider consultation with an attorney ... a short sale may be possible if both banking institutions agree to it, but you'll need an attorney's advice on that one ...
also ... if you are going to try for an apartment after this, you should get the application approved before the mortgage issues show up on your credit report ...
- Anonymous1 decade ago
There are a lot of benefits when you have a home equity. First of all, it increases the value of your home. Moreover, you can make use of it so you will be able to improve your credit rating should you decide to apply for a home equity loan.nBut do you exactly know how to make good use of your loan? Just to help you out, here are 4 tips for you. Be careful when you're applying for a home equity loan If you're familiar with standard bank loans, then you will know how this works. When you're going to apply for a conventional loan in a bank, you will have to provide collateral, which can then function as your secure deposit. It lowers down the risks of banks in entering on a loan with you.
Thus, they can provide you with a mortgage with lower payment terms and interest rates. However, if you ever miss payments on your loan, or you can no longer cope with them, there's huge possibility that your collateral will be taken away from you. It's the same case with your home equity loan. If you aren't too careful with it, you will likely lose your own home Take note of the length of your loan. You can have the power to take control over the length of your home equity loan. However, you should be wise with this. Logic can tell you that if you're going to extend your loan for so many years, you will be enjoying lower interest rates.
- Anonymous1 decade ago
Start by reading IRS publication 4681.
Technically, you borrowed money, not a house, so your promise was to pay back money, not a house. The second mortgage is almost always a recourse loan. If the bank doesn't pursue the debt, they issue a 1099-C and the difference between the loan and the foreclosure/short sale value is called "cancelled debt income."
How this debt is handled on your federal tax return depends on whether you actually used the money on remodeling or if you spent it on something else. Even if you can exclude it on the federal return, you state may treat it differently.