Obama's Economy

We are about to file bankruptcy and our house will be foreclosed upon. We owe $880K on a jumbo loan and ?

another $120K from a HELOC. The home is worth about $850K today. We have another $100K in the house and just put in $200K in home renovations. Now, we are completely upside down, so facing foreclosure. Can my parents buy the house at the foreclosure auction and what are the risks in this climate? We are not considering a short-sell bc they are not at an “arm’s length.” What about for foreclosures?
Any other ideas? The banks won’t negotiate with us bc we don’t have enough equity in the house. ;(

Dear Gogo,

If you no longer have to pay your mortgage note after foreclosure do you still need to file bankruptcy?

And after you lose your real estate security do you own hard assets above and beyond state & federal exemptions that can be taken by creditors.

Let me point out that few states allow deficiency judgments after foreclosure of owner occupied properties. Secondly, no debtor prisons exist in the U.S. and you might not want to file a bankruptcy to minimize your exposure of your most personal financial information,
interfere with retirement/insurance rights or use up your bankruptcy rights for less than your greatest potential or actual liability.

You might want to live with indebtedness inorder to pay off remaining debts for pennies and never go through bankruptcy. Get effective economic analysis from an accountant or from an attorney not operating a filing mill.

Short sales need not be full arm’s length. That is up to the lender. Mortgage renegotiation is a major consumer rip-off in too many cases. Banks and lending institutions are not granting major compromises in interest rate terms or mortgage balances because they fear substantial personal/corporate liability from second guessing shareholders/investors.

I can only address California market conditions but the UCLA Anderson School of Business believes a new waive of foreclosures is due in the $1 million plus loan arena in the months of January through April time frame wherein lare numbers of these size loans are scheduled to require readjustment/refinance. More downward price pressure would result to individuals purchasing your property at or near $850K.

If the payments are otherwise affordable, you should stay in the property and wait 2-5 years until the market recovers. It does not appear new opportunities will allow you to soon reacquire this type of asset if you are foreclosed or otherwise forced to give it up. There are benefits from owning a property against which you owe more than its current value. Those benefits include the mortgage tax relief, absence of rental payments and enjoyment of living in a property under personal control. Is it possible to rent out a room or two to help with your mortgage payments? I know individuals living close to UCLA and Pepperdine University renting rooms to students trying to keep homes.

Good Luck!