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Shortly before the pandemic, my husband accepted a job that required us to move out of the state; however, we have not yet had to because of teleworking. My husband and I have two small children. Because of our remote work, my fathers-in-law observed our children in our house and often stay for days.
My husband and I asked his parents to move in with us when we moved. In theory, this is a great plan for everyone involved: free child care for us, reduced costs for them and we all enjoy each other’s company.
The dilemma is that my mother-in-law has $ 50,000 underwater at their town house. The house has problems with water penetration and foundations that are worth only about $ 100,000, at best. My father-in-law is a very disciplined man and doesn’t think leaving is the right thing to do. He thinks that continuing to pay the mortgage is the best plan, even if they do not live in the house.
A short sale, even if the buyer were willing to accept the problem, would be disastrous for any savings he has. My husband feels that going and accepting a foreclosure loan agreement is the best option. They would live with us and would no longer be bothered by paying the mortgage.
In addition, my husband is the only child and the appointed executor of the property. My husband realizes that his home will take care of his home whenever his father dies (he is 71 years old). Should my father-in-law keep paying or walking away? Are there other options we should consider?
Your letter is an important reminder that even at a time when home values are rising at a record pace, many Americans still owe more on their mortgages than their homes are worth, also known as “being underwater” at home.
Millions of Americans found themselves in this position after the mortgage crisis that caused the Great Recession. But even though house prices have risen – in many cases to new highs of all time – some 1.6 million homes are still in negative capital since the third quarter of 2020, according to the latest data available from CoreLogic
This represents approximately 3% of all mortgage homes nationwide.
Leaving a house that is under water is a reckless move, no matter how you cut it. And virtually any financial expert would advise your family to avoid this at all costs.
For starters, foreclosures are absolutely disastrous for a homeowner’s credit score and remain in a person’s credit file for seven years. You might be thinking, what’s the difference? So what if your new life arrangement fails? Your family and the bride and groom spend only a short period of time together – this is very different from living together forever.
If your in-laws decide they need their place, they may have trouble qualifying for a low-credit lease they would have after foreclosure. Are you and your husband ready to act as guarantors in such a situation?
Enforcement is not a ticket to get out of jail. You have written off the possibility of making a short sale because it would harm your in-laws ’savings, but that is exactly what could happen with foreclosure.
“Depending on the laws of their state, the lender can enforce the loan, sell the property and seek parental judgment for the defect – the difference between the sale price and what is owed on the loan plus taxes, insurance, fines and fees,” Rick said. Sharga, a veteran of the mortgage industry and executive vice president of real estate data company RealtyTrac.
Don’t miss: I’m planning to retire soon. Should we sell our home while prices are high – and rent for two years?
Federal law specifies that pension savings in company-sponsored pension accounts, such as 401 (k), are exempt from prohibition by creditors in the event of a default judgment. Some states provide the same service to self-governing retirement accounts.
There are both moral and ethical considerations. Your in-laws have signed an agreement with the mortgage lender, so it’s understandable that your father-in-law feels obligated to maintain his end of the deal. In addition, research shows that foreclosures can reduce the value of nearby homes ’assets.
What to do instead? Well, to begin with, you should all investigate whether your in-laws qualify for any form of assistance in order to make the necessary repairs to your home to bring it to a state of sale. If any of your in-laws are military veterans, they may be eligible for assistance through Operation Homefront. Other resources they can explore for financial assistance include the National Association of Regional Aging Agencies and Habitats for Humanity.
I also think you should consider a short sale and see if the mortgage servicer of your in-laws will agree to a reduced amount to repay the mortgage. Servicemen can still claim your in-laws for the remaining balance after the sale of the loan – although it depends on the state – but as I said, the same goes for foreclosures.
“Another option could be‘ act instead of foreclosure ’, where they would hand over the house to the bank without going through foreclosure proceedings, perhaps in exchange for the bank’s promise to waive any deficiencies,” said Eric Dunn, director of litigation on the national housing law project .
A short sale or deed instead would affect your in-law’s credit, but they would still be less serious than a blow that would take them to foreclosure. And with any of the options, you need a service technician to agree.
How does foreclosure happen?
- 1 How does foreclosure happen?
- 2 What to do if you are underwater on your mortgage?
They could also always see if the lender would be willing to forgive them part of the loan principal. This may interest you : My in-laws are underwater on their mortgage and their home is in disrepair. Should they just walk away and move in with us?. Unlikely, but the lender may be willing to be flexible – foreclosure is finally expensive for mortgage companies.
Do you get any money if your house is foreclosed?
Before your family makes any decisions, I warmly recommend that you discuss your case with a real estate attorney or HUD-certified housing counselor. These individuals could help negotiate the best possible solution with their father-in-law’s lender to ensure they get out of this situation in better shape. Read also : My in-laws are underwater on their mortgage and their home is in disrepair. Should they just walk away and move in with us?. I wish your family good luck.
Can you still live in your house after foreclosure?
Read more: I am retired and I will not wait for my mortgage to pay off. To see also : Will selling my own home save me money?. Should I refinance to reduce my monthly payment?
Do banks want to foreclose?
Enforcement occurs when the borrower fails to pay the mortgage and the lender or mortgage investor must return the house to possession. Enforcement can also occur when a homeowner does not pay property taxes or fees to a homeowners association.
What to do if you are underwater on your mortgage?
Generally, a seized borrower is entitled to additional money; but, if any lien is pledged at home, such as a second mortgage or HELOC, or if the creditor has recorded a lien on the property, those parties get the first crack in the funds.
- In some cases, panicked homeowners leave their home after missing several mortgage payments or after foreclosure begins. But you have a legal right to stay in your home until the process is complete. Enforcement proceedings can take several months or, in some cases, a year or longer.
- Banks are run like business because they are companies that want to make money. If foreclosure costs more due to agreeing to a short sale, the bank will most likely favor a short sale. With foreclosure, the bank takes possession of the house and then sells it on a mortgage at auction to the highest bidder.
- What are your options if your mortgage is under water?
- Option 1: Stay in your home and work to build more capital. …
- Option 2: Refinance the mortgage. …
What happens if you sell a house for less than you paid?
Option 3: Sell the house and pay the amount you still owe with your savings. …
Can I refinance if my house is underwater?
Option 4: Sell your home with a short sale process. …