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In Foreclosure, Need Some Advice.?

It was a really bad year for our family. Job losses, thousands of dollars in unforeseen expenses, loss of a huge sum of money in a bad investment, and the recent increase in house payment had forced us into foreclosure. I was wondering since we live in California is it possible under our state law that the mortgage company can come after us for the balance after our house is sold for lesser amount? What should we do now ? Is there anyway we can start to build our credit again ? What steps from here we should take to sort of restart again ? The fact of the matter is that we lost so much money and so many bad things happened that I have broken down inside. I don't know what to do now. I will really appreciate any good advice.

Public Comments

1. In California if your mortgage is a purchase money mortgage (not a refinance) the lender CAN NOT make you pay any more if they do not sell the house for the amount owed.
2. California is a trust deed state and if your home was used as your residence and the loan was a 1st trust deed they won't be able to sue you for a deficientcy balance. Time is the only real way to rebuild your credit . Pay your bills on time and sometime down the road you'll be able to buy another house. There are a number of other ways besides getting a loan to buy a house. Go to http://profitinforeclosures.com and pick up a copy of my report concerning foreclosures and short sales. While at the site look around and you will get ideas for alternative ways to buy. Good luck. Don
3. You can put your house on the market and try to sell it for less than you owe (for instance, you bought it for $400,000, you owe $390,000, and you could probably sell it for $350,000 right now.) This is called a short sale and it's less damaging to your credit than a foreclosure. However, the IRS considers that $40,000 difference between the balance owed and the sales price to be income and they will most likely tax you on it. (A bill just passed in Congress to get rid of this law so it may soon go away, but as of right now you'll be taxed on it.) If I were you, I'd go find a place to rent now while your credit is still ok. If you list the house and can't sell it and the bank forecloses, at least you'll already have a place to live. Your credit will be hurt pretty badly but if you pay all your bills on time, get rid of as much debt as you can, you'll start repairing your credit. Then in 2-3 years you can try buying another house. If you decide to do a short sale, get a Realtor who's got a lot of experience doing them. It's very difficult and that person will have to spend HOURS on the phone with your bank. You might want to call your bank and ask for a short sale package. Write a letter about why you're in this situation - the more of a tearjerker it is, the better. Send it in with your short sale package so that you can start the ball rolling. Many banks will delay foreclosure if you're actively trying to sell it. Best of luck to you!
4. As a real estate agent I see a record breaking rate of people going through what you are going through. The good news is you could buy a house today for a song. I kid you not, it is so easy to buy a house. What I would advise you to do is rent something and stockpile money and then buy when you see the market going up.