Upcoming Foreclosures

Does foreclosure mean they can take other properties from you??

My mother-in-law owns 2 houses in southern Florida…the main one she lives in and the investment one she bought several towns over 2 years ago. The second one that she owns and had been renting out is now empty and she can no longer afford the payments. She has been to see her mortgage bank and they told her that it is only after she is 60 days late on payments they have to “do something about the situation.” We have been talking and talking for days now and she has decided that the only viable road left open to her is a Foreclosure. She has asked me for information about it and I do not know about Foreclosures. Does anyone know if her main house – the one she lives in and maintains a Homestead exemption on – can be taken from her if she Forecloses on the second one? Does anyone have any real information about this? Please do NOT respond with advice, about loans, business opportunities, money-making schemes, etc. I really just need Foreclosure information. Thanks very much.

Public Comments

1. After the foreclosure the house will be sold. If the sale does not cover the mortgage and all liens and forclosure expenses then a deficiency judgement will be granted to the bank. I do not know if a lien can be put against her main house. I am no lawyer which is what is needed and keep in mind the laws vary from state to state.
2. The foreclosure route SHOULD be the last option. If the house goes to foreclosure it will: 1. Ruin her credit, 2. Result in significant additional legal fees that will be tacked on to the balance owed, 3. NOT eliminate the debt. It will only reduce the debt by the amount the house sells for. Any deficiency balance plus fees will still be payable by your mother in law. If she owns her own home in the same name in which she borrowed the money, the deficiency balance can be assessed against her home as a lien that will need to be paid off before she will ever be able to sell her home. The good news is that, in Florida, assuming she has "homesteaded" her home, she cannot be foreclosed on her residence as a result of the judgement deficiency balance. She'll still need to pay it off at the time of a sale (or transfer due to death, etc) but she will not be thrown out of her principal residence due to a judgement. That all said ..... has she tried to SELL the rental? Even if she owes more on it than she can sell it for ... she can 1. Ask the bank to allow a "Short Sale." That means that they accept the amount it sells for as final payment on the loan. 2. Ask the bank to allow her to sell the rental for less than is owed and transfer the remaining balance due over to her principal residence as a mortgage. She'll still end up paying the deficiency but she'll avoid the foreclosure. Avoid the foreclosure at ALL costs. It will remain on her credit report for 7 years .... AND it eventually will cost her a lot of money since any variable debt (credit cards) will also see their interest rate increased due to the "universal default" clauses in credit card agreements. She made a bad investment in purchasing the rental property. The bank did what she asked in making the loan. She needs to do whatever is humanly possible to make the bank whole. Hope this helps!!!
3. Listen to what Joe above me has to say. Foreclosure should be the very last option she chooses after leaving every other stone unturned. It will absolutely ruin her credit and she will still owe on it. Try to sell it before the bank takes hold. FYI - The bank may start collection options at 60 days, but they do not foreclose at 60. She still has some leeway. Sell it for less than owed on it if you must, but try to get that thing sold!! OOPS!! In answer to your question...if she used her main house as collateral for the second mortgage, then yes. They can take that, too. However, if they are two separate mortgages and have nothing to do with each other, than no they can't. She should quite honestly seek legal counsel before doing anything on her own. A few hundred bucks for some solid advice is a lot smarter than throwing away $$ THOUSANDS $$!! They might have some better alternatives for her.
4. It depends on the terms of the loan. Are both homes on the mortgage? More than likely the loan is just for one home but you should check. They can't take the other home if it isn't listed as collateral in the mortgage contract. It would be better for you to talk with the bank and see if they can delay payments while you are attempting to sell the home. If they let you do that, don't go for a profit. Set a price that will sell the home quickly and pay the full amount of the mortgage.