Monday, December 13, 2010

What Our Lawyer Says About Foreclosure and Short Sales

It has been awhile since I have blogged because you know, life is busy. I been caught up with starting my own business (something I'm doing very part-time), getting ready for Christmas, fussy little girls, and just life in general. My husband and I paid a whopping $350 to talk to a real estate attorney about our short sale situation. Yes, it's a lot of money but it was worth it to us to make sure we were making correct decisions. We had researched a lot before talking to the attorney but he told us some things made my jaw hit the ground. I thought I would share them since 1/2 of the country is in our boat. So save your $350 or more bucks and here you go. I will try to be as accurate with what he told me as possible.

First in regards to foreclosure, he said that when you sign the "deed of trust" when you purchase your home, you are agreeing to pay all of the amount owed...however, if you unable to pay the bank they my take your home and sell it at auction. Therefore, you are released from that agreement. He said Washington is one of the very few states that will not sue homeowners for the difference.

So why not just walk away and forget the short sale? Here's the catch and this is what shocked us...

You are only protected if you have 1 loan through 1 bank. If you have a 80/20 loan (even if they are through the same bank) you are NOT... again NOT protected from the 20% loan. If you foreclose, you are liable for the 20% loan. The attorney said the trick is to do a short sale and get both banks to agree to "meet full and total satisfaction"of what you are short. We currently are released from our primary mortgage loan and are in the negotiation process with the 20% loan (Chase). I asked him if he has seen people sued for the 20% and his answer was "Oh yeah!" I actually have two friends who have these loans, lost their homes to foreclosure, and the 20% loan bank is threatening to garnish their wages. They now are claiming bankruptcy to protect themselves.

There is a good chance the short sale will go through and we will still have to pay back the 20%. We are giving this to the Lord because it's out of our hands now. I felt I needed to share this information so people can be informed and protect themselves.

The attorney told us why these banks gave out all these bad loans. He said, "I will tell you this, I do not feel bad for these banks who have went bankrupt. They had this genius idea to give loans to people who usually wouldn't be qualified for the loan to begin with. We'll charge them up the butt with interest, and if they really can't afford it they will foreclose and we will just sell them at auction and get back our money back and more because real estate only increases with time. So they thought... it back fired and the market crashed, people lost their jobs, and people stopped paying their mortgage."

I really think some law will pass to protect these homeowners. The banks get bailed millions of dollars out but we don't get a break? Something needs to be done! We should find out next week if Chase says our loan "meets full satisfaction". Fingers crossed.

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