Worst case scenarios

[Paxton R Nicholas]

I own a 4 unit in Seacoast NH with an FHA loan. I live in one of the 4 units and rent the others out. The other units pay the mortgage plus all expenses, plus reserves I stuff away for vacancy and repairs which need to be addressed in the future.

So my question is even if all goes well and I make my payments to the bank on time, is there anything that I don't have any control over which might happen. If the bank needed to could they foreclose?

For the sake of argument, let's sy the market takes a huge downturn and I'm suddenly upside down on my mortgage, I owe more than the house is worth, what could the bank do in that case?

I am just trying to understand my risks even though I know they are very unlikely. I still want to come to grips with them.

Thank you!

[Account Closed]

Originally posted by @Paxton R Nicholas:

I own a 4 unit in Seacoast NH with an FHA loan. I live in one of the 4 units and rent the others out. The other units pay the mortgage plus all expenses, plus reserves I stuff away for vacancy and repairs which need to be addressed in the future.

So my question is even if all goes well and I make my payments to the bank on time, is there anything that I don't have any control over which might happen. If the bank needed to could they foreclose?

For the sake of argument, let's sy the market takes a huge downturn and I'm suddenly upside down on my mortgage, I owe more than the house is worth, what could the bank do in that case?

I am just trying to understand my risks even though I know they are very unlikely. I still want to come to grips with them.

Thank you!

 Honestly in those parameters, I dont see much risk. If its a fixed rate/term loan, they bank can't do anything as long as you stay compliant. Keep paying on time, keep insurance/pay the taxes or keep paying escrow, and they will happily cash your checks until you pay off the loan. 

I honestly don't think there will be a huge downturn. The 2009 crisis was due to tons of subprime and "liar loans" where banks were throwing money at people who honestly weren't qualified.  That's largely gone now. The only thing I could see happening is if credit is suddenly froze up, meaning people can't buy easily. However, you are renting, so as long as you don't really need to sell and can keep finding tenants, no big deal and just wait it out. 

Rents falling would be probably your biggest market concern, so you can look at your market and see if you think demand will remain.