Need some advice...thinking about letting my property go to foreclosure.

[Phil James]

I purchased an investment property 3 years ago. At the time of purchase it appraised for 96k. Over the last three years I have been losing about 10k a year on the property. I recently had it reappraised and the appraisal came back at 48k. I currently owe 90k on the property. I am thinking about just letting it go to foreclosure. I spoke to an attorney and they said due to the difference in what it appraised for and what I owe, there is a good chance the bank could file a deficiency judgment against me after they sell it. I figure since I have been losing 10k a year on it… if the bank comes after me for 30k-40k I won’t be too far off from what I would have lost on it eventually. I have money in the bank to pay the mortgage, but I just feel like I am throwing it out the window and delaying the inevitable.

Every realtor I have spoken with said they never heard of a bank filing a deficiency judgment against anyone. Any feedback or advice on how some of you would handle this type of situation is appreciated. At this point I think I should just let it go.

thank you!

[Joel Owens]

Phil is Wells Fargo the investor on the loan or the servicer??

Depending on how this loan was formulated there are pooling and servicing guidelines that MUST be followed or the servicer can be sued by the investor on the loan.

There is a process by which different degrees of workouts are followed with each one being more severe in loss according to averages. An investor that owns a loan just can't claim big losses or insurance would deny the claim. Insurance wants to know every workout was pursued and documented before they payout anything for losses on a loan.

The DIL is not something you can do right away. When you call in Wells Fargo has many different departments (customer service, collections, bankruptcy, loss mitigation, short sale, foreclosure, etc.). If you haven't missed a payment your loan isn't in one of the workout departments so of course they will tell you no.

Usually they will make you go short sale before looking at DIL. If there are other liens on the property then the bank will not want to do the DIL. They will short sale with junior liens discounted to cents on the dollar to release lien interest or they will foreclose and wipe them out.

They could file a deficiency if there are assets to possibly attach or go after. An attorney can argue and try to get any deficiency amount reduced.

Have you thought about getting a loan mod on the property?? Maybe this would help it cash flow. What about owner finance with a wrap around?? The key is to look at your mortgage papers you signed and see what their recourse is in case of default.

You could see if they would agree to a reduced difference of a promissory note when you sell to make payments on. Many options. You can't just give something back to somebody without their acceptance. Some banks do not want to own property because of liability of someone getting hurt on site and suing, vandalism to the property, and fines by the city and county for code issues etc.

No legal advice.