Can this Deed in Lieu be done? Or a Short Pay?

[Brian Jones]

Hi Everyone! Any suggestions, greatly appreciated. I'm trying to help a good friend out that got herself into a real bind. She bought a property from a shady investor in Birmingham, AL 1/09 that has been nothing but a nightmare. He gave her a verbal warranty(her 1st mistake not in writing) on the house for a year as she did not get an inspection (her 2nd mistake). 6 months after owning the roof caved in, then the tenants later living there totally took advantage, numerous other expenses spent, and finally getting notice from code that the property supposedly has been condemned since 2002 yet that never showed on any public records(Title ins did not cover) and the water was previously able to be turned on, yet now city saying it can't b/c property is condemned?? 10k+ in repairs needed to now bring out of condemned status b/c code really stuck it to her. She had a property manager out there that didn't quite manage. She lives in FL

Anyway...she currently owes 60k (purch for 76k), the properties in the area are now selling for literally 5-10k(for 3bdrm houses). With the repairs needed to bring out of condemned status this house is worth nothing, $0.

I intend to help her by negotiating w/ her lender Wells Fargo, but I don't even know where to start on this one. Property was purchased as a 2nd home, she can meet the hardship no problem, but would the bank accept a deed in lieu on something like this? or should she just let it go and deal w/ probable/possible deficiency later(She does have job earning approx 50k/yr). I was thinking if she could offer maybe 10-15k cash they may take it as a short pay, but I don't know if the bank is going to want anything to do w/ that property w/o giving her a fat deficiency judgement.

Any suggestions on how to approach this with the lender greatly appreciated. She mentioned the loan was w/ I think HSBC and now it's w/ Wells Fargo(she is current still, but planning on letting go next month), maybe we can find some loop hole in requesting the lender to produce certain docs, that maybe have been lost in the shuffle since Jan 2009? I don't know.. Any creative ideas or advice from experience greatly appreciated, She is a really sweet girl and doesn't deserve what she's gone through, would love to be able to offer her some help. Thanks!

[Joel Owens]

First question:

Is here credit good?? If it is crap already then you just work to not get a deficiency.

If the credit is good will she be okay if it gets ruined?? If she borrows a lot the credit score going down will cost here future money in higher interest rates.Some credit card and other companies now have provisions in small print where if other accounts that are not their default and start going late they can up their interest rates to cover future perceived risk.

They can also freeze credit lines,credit card accounts and just ask for her to keep paying the balance but not allow new charges.

So there are many implication here that have to be considered.

There are certain items by law that creditors cannot touch.That won't keep the collector though from trying to convince you to pull from a retirement account,401k etc. to pay them.So watch out and know the laws and your rights.

The owner of the actual loan and who services the loan could be the same or different entities all together.The point of contact will be the loan servicer and they will contact the owner of the loan directly.

Whether a bank wants a property back will depend on costs to foreclose versus a DIL and if any post redemption rights exist which the seller could waive giving the property back to the bank.

If there are a bunch of additional liens attached the bank will generally foreclose to wipe those out unless the junior liens agree to release for a tiny amount say 1,000 or so.

First step is to get and ATH(authorization to release) and get it to the bank for permission to speak about the account with the servicer.

With the account being current they won't be that motivated.Usually you are in customer service,then after a few lates you will go into collections,and then loss mitigation before foreclosure attorney gets involved.