short sale vs foreclosure for a loved one?

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Need some advise on my mom’s home. She hired a firm to do a modification for her home loan payment back in Sept of 2010. Modification went to the lender for review, still waiting to hear back. Was served with papers for complaint and summons from the bank. She has dementia and is not mentally stable to stand in court to represent herself fully or answer questions appropriately so question is, being I am her POA, should I just consider going for a short sale and be done with her home and avoid foreclosure or proceed with the nerve wracking answer and motion deal to set the foreclosure intention back some in hopes the modification will be decided in her favor by then? It’s very nerve wracking. Also, if she has her name on another property but her son is mentally disabled and has a reverse mortgage out with a different lender on that home, (I am his guardian), can the bank take this property as well if her original home goes into foreclosure? I was told being her son is mentally disabled, they can not take a home away from him or me for being his care taker but not sure just how true this is. This is in the wonderful corrupt state of New Jersey by the way. Any advise or suggestions would be greatly appreciated. This is such a stressful situation to deal with. Please help!! Thanks so much for your time….

5 Comments
  1. Reply
    ForeclosureDataBank.com
    February 11, 2011 at 2:34 pm

    How many months are you behind on your mortgage? Banks need to work with you to avoid putting more homes on foreclosure. If you feel safer short selling go for it, but give it some time first before you decide to put the house on the market. Try to talk to a real estate lawyer to get an opinion. With your mom being ill, helps the situation due to certain laws protecting her rights. I would talk to a lawyer before deciding.

  2. Reply
    someone
    February 11, 2011 at 2:41 pm

    You need to answer the summons, appear in court with your POA and present your case. Odds are the judge will rule in your favor which ever way you decide to go. Go for the Short Sale
    Appearing in court takes the pressure off you and the current lender to behave what with the judge watching

  3. Reply
    Kathi S
    February 11, 2011 at 2:46 pm

    You may not have a choice. The bank would have to agree to a short sale and there would be tax implications for the amount that was written off. As far as the other house you would have to check the terms of the mortgage on that one, but they can take the house away from her if the value drops below what she has already taken out in the reverse mortgage. Your brother living there has no bearing on it unless that was written into the contract.

  4. Reply
    godged
    February 11, 2011 at 3:09 pm

    OK……

    Problem #1 is hiring a company to do to the modification, this was probably a waste of money. I have seen information that the success rate of these companies is deplorable.

    The possibility of a loan mod is low, so you should talk to the lender about a short sale.

    I doubt they can come after the house with the reverse on it, but bear in mind there is a limited time period after mom’s demise that you have to satisfy that reverse. It does not matter that someone with a disability lives in it. Typically, you have a year, with a possibility of a year extension if the lender will grant it. Then you either pay back ALL the money owed or they will foreclose.

    FYI, the reverse mortgage is one of the worst financial decisions a consumer can make. The heirs usually end up holding the reins of a white elephant and lose the house that has the reverse. The fees associated with these are staggering.

  5. Reply
    Robert E
    February 11, 2011 at 4:07 pm

    Depending on your state, while in the process of a loan modification the banks are supposed to consider your account in review and not proceed with foreclosure procedures. If you are not happy with your loan modification company may I suggest you at least do a search for forensic audit specialists, as this might be another solution to saving the property if the loan modification company is not successful.

    If you have a short sale specialist and they have been successful with negotiating with the bank, and you are not looking to save the property, this is a very good alternative as well. However, banks are not required to approve short sales just like they are not required to approve loan modifications. Make sure there is no charge upfront to perform the short sale.

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