Many owners have two mortgages and the combined balances on them are so great,that
it will take as long as 20 years to realize positive equity in the property.Thus, the owner must
explore all options with respect to the debt. Important consideration should be given to situations
where either the owner will need to relocate or retire in five years. Continued payment of the first and second mortgages for a period of three to five years still will not allow the owner to complete
a conventional sale.
As wages and retirement plans are not growing at anticipated rates,an owner should strongly
consider a strategic foreclosure. Thus ,while the owner can afford the mortgage payments, he or she will have to attempt a "short sale" to sell the property if required to relocate. By choosing not to pay mortgage payments, a owner may be able to save money to relocate and in some cases pay "cash" for another property, thus enjoying substantial costs in the ownership of a home.
Two obvious questions arise, first the issue of liability of the owner on the mortgages and second,
the affect on the owner's credit score.In Florida,most foreclosures of a first mortgage are "in rem",
meaning that the lender will not pursue a monetary judgment against the owner and will proceed
only to take back ownership of the property.
If there is a second mortgage,most likely the lender will accept settlement from the owner at a deep discount form the balance owed, sometimes as highas 90% off the balance.While the owner's credit score will drop, he or she will still have use of all their credit cards, however there may reductions in the credit limits.
A viable option is the filing of either a Chapter 7 or Chapter 13 bankruptcy which will delay
the foreclosure process. In a chapter 13, which usually involves a 60 month payment plan of debt, the owner in some instances may "strip" a second mortgage, whereby at the end of the 60 months, only the first mortgage remains as a lien on owner's property. In either Bankruptcies,the owner will have to include all credit card and other unsecured debts.
A strategic foreclosure alone or in combination with filing bankruptcy may be a solution.
Please contact the law office of John E. Mufson at 561-272-1003 for all other questions.
