how can i protect my primary residence, if I own more than one property and one of them goes into foreclosure?

Question

would a homestead work?

Answer 1

You might be concerned about nothing. You did not provide a lot of details so I will only be able to answer in a general fashion.

Assuming your own two properties and one looks is likely to be lost in a foreclosure process...

If the foreclosure is really a trustee's sale and there has been no fraud when you applied for the loan the lender can only take the property. If the property does not cover what they are owned they are unable to come back to you to make up the difference. That is a condition of the trustee sale process.

If they choose to use a judicial process (you are in a mortgage state so a trustee sale is not an option) the lender can come back to the borrower for a deficiency judgment if the sale of the homes does to cover what the lender is owed. Just because they can does not mean that they will as it is not always worth the legal cost and time to pursue just a deficiency.

Even if they get a deficiency you will not be forced out of your home. You may end up with a judgment on it so that if you sell they get to stand in line and collect after the senior lien holders. Until you sell the lien holder from the deficiency can not do much. The judgment can expire if they do not keep it active.

You can agree to pay a judgment for less than what is owned if the other side agrees. Hence you can bargain the amount down is there is a judgment.

If you are in a state that allows a homestead then you can apply or do what your state requires to set one up. Normally they only protect part of the value. If you sell then that amount is protected from creditors. The rules vary by state so check with your state (the state where you home is located).

You can also transfer the home into another legal entity or family member. That is not as useful as it could trigger the loan on the property coming due or introduce other complications. You would be selling the property, etc. Though there are some advantages you may be taking action when you do not have a real risk. See above.

Finally there is the standard advice that is actually rather use. See a lawyer that focuses on real estate law so they can review the real facts in your situation. Also see what you can do to get the property sold or the loan paid off so there is no foreclosure. Remember that some lenders would rather sell and accept less than they are owed than go through a full foreclosure and redemption process (if there is a redemption period). This is called a short sale. There can be a minor tax impact on a short sale but do not let that be a concern compared to having a foreclosure.

If you have more questions send me an email.

Answer 2

Hi there. since I have not gotten the complete story, I can only give a general answer.. If the mortgage is current on the primary property the bank cannot came and take the property... the foreclosure is to satisfy a debt that the loan was issued for.. when buying a property with a mortgage the property in question does not belong to the bank it belongs to the person who is buying the property... the mortage is issued and the property is used as collateral to insure that the debt will be paid.. The bank loses alot of money when a loan goes into default... they are in the business of lending money, not property management or sales.. smiply put they don't want bad loans on their book beacuse it limits the amout of money they can borrow from the federal reserve plus they have to foot the cost for the foreclosure which can cost in upwards of $20,000. You may have serveral options that are available to you depending on how long you have been in the foreclosure process. There are federal programs that are available to you that may be able to get you out of this situation. They have loans that don't need to be paid back unless you sell the property. this may help you. But if you need to sell the property and get out form under it if I can be of service please let me know.

Answer 3

Try to stop the foreclosure by any means neccessary. Contact the lender and attempt to work out a loss mitigation package. Or....sale the property short sale or return it to the bank (deed in lieu). The foreclosure will really hurt your credit. However, I am really not understanding how a foreclosure on one property would cause another one to be harmed other than harming your credit score.
By all means, preserve your credit... even if it is an investment property.

Good Luck
Tyra

Answer 4

I think what you mean is, that you're afraid that the bank will try to take your primary residence which you have built equity in to make up for losses in they suffer in foreclosing you investment property. The best thing to probably due in that case is to transfer the title of that property into a family member's name asap. If they can even due that. The best thing to do is contact a real estate attorney.

Answer 5

You most likely have to transfer title and re-mortgage the property in a LLC. Since the LLC will have little to no credit than your interest rate will be higher.

Answer 6

Contact a realestate attorney now and go over fine print of contracts of property!