Can't afford the house mortgage, can the house be given back to the bank?

Question

My parents have a 1st and 2nd mortgage on their house. They are getting older and cannot take care of or afford the house. The house needs a lot of work. Is their away to give up the house without having to pay anything to the lender?This is in New Jersey.

Answer 1

Nope! You owe the bank the money. They will not take it off your hands, just because. They wouldn't make any money. Maybe it's time you try to sell it, and hopefully you will get enough to cover what is owed and break even.

Answer 2

There are several options:

1) Contact a GOOD realtor to get a TRUE current value as well as the possibility of selling.

2) Contact the lender (1st and 2nd) & explain your situation. Ask about a) Deed-in-Lieu of Foreclosure, b) Reverse Mortgage. Your mortgage company may not dealin the reverse mortgage because not all do so that may be another call.

3) If you have anyone that can take over your payments (and the house they may rent to you) check with an realty attorney regarding a Quit Claim Deed.

4) Check mortgage documents to see if mortgage is assumable. This usually entails the purchaser catching up back payments and assuming the mortgage payments.

5) While talking to the mortgage company ask about putting the interest on the end of the term . This will bring the account current to give time to sell or make other arrangements.

Answer 3

A home mortgage is a secured debt. Secured debt is debt that is held against an asset; if the debt is
not paid back by the borrower as agreed upon the asset can be taken by the lender. If you do not pay
back your mortgage in the manner specified in the mortgage agreement, your lender can take your
house. For this reason, it is essential that you do not fall behind on your mortgage payments.

If you are having trouble making payments or think you may be facing future payments that you
cannot afford, cut back on your spending. Do everything in your power to make up the missed or
late payments. If you have other debts that suck up your funds before you pay for your mortgage,
make your mortgage payments the top priority.

The following is a typical timeline, from late payment to foreclosure that shows what might happen if you
do not communicate with your lender and resolve late payment issues in a timely manner:

Day 1
You miss a mortgage payment.

Day 16-30
A late charge is assessed on the missing payment. The mortgage servicer (the company that
processes your payments) will attempt to make contact with you.

Day 45-60
The servicer will send a "demand" or "breach" letter to you pointing out that you have violated
the terms of the mortgage agreement. You are given 30 days to pay the delinquent amount.

Day 90-105
The servicer refers the loan to its foreclosure department and a legal representative to initiate
foreclosure proceedings. That representative may record a formal notice of foreclosure at a
courthouse (known as a “lis pendens”), publish details of the debt in the local newspaper, and
attend hearings on the case.

Day 150-415
You house is sold at court-ordered foreclosure sale or auction.

If you fall behind on payments and are unable to catch up then you probably cannot afford the
mortgage you currently have and must act quickly. Contact your lender immediately. Do not
ignore the lender’s letters or calls. Let them know that you are having difficulty and are willing to do
whatever is necessary to stay current on payments and keep your house. There are a number of steps
the lender may consider taking to remedy the situation, such as:

Repayment plan: The lender may be willing to agree to a new repayment plan and may split the
past-due amount so that a small portion is tacked on each future monthly payment amount.

Short refinancing: The lender may forgive some of your debt and refinance the rest into a new
loan that you can afford.

Answer 4

I know some people are mentioning foreclosure. DO WHATEVER YOU CAN TO NOT HAVE THE HOME FORECLOSE!! You need to contact a realtor ASAP and tell you what the home is worth. If you owe more than it's worth call your lender(who holds the first mortgage) and ask about doing a short sale. My brother owed $330,000 on his first mortgage and $50,000 on his second on a home he owned in IL (he took another job in a different state and could no longer afford both house payments). The lenders contacted his real estate agent to see what the house could sell for- and the realtor told the bank $350k to get it sold. The first mortgage holder said that should be fine, and they contacted the second mortgage holder for him!!! His home sold in 3 days because the realtor priced it at $350k instead of $380k (it could have sold for that but may have taken 5-9 mos.). Expect some delays after the contract is accepted. It took the bank nearly 6 weeks to get all of the approvals at the lower price. My brother obviously didn't make any money off of it but the foreclosure wasn't on his credit and he didn't have to worry about anything. Banks want to avoid foreclosure because it costs them a lot of money in time, lawyers, etc...they'll make a deal with you if you ask!

Answer 5

You need to establish what the house is really worth and can be sold at . A realtor will tell you what the houses in your neighborhood are selling for. You need to know what they owe the bank on the house. You can call the bank for this information. Then you need to determine how much the difference is... this is their money / equity. I would get the house listed as soon as possible and try to sell it before they lose it. If they can't sell it , then they will probably want to consider a foreclosure. They will need an attorney for this. I would try for a sale of the house because there are a lot of people that do want to buy a house that needs fix up work at a discount because they can do the work and make money. You want to be sure you sell the house in "AS IS" condition so that no one comes back and tries to get money from them after the sale for warranty stuff. AS IS sale will ensure that they are protected. Sounds like they need a lawyer to help advise. Get more than one opinion. Don't pick the nice one .. pick the one that makes the most business sense. you can't really trust either. lesser of two evils ..lol.

Answer 6

They could call and request a deed in lieu of forclosure (both companies would have to agree to this since they have two mortgages). She doesn't live in one of the 6 states that require the debt be expunged, so they would still likely be on the hook for the balance of the mortgage once the house has been sold...The problem would be that there is more than one interested party (unless the 1st & 2nd loans are from the same bank!)

Answer 7

Sometimes the lender will take the house back and sell it. Your parents may be required to pay the difference. But not always. I would contact the lender on behalf of your parents to see if they can help you work something. The sooner you contact them the better. Have you considered selling the home? You could sell it for what they owe "as is". Good luck!

Answer 8

If your parents have at least 30% equity in their home you can do a leaseback program. The property is purchased by an indpendent investor and leased back to the homeowner for 1 or 2 years. The homeowner continues to make payments to the investor and can buy th home back at any tine before the expiration period at a premium of 10% investment cost.

Also you can submit to an Investor Network and can be sold prior to foreclosure. When an investor purchases the property the homeowner may have an opportunity to cash out some equity.

There are more choices as well such as a short sale,selling it themselves, lease-option,etc.

Answer 9

they should contact the lender and explain the situation and see if there is a program to help them. Failing that, they can try to sell the house and when it comes time to close, the lender will have an opportunity to get most of the money due them and will probably accept the deal to close the books on an at risk loan.

Answer 10

Some of the above advice is valid, however, I didn't see if anyone asked you "age" of your parents. If they are old enough, have you thought about a reverse mortgage. If they are eligible age and sufficient equity in property, the two mortgages would be paid off and they would not be required to move until they either sold the house or died. Perhaps you can edit your question.

Answer 11

did your parents check into a reverse mortgage option? Talk to a local lender/bank if the house is qualifying.