Consequences of a foreclosure versus-LA AREA?

Question

I’m located in the Los Angeles (Antelope Valley Area)
I tried really hard to sell my home to no avail. Now my payments are just too much to afford. I tried contacting my lender to get a hardship because my Mom passed away. They did not care. I was told to sell everything. At this point short sell aren’t selling in my area I am considering a foreclosure.

What are the consequences of a foreclosure? I paid my adjusted payment for one year and there going up again. My home was worth 450000 now buyers can buy the same home with lots of perks and upgrades for 200000.

With a foreclosure do I still pay taxes and homeowner insurance until the foreclosure is final?

Will the mortgage collection people call my job. I hear they show no mercy.

How long will a foreclosure and judgment stay on the credit?

Answer 1

The consequences of a short sale, foreclosure and deed-in-liu are all similar.

The main thing that changes as far as consequences goes in all these three is you the consequences with your credit report. A short sale is much better than a foreclosure, that is for sure.

The legal consequences well.....that all depends on the type of loan (recourse or non-recourse) and on the lender.

Tax consequences well......you many end up paying taxes for the TOTAL amount that the lender loses when the property is finally sold as a short sale or foreclosure. BUT you may be able to avoid paying these taxes by declaring insolvency.

On my webpage you can find the link to the IRS that talks about insolvency. (look it up on the short sale-foreclosure guide Pt4)

Answer 2

Primary issues:

(1) credit report score will go down by 100-150 FICO points.

(2) having foreclosure on your report will reduce your ability to borrow for 7 years.

(3) any forgiveness of debt will be taxed by the IRS. Talk with a foreclosure specialist with the IRS. They have a special dept.

For more info on the foreclosure process, see the book below.

Answer 3

It won't be pretty in the end. Your credit will be mostly trashed, and you may receive a 1099 form requiring you to claim any shortfall as income in the taxable year in which the foreclosure is finalized. The property taxes will accrue to your shortfall, so that call is yours. As far as insurance goes, I would continue the policy, in the event that the property should go up in flames. If you have no coverage, the entire value of the mortgage would be your shortfall. The insurance is worth the expense.