Can You buy your own REO back?
Homeowner · Riverview, MI · Member since 2009 · 7 posts · 0 votes
I am currently going through the foreclosure process. I am at the very begining and was wondering if it is possible to let it go to auction and wait until it doesn't sell then offer the bank more like what it is worth. I am currently 75000 upside down and the best the bank is willing to do is give me a 6 month 5.25 intrest rate after that it adjustes back to 14.9%.
Will, I'd agree that buying your own short sale is going to run into trouble. But if the property becomes a REO, and you end up buying it after the fact, what grounds would the bank have for either refusing to sell it to you, or coming after you if you did buy it.
If "currently 75000 upside down" means you owe $150K and its worth $75K, buying it back at $75K would make a big difference in payments. If the OP means they owe $500K and its now worth $425K, then I agree it won't make much difference. All that notwithstanding the fact you're not going to get a new mortgage just after going through a foreclosure.
15% is outlandish. Paying $1000 to the balance and $16000 the principle is painful. Perhaps you will fall under the program the feds have set up to try to help people stay in their homes. If you can afford the current payment, you could certainly afford one at a more reasonable rate. Getting from 15% down to 6% would cut your payment in half. Your principle paydown would be better. But realize that even with a 6% rate, you still pay MUCH more in interest than in principle, until you get much further along with the loan. At 6%, you have to be 18 years into your 30 year loan before the principle payments exceed the interest.
Is there a local agency that helps homeowners deal with this sort of loan? Have you spoken to the bank in the last week and specifically asked about the new programs? Even with your dad, I think you will find it very tough to get a new loan. Lots of houses in Detroit you could buy for cash with $25K (or less) in your hand, though it looks like Riverview is a nicer area. Something to consider, though
15% interest!? Wow. Didn't see that until just now.. That's gotta be rough.
Hey Jon -- for the record, not saying anything new here either, but Detroit is a mess. $25k in hand seems to be a rarity actually, when you look at how many properties I've been seeing in lots we bid on that are going for WAY less. Its pretty crazy, and is pretty surreal that these prices are in a major US city too. Ugh!
I know. No way would I buy anything in Detroit. Lots and lots of houses on the MLS for under $1,000. I can't imagine what you're paying in bulk. I don't really think they're a deal at $1K, given the population drop and the declining fortunes of the big car companies.
Ryan, according to Fannie Mae guidelines, they will not buy any mortgage if the borrower has a foreclosure in the last five years. So, you'll need to go with a portfolio lender. That is a bank that keeps their loans in house. Even with your big down payment. But, all you can really do is to talk to some local banks and see what they have to say. Tough situation. Consider just renting for a while. I really don't think Detroit is going to see a sudden comeback.
As far as I know, the maximum interest rate on a mortgage in the State of Michigan is 11%. Unless I've been given bad advice by two different attorneys, that's the rule I follow when I hold a land contract for a buyer. I would dig deeper into my claim, but I'm nearly 100% sure that 11% is the max (either that or I've been foolishly following a fictious guideline).
But on another note, I'm with Will. How can you consider walking away from something which you signed up for under NO duress? Nobody forced you buy at the peak of the market and obtain an ARM. Imagine what would happen if all the upside down homeowners just walked away from their mortgages.
I have a short sale listing right now in which the homeowner recently lost his job. He does have a good amount of retirement saved. Shortly after I got the listing he was trying to convince me to buy the property for cash from the bank for 20% of note (which is an accurate value for the home), then he'd buy it from me with cash on a QCD for that price plus a few grand for my hassles. As tempting as it initially sounded, I wanted no part of of that. It's morally wrong. This example is no different than what you're trying to pull off, Ryan.
unless I am reading my note incorrectly but the payment is 1543.68 on a orginal balance of 146,000 fo a 40 year note with a balloon payment of 106,000 at the end and I see three intrest rates listed 7.9, 11.49 and 14.9 and my payment changed 3 times during the course of the note to reflect this.
so far the bank is considering extending
the lowered intrest rate but that is not for sure and they can't tell me how long for. I will know more after my current mod expires in acouple of weeks.
Once again thank you all for the Free Advice I know at this point in time I can;t afford to pay for any of it.
Were all three of these loans used to acquire the property? Or are some of these HELOCs that were used for other purposes.
I don't understand how you can assign blame to anyone except the home owner. Nobody forces any homeowner to purchase a home or to sign any loan document. With your rationale, we should all walk away from our home, auto, student loans, alimony, child support and any other contactual agreements we made just because we don't like their outcome. Nobody ever guaranties that home values will increase.
I think you're fundamentally correct, Jim, but John has a point. There was a deliberate US government program to encourage home ownership. They pushed, some would say forced, Fannie Mae and Freddie Mac to buy marginal mortgages. That started the ball rolling on this flurry of securitization that made credit easy and almost free. Its obvious in hindsight that buying a home you could afford based on an 80/20 negative ARM loan, and assuming you would be able to refi later (how?) was a house of cards. But we have a system that DOES NOT educate our children on the dangers of credit. Quite the reverse. Big banks, car dealers, furniture stores, Best Buy, and just about anyone who sells anything for more than $100 freely doles out credit. How many times have your heard "buy now, you deserve it?".
So, you're right, nobody held a guy to anyone's head to buy any of this crap - homes, cars, furniture, electronics, etc - on credit. But "the system" sure made it sound like the right thing to do. And sure made a lot of people in a lot of places very rich.
As far as "guaranties that home values will increase", there were two organization that for all effective purposes DID guarantee values would always increase - National Association of Realtors and National Association of Home Builders. Google NAHB and what shows up? "The National Association of Home Builders is a trade association that helps promote the policies that make housing a national priority." That is, to convince poeple to buy more and more houses. In his interview this weekend, Warren Buffet said "we have 1.6 million too many houses in this country. We can't make 14 year olds marry and start having families." (probably not an exact quote, but close.) We've built a huge "housing industry" who's goal is simply to sell more and more houses. They've overshot demand, and that's going to tank prices, just like in any other cyclical industry.
I fully agree with the concept that people should follow through on the obligations they signed up for. I also fully understand that many people, especially our policitations and big business, do a cost benefit analysis for every decision they make. It doesn't both them a bit to put employees on the street when it no longer suits their needs. More and more, it just doesn't seem that different for someone to say "I can pay another $300,000 over the next 20 years to stay in this house, or I can sacrifice my credit and walk away."
As far as any maximum interest rate, your friends could be correct at what the rate is currently, but that does not matter in this or any other case. What matters is what the legal maximum rate was at the time that the contract was entered into.
Think about those that entered into 30 to 40 year home loans when the iterest rates were what doomed Carter. IF they were still around would the bank be wrong for extending the payment terms of the loan?
NO because the loan was legal at its inception. These legal limits only to loans originated during the time they are applicable to.
By the same reasoning if you were able to buy a long-term CD a few years ago for 30 years you would be able to collect more interest today than most of those legal limits. Dont forget though that there are State limits and also Federal limits. And one does not always affect the other like some think.
Those attorneys are not "friends". If you look back at the beginning of this thread you will see that this home was recently purchased. So, the legal limit is still applicable to the time when this home was purchased. The maximum interest rate regulations have not been modified in the State of Michigan since the 80s.
Very good points Mark. I guess I was more responding to what you normally hear from people who cry about the legal limit and forget to look back to when the contract was initiated. It appears that I did not give this boards members enough credit. I am still used to those (on other boards) that just say thing before the research is done. I am not to big to admit my mistakes and apologize to any offended.
You guys are great. I hope my contributions can be helpful to some in the future.
I know this is a little older of a posting but i know an investor that had about 30 homes go belly up in florida and was so stressed trying to figure out what to do. him and an attorney worked on them and figure out they can short pay! So recently he has been able to shortpay so it cashflows good and he sells it off to make most the money back. Every state is different so i dont know.