What is this Lawyer talking about and is it legal?

JPowell · Joined: 20 Jan 2010 Posts: 103 Location: PA

All right, I'm not sure if this is the proper subsection of the forum to put this in, but I wanted to explain my friend's situation and see if anyone has any advice.

He has a house and I guess he has a flexible mortgage or something because he just got notice that his mortgage will be going from $1700 a month (which is already outrageous for the size of the house) up to $2500 soon. If he sells the house, he will end up having to cut the bank a check though because the market is so bad that he won't be able to get enough to cover the rest of his loan.

He contacted a lawyer about the issue and from what I understand, the lawyer told him that he could tie up the bank/mortgage company with red tape until November. During this time the lawyer says he will not have to pay his mortgage (just his utilities) and the bank will not be able to come after him. In November the house would be turned over to the bank, but my friend would not suffer any setbacks from it... meaning it wouldn't be a foreclosure on his credit report or anything negative on it at all.

It sounds fishy to me to say the least.

Can anyone tell me what this guy is talking about doing and if it's really legal?

The_NV_Guy · Joined: 09 Feb 2010 Posts: 6 Location: Mid-Atlantic

Sound like he's going to have your friend do a short sale as a stall tactic or maybe have him declare bankruptcy? I guess they haven't had a chance to sit down and discuss a game plan yet.

TNG

TimtheMortgageGuy · Joined: 16 Jan 2008 Posts: 96 Location: Rosemount, MN

Sounds to me like a deed in lieu of foreclosure which WILL impact the person's credit about the same as a foreclosure.

MrPink1130 · Joined: 11 Feb 2010 Posts: 17

the lawyer sounds like a moron to me...........

if he short sales the house.....the mortgage comapny won't come after him for the money that he shorted the company, but the IRS will.

here is what you are looking at..........

if your friend owes the $200,000 on his mortgage, then the mortgage company short-sales it to someone for $100,000, your friend will receive a 1099-C from the mortgage company at the end of the year. your friend will have to pay federal income tax on that $100,000 due to it being seen as income.you've heard of people owing the government 100's of thousands of dollar's. That's why.

MrPink1130 · Joined: 11 Feb 2010 Posts: 17

your friend needs to find out if he is on a fannie mae or freddie mac loan ..... MOD's are avaiable for him if he is in a hardship

and with the index's being as low as they are now, that tells me one thing. Your boneheaded friend was on an INTEREST ONLY ADJUSTABLE RATE MORTGAGE , what did he think was going to happen? living in a house that he couldn't afford anyway.