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Marcus Said:

Foreclosure / Deed in Lieu laws in Missouri What will the process be like???

We Answered:

Keep in mind that a short sale and a deed in lieu are two totally different approaches to avoiding foreclosure. I will do my best to explain both sides in some depth.

With a deed in lieu, whether in a state that allows deficiency or not, a lender WILL NOT pursue deficiency. That is the upside to a deed in lieu. However, you will have a "voluntary foreclosure" on your credit report. This can keep you from purchasing a new home for at least two years in most cases. It will effect your credit negatively but they will NOT pursue deficiency regardless of the state.

With a short sale the lender is accepting, from an end buyer, less than what you owe. They can pursue deficiency in states where deficiency judgement is allowed. Now not all lenders will pursue a deficiency and it is very possible to have the lender sign a deficiency waiver if the short sale is submitted correctly. It is still ultimately up to the lender. Now I have done some research and also worked with some clients in MO and it is my understanding that deficiency IS ALLOWED. Please research this and make sure you have all information on your state laws before making a final decision.

However, you will not receive a credit beating because this is actually a sale of your property and therefore a settlement of your debt.

Now on the back side of this the lender can issue a 1099 "Forgiveness of Debt" for the difference. For example, if you have a buyer for $150k and you owe $175k and the lender approves this short sale than they can issue a 1099 for the amount of $25k.

There are particular ways of reporting this and it is possible you will only owe tax on the part of the $25k or owe no tax at all. However, it is highly recommended you seek the advice of an accountant and explain to him the reasoning for the 1099 and that it is coming from a property.

Now the other snafu you may run into here is that part of the $25k could be picked up as proceeds on sale of your "personal residence" and you would then be exempt if there were a gain caused by the sales price and the portion being picked up from the 1099 (if any). You will however, need to pass the personal residency test.

Considering that I don't know all the particulars surrounding your circumstance that is the most general description I can give you. Remember to seek the help of a CPA when filing your taxes if you receive a 1099 "Forgiveness of Debt" from your lender.

Kurt Said:

My name is on the title to our house, but the mortgage is only in my wife's name.?

We Answered:

1. If you and your wife walk away from the debt your wife's credit will be destroyed, but yours won't be. When the house is foreclosed upon and eventually liquidated the lender can pursue you for the balance plus fees of the foreclosure and attach the new house since your wife will have ownership interest in it. Thus if you do this offer the deed in lieu of foreclosure to avoid the added fees. Recording a quit claim on your present property will serve no benefit.

2. No. But you could buy the new house as an investment property under a corporation or title the house in your child's name to keep it safe from other creditors

Joseph Said:

Is this a violation of the law?

We Answered:

This is a very gray issue. If you are actually submitting a loan application in the name of a licensed broker that has hired you as a subcontractor, then you probably are not breaking the law. That company would need to make sure that it is valid for you to be a subcontractor under Illinois law. The company that is licensed in Illinois would be the one breaking any laws, not you.

Marcus Said:

I am thinking about just walking away from my home.?

We Answered:

in other words, you refin 3 times, and took money. Now you don't want to pay it back. This is called stealing. You are a thief.

The bank WILL come after you for their TOTAL lose and the IRS will tax you.

Pamela Said:

I need a mortgage lender in Missouri!?

We Answered:

Take it, it is a good deal considering your credit history.