mismanagement of money, advice please :)

[Harmony-bc]

I have a question. I have a friend who is having financial troubles. She had a mortgage on her house, then she took out a second mortgage through a loan shark type company. Her whole mortgage payment is $3500/month. Her whole house is mortgaged for $300,000 and something. Anyways she had trouble making the payments every month, so the loan shark company is foreclosing on her house.

My question is, If she owes the loan shark guys $150,000 can they take her whole house, or do they pay off her other mortgage as well, when they take it?

The loan shark was a dumb idea, but she has exhausted all other resources. The reality is this. This is a woman who always had a sugar daddy to help, so she has no idea how to manage money. The bank cannot help her, she cannot get any other loans from any where. Not an option.

My question is; Can the guys who are foreclosing on her, take the whole house or do they have to pay back the other mortgage. I am telling her to sell, she is saying that she doesn't have the energy to, she just wants to let them take it, but that would only be a good idea, if she was left with no mortgage.

This is a woman, who has a very gentle heart, just really bad with money.

 

[wilde]

The second mortgage is subordinate to the first mortgage meaning that the first mortgage gets paid off first before the second mortgage. At this point whether your friends sells or the property is foreclosed doesn't really matter as either way there likely will be nothing left for her once both mortgages are paid off. The exception would be that the property can be sold for more than the first and second mortgage combined, i.e./ $450,000, in that case, she will get the residual proceeds.

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[MissingOne]

She needs professional advice. Maybe there are those on this board who can offer some sound advice, but ultimately, she needs a pro in her corner. Maybe she can come through this with some assets left.

I can't really say who are the right people to talk to, but I know that this isn't the sort of situation to face alone. Maybe somebody else on the board can make some recommendations as to who to see, but be careful.

 

[Harmony-bc]

The second mortgage is subordinate to the first mortgage meaning that the first mortgage gets paid off first before the second mortgage. At this point whether your friends sells or the property is foreclosed doesn't really matter as either way there likely be nothing left for her once both mortgages are paid off.

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I know, at this point, that is not the issue. I am just worried that the guys will take her house for the $150,000, and she will still owe the other mortgage, be without a place to live and still be a couple hundred thousand in debt.

She is not trying to make money off the sale, or on losing the house at all. I just want to know legally can the loan shark guys take her house and not pay the other mortgage.

Thank you

 

[Harmony-bc]

She needs professional advice. Maybe there are those on this board who can offer some sound advice, but ultimately, she needs a pro in her corner. Maybe she can come through this with some assets left.

I can't really say who are the right people to talk to, but I know that this isn't the sort of situation to face alone. Maybe somebody else on the board can make some recommendations as to who to see, but be careful.

Thats why I posted it here.

Some of you guys are just so wonderful and helpful.

 

[trackstar]

Could she not file for personal bankruptcy in this case? Otherwise, the dwelling will be sold to pay off as much of the debt as possible, with her still owing what is left. If her SD was paying the 1st mortgage, why would she take out a 2nd I know you say that she is a good soul, but it looks like she tried to get as much out of a good thing as possible and is now paying for her greed.

 

[wilde]

She is not trying to make money off the sale, or losing the house at all. I just want to know legally can the loan shark guys take her house and not pay the other mortgage.

The first mortgage holder gets paid 1st so no this will not happen. She needs to talk to a real estate lawyer asap.

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[Harmony-bc]

The first mortgage holder gets paid 1st so no this will not happen. She needs to talk to a real estate lawyer asap.

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I have offered to pay for a lawyer, so can anyone recommend a good one. She is on the Island. I am not.

 

[Harmony-bc]

Could she not file for personal bankruptcy in this case? Otherwise, the dwelling will be sold to pay off as much of the debt as possible, with her still owing what is left. If her SD was paying the 1st mortgage, why would she take out a 2nd I know you say that she is a good soul, but it looks like she tried to get as much out of a good thing as possible and is now paying for her greed.

She has not had a sugar daddy for quite a few years. She has been managing her own business for quite a while, just not doing a good job of it.

 

[trackstar]

She has not had a sugar daddy for quite a few years. She has been managing her own business for quite a while, just not doing a good job of it.

I based my statement on you saying, "The reality is this. This is a woman who always had a sugar daddy to help". An option may be for her to find someone who wants to buy into her house. When the market makes a climb again, the partner can then claim a profit. Your friend will most likely not make anything off of the deal, but at least she still has a place to live. The other option may be a reverse mortgage?

 

[sirlickheralot]

I know, at this point, that is not the issue. I am just worried that the guys will take her house for the $150,000, and she will still owe the other mortgage, be without a place to live and still be a couple hundred thousand in debt.

She is not trying to make money off the sale, or on losing the house at all. I just want to know legally can the loan shark guys take her house and not pay the other mortgage.

Thank you

The Loan shark company can't just sell the house and keep the money. In order to foreclose they would have to file a motion to approve the sale of the property with the Supreme court of BC. The motion would specify how the proceeds from the sale are to be disbursed. Usually any outstanding property taxes are paid 1st, real estate commissions 2nd, 1st mortgage 3rd, 2nd mortgage 4th, etc.

If the proceeds from the sale aren't enough to cover both the 1st and 2nd mortgage your friend could still end up owing a debt to the 2nd mortgage company, in which case she might have to declare bankruptcy.

 

[trackstar]

Track, her filing for personal bankruptcy would screw her for years to come. She then wont be able to apply for any credit or loan whatsover.
Trust me, I know 3 people that I work with that have gone down this road . Taking this road really really hurt them for many years.

If she has missed enough payments for them to consider foreclosing on her house, her credit is already screwed for years to come. The reality is, is that she is facing losing her house, still owing a shit-load of money, being financially destitute and with very few viable options to get her back on track. Relieving the stress alone would be worth it to me.

 

[spicdick]

Da Wilde guy is right on.
first mortgage gets paid first , second paid second and so on.
However it is still a long hard process to take the house as long as she is making some effort to pay.
Put a few mexicans in it , make a payment everymonth. even if it is a few hundred dollars. But every month is what counts.
It will take years to kick her out.

 

[trackstar]

you and I are on the same road on this. Lets just hope she doesnt have to do the bankrupcy thing is the only thing I am saying.

No kidding. It's sad that money can make or break a person. Money can buy happiness, unless you borrowed that money, then happiness is usually very temporary

 

[Exhausted]

yikes

Ist mortgage is paid first, but I would be more worried about owing loanshark types 150 big ones. Believe me they will find more imaginative ways to collect than just selling the house. An example would have to be made and I would be scared witless...

 

[Pantherdash]

Be especially careful about declaring bankruptcy with all the information that is available online these days. Not only does it severely and negatively affect your credit for years to come but it also screws up job prospects as well. Any job requiring a security clearance requires a credit check and there are more of these kinds of jobs out there than you think. Plus any prospective employer, including volunteeer work can simply go online to the Attorney General's office of your province (not sure if it's in every province, but it certainly is in BC) do a search under civil cases with your name. If you declared bankruptcy, the case will show up as "Jane Doe vs. ABC Trustees" and under classification of file it will show "Supreme/ Bankruptcy."

Panther

 

[bcneil]

What is the current market value of this property?

 

[Harmony-bc]

What is the current market value of this property?

It has been appraised at $420,000. I think she owes almost that in mortgage debt. It needs a few things fixed on it, and a real good cleaning, plus the yard to be made pretty.

I was just worried about the second mortgage taking her house, so that answer has been answered. You guys are absolutely wonderful. Thank you for all your help. I am sending her money tomorrow for a retainer fee for a lawyer. Hopefully she will be able to sell it on her own terms.

 

[Krustee]

She needs professional advice.

This is an understatement in this case!

Could she not file for personal bankruptcy in this case?

BAD IDEA!!!!

... but it looks like she tried to get as much out of a good thing as possible and is now paying for her greed.

That's what I was thinkin to.
Somebody should have talked to this girl about the realities of life before she sold the goose that lays the golden eggs.

Far too many greedy people here & especially the US have taken their house (their security) & used it like a credit card.

The other option may be a reverse mortgage?

Unless she is of retirement age & qualifies for it.
She must be 62 years of age & she would have to continue living in the house or face having to pay off the loan.
Furthermore, because there are no payments on the loan the principal remains unpaid and interest accumulates until the loan is paid back, home is sold or she dies & the loan is repaid from the estate.

She should see a lawyer. There are a few ways to get around the timing of the foreclosure that might work in your friend's benefit. Of course the easiest way would be just to catch up on the arrears, which would buy her time to sell the house on her own terms. That being said, I'm assuming that the avenue of temporarily borrowing funds has been exhausted. If it can be brought up to date then that would buy her 3-4 months in which to sell the house and maximize the return.

Alternatively, if she can bring it up to date then she could defray her personal expenses by bringing in roommates or renters to help her cover the mortgage until she is more stable financially, and use the balance saved to pay down the loan she gets from whoever to bring it up to date.

She should talk to an attorney & see if it is possible to get an injunction on the foreclosure proceedings.

However it is still a long hard process to take the house as long as she is making some effort to pay.
Put a few mexicans in it , make a payment everymonth. even if it is a few hundred dollars. But every month is what counts.
It will take years to kick her out.

This is true, if a negotiation to pay can be reached it is actually better for both parties.
If she had anybody worth their salt who could negotiate with the loan holder to settle the debt outside of foreclosure.

I would offer my services but there are some here who claim I'm a stalker/liar/creep/woman beater/rapist/baby killer so maybe she would not feel comfortable.

Actually, just missing payments on the mortgage wouldn't likely hurt her credit much, if that was all. Mortgages don't typically report to the bureau. It's more likely that the other crap that has also fallen behind (credit cards, lines of credit etc) would be screwing up the credit, but again we don't know the extent of the debt situation, or of the resources available.

There simply isn't enough information here to provide any kind of reasonable financial advice, beyond broad generalities.

This is true.

It has been appraised at $420,000. I think she owes almost that in mortgage debt. It needs a few things fixed on it, and a real good cleaning, plus the yard to be made pretty.

I was just worried about the second mortgage taking her house, so that answer has been answered. You guys are absolutely wonderful. Thank you for all your help. I am sending her money tomorrow for a retainer fee for a lawyer. Hopefully she will be able to sell it on her own terms.

The house cannot be taken the foreclosure would merely bring about a court ordered sale of the home to pay the debt.

She still can offer to pay the outstanding payments owed, bring the account current & she would be able to stay in the home.

I used to know a few real estate agents in Victoria if that is where she lives.

I am sure they would be able to recommend an attorney.

 

[rafterman]

Agreed with out knowing the exact financial details difficult to provide specific advice and a good real estate lawyer is recommended.

My sense is though that one way or the other your friend is going to lose the house.

I'm guessing the rate of interest on the "loan shark" second mortgage is much above market i.e. 10...12...15%?

Even if she can bring the financing current she will never get out from under that debt.

Surmising that with the decline in real estate values over the past couple of years there is probably nil or even negative equity in the house this will typically expedite a foreclosure.

A judge will be less inclined to provide a lengthy redemption period for a home owner to get a mortgage current if the house has no equity.

One option maybe to approach the mortgage holder and offer them a quit claim. They save the time and cost of a foreclosure and in exchange they don't pursue a deficiency judgement against your friend.

If they think she has a lot of outside assets or earning power though this might not fly and depending on the size of the deficiency and her other debts bankruptcy may be the best of several bad options.