Quote:
Originally Posted by DARISC
Thank you all for taking time to read my post.
McLovin, I really appreciate the effort you've spent replying. I'll be talking with my friend over the week end and will go over your posts with her.
She did not want to lose this (her only) property and had applied for a loan reevaluation, at which time she quit paying the mortgage. Months passed, then finally a request for docs/info, which she provided, then more months and another request for same, again, provided, more months pass then, WTF?!, a third request for same and, for the third time, provided.
More months passed and the bank then told her that she doesn't qualify because it's a commercial property, so it's apparently a recourse loan. So she notified the relevant department of the bank that she had to walk away and, months later, they said they'd get back to her; that was months ago also, so she called the bank again to ask about the foreclosure procedure. She was told, surprise!, they'd get back to her.
My friend has no assets, real estate or otherwise, for the bank to go after. She feels terrible that she is losing her investment, which she's had for maybe fifteen or more years and hates walking away, but really has no other choice at this stage.
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She's had it for 15 years, and it's still underwater (not performing/cash flowing).
That means she must have refinanced it during the bubble to pull "equity" out.
(Equity in quotes, because it wasn't really there, it was just air in the bubble). I believe the refinance would be recourse in most jurisdictions. That's in addition to you already saying it's a commercial loan, which would almost certainly be recourse (assuming she holds title and the loan in her name personally).
There's always some options to try, but if it's truly way underwater, and can't cash flow even at full occupancy, it's going to be very rough. Her default, for example, takes out some options. She'll NEVER be able to refinance with any normal lender now.
Private lenders aren't likely to be interested, b/c the only way they can be secured is to take out the bank's loan and lien, and the only realistic way to do that is to pay off the bank in full. No one is going to put that kind of money in if the property is underwater.
A short sale is a possibility. Some banks do seem to be loosening up on short sales. The likelihood of success depends on just how far underwater she is. The good thing about a short sale is she can try to get it going at no cost to her - get a broker to list it and see what happens. It's a bit of a no-lose try for her, but even if she gets a buyer, the hard (and maybe impossible) part will be to get the bank to accept the short sale (i.e., accept less than their loan).
As she's seen from the bank's non-response, delays and ignoring of the problem, banks are curious creatures. They have very rigid policies that for the most part are not deviated from, even if it costs them huge amts of money and makes no sense. Part of this is rooted in the decision making process at large institutions, which is hugely unwieldy and tends to favor the status quo (b/c if the status quo/policy is deviated from, and something goes wrong, someone will likely lose their job).
Part of it is because banks act like pendulums. In 2007, they were riding high, freewheeling, giving free money to everyone. Now the pendulum has swung and they are at the opposite end, they are terrified and frozen into inaction.
Again, there are some variables, and some chances, but I've seen this a lot, and like I said, IMO there's a 90%+ chance this will eventually simply go into foreclosure. B/c that's the decision that no one at the bank can ever be criticized for or lose their job over. If she doesn't have the ability to raise significant money to solve this problem (ability, and willingness to throw a lot of money at this), the odds go to 99% IMO.