Dear friend needs real estate legal advice

[oldgunner]

What about bankruptcy, I've always heard that you can keep your primary residence.

[ed martin]

I think you're referring to a Homestead Declaration. You can exempt up to $75,000 of home equity from creditors. You have to file a Declaration of Homestead with the county recorder. It applies only to a primary residence, so I don't know if it would work in this case.

[McLovin]

When she took out the additional money for repairs, etc. did she refinance the first, or did she take out a second?

[DARISC]

Originally Posted by McLovin

When she took out the additional money for repairs, etc. did she refinance the first, or did she take out a second?

Both refi and heloc. She's done, bank will foreclose. Thanks for all your info/advice. FWIW, her's is a complicated situation and I'm glad she's walking away.

[Rick Lee]

Originally Posted by McLovin

When she took out the additional money for repairs, etc. did she refinance the first, or did she take out a second?

What are they doing about HELOCs these days? On paper they're still subordinate loans to the first trust. Do they ask for proof that the money was spent on repairs or improvments to the property? If they were not spent that way and you do a short sale, what happens then? Get a 1099?

[vash]

if her renters find out..they would stop paying too! (wont they?)

[gtc]

I wonder if the renters would have grounds to recoup the rent that was paid after she had stopped making mortgage payments. If I were them, I would certainly explore that.

[McLovin]

Originally Posted by gtc

I wonder if the renters would have grounds to recoup the rent that was paid after she had stopped making mortgage payments. If I were them, I would certainly explore that.

Of course they would not.

They have no interest in what's going on between the bank and the owner. That is none of their business.

[DARISC]

Originally Posted by McLovin

Of course they would not.

They have no interest in what's going on between the bank and the owner. That is none of their business.

Thanks again, McLovin. That was my concern for her also when she told me she'd stopped paying the bank. However, she was saving, not spending, the rents, not knowing whether the bank would come after it when they started foreclosure proceedings.

I thought that was a good idea, but she told me that last month she Googled the question and found exactly what you post above to be true. This relieved her of quite a bit of anxiety, needless to say.

If I'm understanding her situation, the worst she will suffer is the severe hit to her credit rating, which consequence she readily accepts with no qualms or misgivings. She is a responsible lady who's carreer was in accounting and landing in her situation has been emotionally devastating.

When I learned she had a sizeable balance on her credit card, I added to my existing HELOC, paid it off for her and she's been making hefty payments to that rather than her CC.

Then, in a twist of fate, my stock broker for the last 20 years dropped dead from a massive heart attack on his way to lunch last Monday. Three days later I was meeting with my new broker at a different firm and he suggested I might refi my place and pay off the HELOC in the process.

So, last Friday, I nailed it down to refi through my credit union (it beat out Chase, BofA, Green Light and two mortgage brokers), added the HELOC and the $18k balance on her car, saving her a grand a month payments on her car and my HELOC, all the while, my mtg. payment is reduced by $180 mo. Turns out to be a win win for both of us.

Again, thanks to all who have offered advice. I think my lady friend will do just fine now.