Help a Reader Save His Home

Here's an email I recently received from a reader:

My [family] currently lives in SW Missouri. My wife and I both work full time jobs but have had a string of events that have thrown us so far behind that GMAC has foreclosed and sold our home of  8 years . It did not sell to anyone else at the auction, the mortgage company still has it . We have to come up with $72,000 in order to satisfy them and get our home back, we are currently waiting to find out when we have to leave (which really stinks this time of year).Conventional loans and family are not an option for borrowing money to save our home .We are in a position to make payments now but too little to late as far as GMAC is concerned . I'm hoping that someone can offer advise or know of someone that can help . We don't want a hand out, but we are asking for a chance to get back on the right track without having to turn our children's lives upside down.

There was a car wreck (not our fault, so we replaced the vehicle at our own expense and the other party's insurance has not yet paid and is dragging it out in a big mess) then vehicle failure, our two vehicles died three weeks apart, more complications and money spent . I got sick with a viral bronchitis which took me from work for two weeks. Then my wife had a medical condition which resulted in two surgeries and about three weeks off of work. The result of all of this and a bad credit rating (now worse due to the foreclosure on my name not my wife's) has left us here asking if anyone has any ideas or knows someone that might help give us a chance to save our home.

Anyone out there have any thoughts for this guy?

Comments

[CF]

What about Prosper, or some of the online lending sites - I think they may have limits of $25,000, but there are multiple sites like them, where individuals lend money to each other. The rate will probably be high, but might be the only option at this point considering the alternative. Also, not sure how much the insurance payout will be, but is GMAC aware of it? Good luck to him.

[aa]

If you can't afford to own a house, rent one, period.

[DebtyBetty]

I too would suggest prosper. As a borrower there, I've been very pleased. Yes, they do have a $25,000 loan limit, but it could help! Good luck!

[Jon]

First hire a lawyer to get the insurance money more quickly. Use it to pay off any high interest debt you have. Keep some of it around in cash (not in the bank) or with a friend, just in case.

Call GMAC every day and offer to begin payments again if they'll waive late charges. One thing I've heard is that banks hate owning houses. Given enough time, they will start cutting the price (and taking a loss) just to get rid of your house. I don't see why they wouldn't allow you to restart payments since that's more profitable anyway. Maybe you can get the lawyer from above to write a few letters on your behalf (not threatening obviously but lawyers are generally good with words).

[Jon]

Oh the other thing is to ask the bank to approve a short sale. That's where you sell the house for less than the amount of the loan and the bank forgives the remainder. You don't even have to do the work -- look around for signs saying "WE PAY CASH FOR HOUSES" or the like. These people specialize in convincing the bank to sell the house for less money. You can then often work out a deal with them where you keep living in the house and paying rent, or even get a rent-to-own deal. Interest will be higher but these people are much more "open" to strange financial situations than a real bank.

[Kevin]

Have they checked with the Missouri Housing Development Commission (MHDC) for any help? I know they have programs to help first time homeowners, grants for improvements, etc, so maybe they have something to help with foreclosure.

Other than that, I would say they need to get their car insurance company pushing the other company to pay for the accident.

Honestly, and they probably don't want to hear this, the best thing long term may be to see if they can stay through the holidays, then move out and rent for awhile, save up some money and get in better shape financially. He says they are in a position to pay now, but any loan they are going to get now will likely have astronomical rates due to the foreclosure and worse credit rating. That will only make things worse if more illness or unexpected events occur.

[FinanceIsPersonal.com]

That's a rough situation, definitely. Financial ways out? Probably not many... but we'll be praying for that family!

[LawyerontheDL]

I wouldn't get an attorney for the insurance thing (and I am an attorney). You'll just be giving that person 30% of your claim. I would, however, call the insurance company and threaten to start contacting the attorney general, state insurance department, etc. if the money is not paid now. As far as the foreclosure goes, you don't mention how much was due on the house when it is foreclosed upon. If $72K is in the ballpark, you may want to have a third party approach them to buy the property and transfer it to you. Things must have been going on for quite some time for the property to have actually been sold in foreclosure. This is a good example of how important it is to handle these types of things as soon as you think there will be a problem. That being said, call the insurance company now. Then call the mortgage company and find out how much they want for the house.

[plonkee]

I think it would probably be wisest to make their minds up that they will have to rent. It might not be what they really want to do, but even if they come up with the money, it will still leave them only one emergency away from financial disaster.

Rent a house, regroup and get everything onto a more even keel. Moving out will not be the end of the world.

[Les]

I agree that renting makes the most sense in economic terms, but if an emotional connection to the house trumps the colder rational view, you may want to explore whether the foreclosure was legally valid. A recent court decision in Ohio (http://www.nytimes.com/2007/11/15/business/15lend.html?ref=business)suggests
that outfits such as GMAC may not be able to prove that they are the mortgage holder entitled to foreclose. Indeed, the very reason that GMAC is unwilling to renegotiate these loans before foreclosure is because they have been sold off to banks to "securitize" asset-backed commercial paper. In other words, some investor(s) owned your house, not GMAC. Your house has apparently already gone through foreclosure, and it may be too late under Missouri law to challenge the foreclosure proceeding. I agree with others that hiring a lawyer to fight this may be throwing away good money after bad, but you may be able to find out through Internet research whether such an after-sale challenge is possible if you're determined to try to get the house back. Challenging doesn't mean ultimately winning, however, particularly given your economic situation.

[Jon Kennamer]

Tough love, maybe, but this is what happens when you don't have an emergency fund. EVERYONE needs to have at least 6 months living expenses in the bank for emergencies. This should be in addition to your investments and retirement savings. I don't mean to sound cold, but maybe you should rent for a while, take some credit counseling and personal finance courses, and get your savings where they need to be. Give it 10 years, and by then you should be able to buy another house.

If you can't afford to own a house, rent one, period.

What happens when it's cheaper to own than to buy? If you can't afford to own, can you afford to rent?

Uh, when it's cheaper to own than to rent. Ouch.

[Lord]

The house is already gone. Use this time to rebuild your credit and savings. Don't be in a hurry to make a deal with the lender. Certainly not if you could face the same situation soon again.

[Tim]

cheaper to own than to buy or cheaper to own than to rent? at this point, forget about the house and find a place to rent.

i'm really confused about the car business. why would you voluntarily pay to replace a car if the accident was not your fault? and why would you pay anything before the other person's car insurance paid, let alone filing a claim through your insurance company? not getting the sequence of events here. how much was the amount you paid, what are the small claims court limits for you state since this could be an alternative route to hiring a lawyer? (silly lawyeronthe DL not mentioning small claims).

what is your current state of finances, budget-wise? stop focusing on getting your home back and focus on your overall financial picture, because getting your home back at this point is probably not a doable proposition in terms of expense. Instead of waiting to find out when you are going to have to leave the home, start finding a place to live now.

[xshanex]

"i'm really confused about the car business. why would you voluntarily pay to replace a car if the accident was not your fault? and why would you pay anything before the other person's car insurance paid, let alone filing a claim through your insurance company? not getting the sequence of events here. how much was the amount you paid, what are the small claims court limits for you state since this could be an alternative route to hiring a lawyer? (silly lawyeronthe DL not mentioning small claims).

what is your current state of finances, budget-wise? stop focusing on getting your home back and focus on your overall financial picture, because getting your home back at this point is probably not a doable proposition in terms of expense. Instead of waiting to find out when you are going to have to leave the home, start finding a place to live now."

I am also really confused by the email and story. From the insurance/car issue which is baffling to say the least to how someone would have to come up with $72k not to lose their home and to how a house that has been being paid on for 9 years has no equity and cannot be sold at auction for the remaining loan amount. Even in todays housing slump they are most definitely selling for 1999 and will be for years to come. Only thing I could guess is that a lot of equity was pulled out or its located in an area that became overrun with meth-heads or the place was completely run into the ground and needs to be torn down. Just doesn't add up