Thanks for the kind words. You are right, I am not an attorney and I am in Florida so please make sure to check with a Nevada attorney on this matter.

That being said, if you are not on the title, and not on the loan then you have no obligation on any note that your husband is the borrower on. So if you can qualify for a mortgage on your own, you most assuredly can make your own purchase. However here is where the problem may come in and where I really can’t say for sure what goes in in Nevada.

That is to say, I don’t know how your State views the marital household. This is a bit tricky. States like Florida have very different laws regarding the homestead of a residence. I would be wrong to offer you advice on the marital home of a couple in Nevada. You definitely want to contact an attorney out there. In the interim, I will email your question to an attorney I know in Nevada and get his response.

Once I have his response I will email you and post it here. Thanks for the great question!

You seem to have a lot of knowledge. I realize you are not a lawyer, but maybe you can help. I live in Nevada. My husband purchased a home prior to us being married. It is now between $100K-$140K below value (half the value of the house), depending on who you talk to. I am not on the loan, title, or in any way connected to the house, other than being married to him. Our mortgage company will not help us with a loan modification that will help us enough, and it appears our options are short sale or foreclosure. I have pretty good credit and an income of my own. We do however, share our checking account, making it difficult to show what money is whose. My question is this: can I legally purchase a home for us to live in while short selling his house? Can the new house be considered an asset toward the debt of the old house? Could the money used to purchase the new home be considered money that could have been used to pay the previous mortgage? (It is worth mentioning that the mortgage company would not speak with us until we were behind, so we made the tough decision to not pay our bill.) Please help! Thanks!

Here’s your first problem. You have a Realtor playing lawyer drafting a document that is wholly wrong. You said the document read in part as follows: “the contract is contingent upon Sellers Lenders (and all lein (sic) holders) approval of this purchase” … unless you have sold the house to the bank this is wrong. The bank HAS ABSOLUTELY NO RIGHT TO APPROVE THE PURCHASE!!

As we have said many, many times. A short sale is just like a conventional sale. The only thing different is that in requesting the payoff we are asking the bank to take less. Payoffs are always requested in ever deal (where the seller has a mortgage)..we just want them to take less.

So the only thing we are asking the bank to do is to approve the reduction in their payoff. Who in their right mind would give the bank power to approve or disapprove the purchase!

However, this particular agent did understand to request a full release AND satisfaction of the mortgage, which is vitally important. Once the satisfaction is in hand AND filed in the County records you CAN NOT be subject to a deficiency judgment.

But you had be absolutely sure that you have a release and satisfaction filed. If you need an attorney with specific knowledge of this subject matter, please let me know and we’ll put you in contact with somebody.

Thanks again for keeping this open..
I have asked questions in the past concerning short sales.. I recently got an offer on a short term rental single family home in Orlando area. We owe Chase $216K, the offer is for $175K. My Realtor sent the contract for review and signatures. I asked for a contingency concerning “full release”. She sent a Short Sale Addendum for me to sign. The buyer has signed. Point #1 on this addendum is concerning Approval of Lender. This point says the contract is contingent upon Sellers Lenders (and all lein holders) approval of this purchase. It goes on to state that the lender agrees to accept a payoff which is less than balance and will grant release and satisifaction of the mortgage.
This looks like standard wording. Have you seen Chase accept something like and grant the full release? Is there something else I should be asking for? I will be having an attorney go over everything. I am in Illinois, the house is in Florida. Thanks.

Is that good enough so as not to worry that they can’t legally come back and say we owe anything on the 2nd Mortgage? Both ROM’s (each stating exactly as above) are filed.

I think we’ll be okay and if the collection agency keeps calling, we’ll send them a copy of the filing and then change our phone #.

I might still call your friend though, just to see if there is any action we can take against the lender or title company. Thanks for your help.

I don’t have a copy of the letter so I can’t say for sure what the bank reserved rights upon. You mention a “reduced payoff”..and a ROM…did you notice if a satisfation was filed as well? Also did you notice if the release was actually a full release versus releasing the property but keeping the note in effect. There are, as you found out some very sneaky characters out there. Since you are in Florida perhaps you can give Erik Wesoloski a call. (www.wesoloskicarlson.com) He works with us on our short sales and can advise you of your legal rights AND whatever action he advises that you can take. We keep telling people to make sure that they have an attorney review their closing documents and this is exactly the reason why.

I will also email Erik and let him know that you may be calling.

Sold our Florida home via SS in 12/08. Both 1st & 2nd loans were with WAMU/chase. They accepted “Reduced Payoff” nothing mentioned about any right to pursue balance on 2nd. We owed 401k on 1st and 52k on 2nd. They accepted 270k as reduced payoff. Both loans were referenced in the demand letter and they stipulated seperate net proceed checks were necessary for each loan. We closed. They issued a 1099-C for the 1st, but not the 2nd. Should we be concerned that we didn’t receive one on the 2nd?

We were careful not to sign a promissory note or anything as such. Chase filed a ROM for each loan. The ROM for the 2nd loan was actually filed 10 days before the ROM for the 1st.

One year later we start getting calls from a collection agency for the balance of 52+k on the 2nd. Of course we told them to “get lost”. They typically only call once every 2-3 weeks or so.

Funny though, when the collection agency contacted us, we contacted the title company and requested a copy of everything in their file. To our surprise, the SS demand letter in their file had 1 extra bullet on it that stated “WAMU reserves the right to pursue a deficiency balance on the 2nd loan # XXXXXXXX.. Our SS demand letter we received from the title company did not have that last bullet on it and the copy of the one we received, signed and sent back with all other closing documents was not in their file anywhere. It appears the the lender may have persuaded the title company to replace our copy with their copy that had the extra bullet.

We also requested a copy of our realtors file, and as we suspected, his copy also had that extra bullet. Go figure.

At any rate, I surmise (per your previous posts) that since we the ROM for both loans were filed, they shouldn’t be able to come after us for anything. However, sure would like to “sue the pants off” the lender, title company and our realtor since it appears all may have failed to perform due diligence regarding the transaction.

Would like to know if you have ever heard of this happening to anyone else. Thanks for such a great place with so much interesting information.

Unfortunately, your predicament is all too common today. But you are doing the right thing, knowledge is power.

Let me start by talking about the different legal instruments we have in play here…

First, we have a deed. As you state in your question, the deed is held by a corporation. This corporation is made up of 4 of your friends. If you decide to refinance, sell, or otherwise convey ownership of this property, it will have to be done by whoever has authorization within your company. The Articles of Incorporation will define that.

Second, you have a mortgage. The mortgage is commonly used to describe both the actual mortgage document and the note together, so we will use “mortgage” when talking about them together. The note is the IOU saying you owe the bank money. The actual mortgage is the document that creates a lien against the real property using the note.

These 2 documents, although usually created at the purchase (closing) of the property, are mutually exclusive. As you mention above, you are the one that owes the money because you signed the note/mortgage. The corporation (4 friends) own the house.

Now, to your specific question …. “What would happen to me if we were to stop paying the note?”

As soon as you stop paying, the bank will report your late payments to the credit bureaus. This will start to effect your credit right away (as soon as reported). After a certain amount of time, roughly 30-60 days, your bank will try to contact you and try to work out payments. If something cannot be worked out, they will eventually file for foreclosure and see it thorough till they have the property back. Since the property is located in FL, and we are a judicial foreclosure state, they will file a foreclosure lawsuit.

You next question…. “In foreclosure, could they come after my house and assets?”

Remember, the foreclosure lawsuit is specifically a way for the bank to recoup the amount they have loaned you. They foreclose on the mortgage so that they can sell the asset (the home) to be able to just that. THEY CANNOT FORECLOSE ON YOUR PRIMARY HOME. Well, they can if you do not pay your mortgage on your primary home, but not in the case you describe above. If, however, the get the home back in the foreclosure, sell it, and still do not recoup the amount that they loaned you, they can file for a deficiency judgment. In Florida, this is allowed. The judgment would be for the amount of the mortgage and fees, less what they made when they sold the house. So for example, you owe $250k between mortgage and fees and they sell the property for $150k. They could then go back to a judge get a deficiency judgment in the amount of $100k. That judgment would be attached to you and your assets.

Now, if you do receive a deficiency judgment, they still cannot take away (foreclose) on your primary residence, IF IT IS HOMESTEADED. I assume you live in Florida. It will however attach as a lien on your property making impossible to refinance the home without first clearing the judgment…. plus all of the other great things judgments can keep you from doing.

I hope I was able to give you some clarification on these issues. Again, before you make such a large financial decision, I always recommend sitting down with an attorney and a CPA to go over all of your options.

Thanks for continuing this topic…
I have a single family home in Orlando which is used for short term rental. The house was bought with 4 of my friends. We hold the house in a corporation but have the mortgage in my name. We are now having trouble keeping up with the mortgage and other costs. The house is listed with an agent for short sale. So far no luck. What would happen to me if we were to stop paying the note? Again the mortgage is in my name (my name only). My permanent resident is in my wife’s and my name. I have money in the bank and good in come. I do not have enough income to support both houses. To date the mortgage is paid on time. My partners and I no longer want to contribute to this home. We owe $218K and have the house listed at $165K. Even if we find a buyer, I would be looking for a full release from Chase. In foreclosure, could they come after my house and assets? Thanks.

You need to speak to an accountant and probably a good attorney. I am not one to give direct legal or tax advice but I will proffer an opinion.

You will likely receive a 1099 for your “earned income” as a result of your short sale should a bank accept your request. One question that I have that a bank would also likely have is if your assets are greater than your liabilities, would they even entertain a short sale. If someone owed you money and you had the ability to collect by going after their assets what would you do?

Well in today’s economic climate, a bank still may entertain and approve a short sale but the IRS is a different matter altogether. The only way to lower your asset column is to have less assets. Or have a good accountant who can show you some depreciation or other tax strategies to de-value your current asset base.

I’ve two investment properties in Nevada that are under water, and I’m considering short sale. I understand that I will receive 1099-c for the difference between the outstanding loan balance and the net amount lender receive from the short sale. I’ve also working on the insolvency worksheet, but can’t get the assets lower than the liabilities. can you give me some hints to eliminate the taxable income or at least lowr it? thanks

But in order for me to obtain a deficiency JUDGMENT a JUDGE would have to grant it to me. These sentences were put into these documents to do just what they were intended for. To confuse and scare people.

Only a Judge, in a Court of law can grant a deficiency JUDGMENT. Don’t let any one else tell you otherwise. It’s going to be pretty hard to do since your Final Judgment of foreclosure will have to be cleared, the mortgage released or satisfied and title deemed marketable for the sale to actually happen.

So since you would no longer be involved in a lawsuit, there would not be any JUDGMENT to be had.

You see the trick here is in banks asking people to sign notes to continue their obligation. Don’t fall for that ruse.

I am in a similar situation as Luke above, having to deal with dreaded Bank of America. While I understand this verbiage around a deficiency judgement is worthless because you cannot pursue a deficiency judgement on a property unless it is foreclosed on:

BAC Home Loans Servicing, LP and/or its investors may pursue a deficiency judgment for the difference in the payment received and the total balance due, unless agreed otherwise or prohibited by law, if the short sale closes on the loan referenced above.

I am concerned about the second sentence in their approval letter (which I am expecting soon):

In addition, if this loan is covered by mortgage insurance, the mortgage insurance company may reserve the right to pursue the seller for the deficiency based on the terms of the mortgage insurance policy.

I’m not sure if you’ have to work with BoA, but from what I’ve read everyone else they are not modifying their approval letters for anyone anymore. I know I will probably have to consult an attorney, but would the above phrase make you nervous going into a SS?