GMAC nightmare

Need to know if anyone has gone through this or knows of anyone who did.

5 yrs ago GMAC bought our mortgage and two years later my wife lost her job. We called GMAC to re-finance (never missed a payment and never was late) and we were told that we needed to be two payments behind in order to re-finance. We proceeded to skip two payments and used the money for home repairs but GMAC later declined to re-finance.

My company suddenly closed and I found myself un-employed. We were advised to file bankruptcy to protect us and we re-affirmed our mortgage. One day we received our mortgage payment back in the mail with a letter from GMAC stating they were foreclosing and would not accept any payment less than a total payoff. After months of arguing with them it became obvious there was not going to be any movement on their part so the wife and I proceeded to pack our house and moved our family out of the home before the sheriff sale.

We have both regained employment in our new area and we just receive a notice that GMAC has taken our old home out of foreclosure right before the sale. We contacted GMAC to ask what was going on and now they are telling us that they will not foreclose on the house and they are not asking us for a payment. The told us it is our home, we can move back in, rent it out or short sale it...whatever we want but they were insistent that they were not going to try to collect a payment and they consider the mortgage as a lien now. Any payment we would make (even $20 a month) would get directly applied to the principle.

We drove back to our old house and it has been vandalized and now in disrepair. We cannot afford to upkeep two properties and they will not take the property after going through most of the foreclosure.

Has anybody ever heard of this? I do not trust GMAC at all and they refuse to put anything in writing. Can a mortgage company put a home in foreclosure and take it out at the 11th hour, hand it back to us after we were forced to relocate and tell us it is ours, not wanting any payments and will not put any of this in writing?

[went522]

Wow, this story sounds familiar. An "acquaintance" is going through something much the same. Lost job, fell behind, letter of forecloser, sherriffs sale, sherriffs sale canceled the day of. They moved back in and have recieved one letter, not a mortgage bill...it's been a year and a half and they havn't paid a penny.

Another similiar story...guy built his house on credit during the housing boom 8 years ago, once house was appraised mortgage co gave them a mortgage for outstanding bills. Paid about 6 months of payments, shortly after lost his job, quit sending payments...they have never been sent a warning letter, forecloser...nothing. Been living in that house for 7 YEARS without paying a payment??

BIRDDOG

[yarcraft91]

Originally Posted by Really, really confused

Has anybody ever heard of this? I do not trust GMAC at all and they refuse to put anything in writing. Can a mortgage company put a home in foreclosure and take it out at the 11th hour, hand it back to us after we were forced to relocate and tell us it is ours, not wanting any payments and will not put any of this in writing?

Can a mortgage company do the things you say GMAC did? Yes. It sounds as if GMAC determined that they could not recover significant value through a sheriff's sale, so they are hoping to recover that value some other way. Mortgage lenders are overwhelmed with the number of properties in foreclosure process, so they are grasping at straws.

It sounds like you got in trouble by taking GMAC's original advice to fall 2 payments behind, in order to qualify for refinancing. That's not a requirement I've ever heard from my mortgage lenders and seems like bad advice. Falling behind probably gave GMAC the option to demand full payment, which they did. So, their advice worked to their advantage, not yours. Future advice from them will probably work the same way.

You should not depend upon anything here unless it is in writing. GMAC wants you to keep the house, pay the taxes, pay the maintenance, repair the vandalism, buy insurance and keep paying them something, because it's cheaper for GMAC. There's still that mortgage contract you signed and their lien on the property. If those are the only things you have in writing, some day they will come back to bite you. Get someone to advise you on the option of ignoring that house and letting the county/city foreclose on it for non-payment of property taxes.

I'm opposed to the idea of walking away from one's debts, but that's sorta already happened in your case. Now, GMAC wants to put you back on the hook and you probably don't want to go there.

[rebs]

I too am not in favor of walking away from ones debt, but in this screwed up economy and with the things our government is talking about, SS running out of money and medicare running low on money, more and more people are filing bankruptcy than ever before. It is an uncertain economic world at this time. More and more people loosing their jobs and loosing their homes auto's etc.. The credit rating of the USA has never faltered until now, that alone says a lot about the shape this country is in. Times are tough and I am afraid going to get even tougher. I feel bad for young people trying to raise a family in these times.

I agree with Yarcraft you need to get some legal and professional advice before doing anything further. I never heard of a bank telling a home owner to let their mortgage drop behind 2 months payments. One thing you can be sure of is that whatever a bank tells you is in their best interest and not yours.

[Mark Komo]

Some good tips here. My original mortage and still have it with GMAC. Usually the 2 months missed payment advise is based on "loan remediation" not refinancing. You can refinance any time you wish, bearing in mind of course, whether any loan payoff penalties exist.

Also regarding property taxes, mortgage should be the first lienholder. However, nothing trumps a tax lien. Usually they are first in line.

[lakewood]

So really at this point, you are saying it's your word against theirs? I too do not believe that someone at GMAC told you not to make two payments to refinance. Getting behind by two payments on anything will drop your credit score and nothing will make it drop more than missing a mortgage payment. The long term effects of that will haunt you for years to come. Had you kept your payments current and went out on the open market a number of lenders may have been willing to re-finance your home, but now you are stuck.

Letting your credit score drop will not only effect your ability to buy products down the road, but in the last few years it plays into other parts of your life. Insurance companies now look at your credit report and set your premium based on the score. Potential employers may want to review your credit score prior to making you a job offer. Interest rates you can get thru a bank or car loan are based on your credit score, and the lower the score the higher the interest rate. And the list goes on. A bad credit score will simply cost you more money.

You say you have nothing in writing, but if you signed a mortage when you bought the property, then you have something in writing. That is the document the courts will refer back to if you end up litigating. I am pretty sure in that document it says you will make payments one time per month and if you don't you are in default.

You didn't mention if you were able to buy a new home or if you are renting now. I will go out on a limb and guess that if you want to have your old home back (even in the condition it's in) you may want to consider that offer - especially if you want to have ownership in the immediate future . If you filed BK your credit will be in a mess for a minimum of 7 years and more realistically 10 years - that's all provided you are making your other payments on time and didn't also get in trouble with credit cards. Trying to buy another home with that on your credit record will be impossible.

Good luck on however it turns out for you - not a very favorable position to be in.

This is happening all over the country. In many cases the bank has decided that it will lose more money if it takes the house back (vandalized, disrepair, bad neighborhood, house worth less than the cost to raze it, etc.) and they, the banks, are doing nothing.

Detroit has thousands of these houses. Owners have walked away and filed bankruptcy so they no longer have any liability to the bank. However, they continue to be the owners of record and the City is hunting them down to pay back taxes, pay fines for property condition, pay to have weeds cut, etc. Owners think they are off the hook when they walk away but this isn't always the case. Part of the problem is that the bank is still paying the real estate taxes so until they decide what to do the house can't go to tax sale.

Detroit is in the process of condemning the houses thru court action and will eventually bulldoze them.

Another problem is that many of the banks have sold the mortgages to investors and the bank where you send the payment is only the loan servicer and doesn't have the authority to foreclose.

A guy I know is in this exact situation. Lost job, filed BK, walked away from the house. Bank has been paying the property taxes for 5 years. House overgrown with weeds, fallen trees, etc. County has been cutting the weeks and is trying to get him to pay the costs since his name is still on the deed. Eventually, the lawn cutting costs will become a lien on the property and either the bank (Bank of America) will pay the costs or they will give up and let it go to tax sale. House has no utilities turned on, full of mold, etc.

Its nothing short of a huge cluster... and it going to take many years to clean it up. Your BK should clear you of liability to the bank; I wouldn't go back to the house unless they agreed to take pennies on the dollar for a payoff/short sale. Ask them; they might take it to get it off the books. I've seen houses bought by investors for as low $1. Another investor was at the foreclosure auction and bought a house for $5K. The bank's lawyer was there and asked him if he wanted 3 more for $5K each. The bank wanted them off its books.These were decent houses worth about $75K with some new paint and carpet. He bought them all. Its crazy out there.

BTW, they can put it in for sheriff's sale/foreclosure and take it out at the last minute. Happens a lot.

There is refinancing and then there is loan modification. Refinancing is a new loan with new terms. Missing payments does not help with qualifying for a new loan. Loan modification is when the lender will change your existing loan to help keep a borrower in a house.

This goes back over 10 years but when I was in RE I read that it costs FHA an average of $70,000 when they foreclosed on a property. I know at the time they had different loan limits in different parts of the county with the top being around $150,000. Where I live, at the time, the average FHA loan had to be less than $100,000.

It just illustrates that it is expensive to foreclose on a property. Back at the time housing was strong and foreclosed properties were not that common and lenders tried to get every last dollar back on a sale. Today you have housing prices that have dropped, a depressed economy, and in many areas a supply of homes that would take several years or more to be absorbed at current sales rates. For a bank it is worth it to keep a borrower in a home because a foreclosure may make the loss even bigger.

Today banks are doing crazy stuff not to take a property back. I would not take the house back without a loan modifcation agreement. A loan is nothing more than a lien in which certain terms are agreed on in advance. In some states the borrower can be subject to a deficiency judgment. A deficiency judgment is when the bank can foreclose on the property, sell it, and if the proceeds of the sell do not cover the borrower’s obligation the lender can get a judgment for the difference. Other states a lender is limited to foreclosure without a deficiency judgment. It would be good to check your states laws to see what the law in your state is.

In the OP's case what concerns me is that there is no loan modification agreement. Without it there is no change to the loan, it’s just the lender has not instigated foreclosure. You would need a lawyer to tell you how this affects the loan.

I would go to the county's recorder’s office/register of deeds or whatever it is termed in your location. I would see if the lender has recorded anything new against your property.

It seems like a mistake was made by the borrower. Before the property was abandoned the borrower should have sign a "deed in lieu of foreclosure". You are saying that I cannot pay the loan back and I am signing over the property over to the lender. This would have closed out your loan and may also eliminate the lenders right to a deficiency judgment.

The problem I see in this instance in that the lender did not take possession. The normal course even with abandoned properties is for the lender to secure the home. They hire a company to clean out the home, change locks, maintain the yard and check up on the house. The lender will also get insurance in their name. It sounds as if this was not done.

The borrowers insurance may have been paid up and still be in force. But he should be aware insurance policies do not cover properties that have been vacant more that about 30 days-see the policy. So if the lender has not taken out insurance and the owner’s policy won’t cover the damage then the borrower is on the hook for damages should he take it back.

This property has many twist and turns. The OP should consult a good real estate attorney right away. If he has a chance to reclaim it and wants to he should have a loan modification agreement.

The OP stated that the bank would accept any payment and apply it to the principal. Would they still be charging interest and adding the unpaid interest to the principal balance. Your principal would be growing even with a payment.

[ohiojmj]

Under unfortunate circustances, you walked away from a house. The bank made an economic decision to not foreclose. How can you blame a bank for protecting the interests of the shareholders via legal activities? There are consequences. I acknowledge that many do not understand the banks options as I learned a few things on this post.

The skipped payments were for a loan modification, my mistake...and believe it or not that is what they told us to do and they now admit it was bad advice.

Thanks for the input but I do want to say we did not "walk away" from our home. We were given a date that it would be sold unless we gave them a lump sum amount of $103,000 which was impossible for us to make. They refused all payments and refused to work with us. We wanted to keep our home and asked for a one year period to make up for the two missed payments while making our normal payments and they refused. We never missed or were late with a payment in twelve years until this. We moved because we had no other option…we are now renting.

What they will not put in writing is this new "deal" they are offering where they will accept payments and apply it to the principle.