Upcoming Foreclosures

What are the consequences of letting a property foreclose?

Assuming I live in NH and an investment property I own i stop paying mortgage payments on What will happen? How long until the property goes into foreclosure? If my credit score is about 700 what will it be after? Most importantly how long will it blemish my Credit Report? I have been hearing everything from 2-7 years. So which is it? Will the lender write off the loss or sue me for the difference owed compared to the amount received through auction? This is all of course in theory....no one would want to purposely do this...right?

Public Comments

1. Your credit score will hit 500 (or lower) it will stay on your credit report for 7 years, but if the bank sells it for less than you owed, they can come after you and theoretically keep updating that credit report forever until you pay. Then once you do pay, another 3 years until its off your report.
2. How long before foreclosure is likely 90-120 days before foreclosure is initiated. It could take another 90-120 days to get to sale, and of course by then your credit score will be in the 500's due to the late payments and the late status of your account, and then the eventual foreclosure showing up. The foreclosure is on your credit report for 7 years from the date of last activity (in this case the foreclosure finalizing). The lender has 2 options. They can sue you for the difference and get a judgement against you, OR they can write it off, and you get a 1099 from them because now it is not loan proceeds, it is ordinary income, since you benefited from it, but did not pay it back. So, lets say it is 50k, you will pay tax on the 50k the year you get it, plus that might put you in a different tax bracket, causing you to have even more in taxes. That is basically it.. oh, and the judgement they get if you still own your primary residence? It will appear as a lien against your home. PS.. once you do pay the foreclosure deficiency.. it is not 3 more years till off.. it is 7 more, and it will tank your score again, cuz it will still be a chargeoff, but now it is paid, and the 7 years starts all over again.
3. Here's a simple answer to a very complex question... It will take about 3-4 months from your first missed payment until the bank officcially forecloses. The bank will take the house, try to sell it, and if it sells for less than they were owed, they can get a judgement against you for the difference. It will be on your credit forever, but you can probably get another mortgage to buy a house within 5-10 years. And, yes, everyone is doing this right now... well, not everyone.
4. I agree with some parts of the previous answers. your credit score will tank to at least 500-550. It will start to come back as you are current on other lines of credit, but the foreclosure will haunt you despite the credit score. A judgment stays on credit for 10 years and will fall off if not reaffirmed at the 10 year mark. As far as a lien on your personal residence, in Indiana it depends on whether the rental is in the same county as your personal residence. Title companies here search by county only, so if the rental is in a different county then it will not attach. Some banks file for deficiency, some don't, it is hit or miss and sometimes luck of the draw. As far as purposely, get in line, it was a fad back when money flowed easily and someone could buy 20 houses and cash out and go into foreclosure on all 20 and within 2 years buy more houses. Good luck, in theory.
5. These are just general estimates based on the experiences of other homeowners in similar situations. Every foreclosure situation is unique, so the effects you see will be slightly or wildly different from that of other homeowners. Usually, it takes 3-6 missed payments for the bank to put the property into foreclosure. This depends on how much you communicate with them, as they will give you more time if they think you're working on a solution. Your credit score will start dropping once you miss a payment. If you go all the through foreclosure and lose the home at a sheriff sale, your score might be just over 500. But it also depends on what other credit you have and if you are on time with your other debt payments. If you're late on all of them, the score will be very low, possibly under 500. The foreclosure will be on your credit for 7-10 years, but the first two years after foreclosure will be the hardest. If you can start reestablishing a good credit history after the foreclosure, you can recover pretty quickly. If the foreclosure is the only negative mark, then your overall record will look stronger the further away in time that you are from the original foreclosure. The lender almost always writes off the loss. They know foreclosure victims do not have the money to pay a judgment of tens of thousands of dollars. They may be able to sue you, depending on state law, but it's not worth their time or resources to pursue it. Hope that answers your questions.