Single Source Training ? Archive ? Rented home doesn't pay the ...

Q: We own a home in Georgia. Due to a job change, my husband moved out of state and took a large pay cut. I stayed in the home for a year after he moved and we depleted our savings during that time.

We were finally able to rent the home out, but the rent does not cover our expenses. Now the mortgage company will not accept our request for a loan modification. We are in the arrears since January of this year. I am truly perplexed why the mortgage company will not work with us. Is it to their advantage to just take the home? We have an FHA loan. And what about the renters who just moved in?

Now that you have moved out of the home, your options may be more limited and you may have to make some hard choices.

You stopped making payments to your lender in January and now the lender has the right to foreclose on the home, sell it and use those proceeds to pay whatever is owed on the debt. Georgia is one of those states that allows for a rather quick foreclosure process. While in some states the foreclosure process goes through the courts and can take quite some time to go from non-payment to a home sale, in your situation, it could take just six months or less.

Now that you have leased the home to tenants, your lender considers the home to be an investment/rental property. Most home loan modification programs and foreclosure avoidance programs have been set up to keep homeowners in their principal residence. Making Home Affordable (www.makinghomeaffordable.gov) doesn?t help real estate investors ? even though that isn?t what you intended to be.

Borrowers in trouble with second homes, rental homes and other investment real estate might be out of luck, as few lenders are willing to help them out under any relief programs. Contact your own lender directly and ask; however, since you are months behind in your mortgage, the lender may not feel you qualify.

You still have the ability to sell the home, even if the sale is a short sale (i.e., the proceeds from the sale are less than what you owe). If you sell the home, you will then get rid of the issues that go along with owning it, including the debt.

If you do a short sale, you will have a resulting balance you still owe the lender, called a deficiency. In some states, the lender will be unable to pursue you for the deficiency. In states where deficiency judgments against borrowers are allowed, the lender can sue you for the amount owed and can attempt to collect that debt for years to come.

In your situation, you can wait for the lender to foreclose or you can try to sell the home. If you are successful in selling the home, your credit will have a black mark on it, but your credit history won?t suffer as much as if the home is lost through a foreclosure.

As for your tenant, you are now well into positive balance on your home budget. You?ve stopped paying the lender and you?re collecting rent on the home. It?s time for you to make up your mind as to whether you want to keep the home or get rid of it.

Article source: http://www.northjersey.com/realestate/152189405_Renting_your_home_limits_options_for_mortgage_relief.html

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