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Richard
Richard, Lawyer
Category: Real Estate Law
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Experience:  32 years of experience as lawyer in Texas. I'm also a Real Estate developer.
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I just received a Notice of Intent to Foreclose. The house

Customer Question

I just received a Notice of Intent to Foreclose. The house was recently appraised for about 50% of what is owed on the mortgage. I cannot afford to keep the house (due to death of spouse last August, 2012) and would like to do a deed in lieu of title. My mortgager is Wells Fargo. What are the requirements for a deed in lieu of title? If Wells Fargo will not do this, which would be the "best" way to go: bankruptcy or foreclosure? I obviously don't want to do either of these, but I may have to.

My son-in-law is the PR of my husband's estate and he spoke with a real estate agent who said a short sale is not likely due to the 2 mortgages on the house. Original mortgage balance is approx $98k and the 2nd lien is approx $40k. The house & land (1acre) was appraised at $70k.
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  Richard replied 1 year ago.
Welcome! My goal is to do my very best to understand your situation and to provide a full and complete answer for you.

Good morning. Is WF the lender on both mortgages?
Customer: replied 1 year ago.

No WF is the lender only on the 1st mortgage.

Expert:  Richard replied 1 year ago.
Thanks so much for following up. Given that there are two different lenders are involved, the agent was right in that a deed in lieu is probably not going likely to be possible. That's because a deed in lieu with the first lender does not extinguish the lien of the second lender and would result in the first lender getting the property subject to the second lien. And, the second lienholder is not likely to release its lien because it is getting nothing in the deed in lieu. Only a foreclosure automatically will extinguish the junior liens...so the first lender is going to need to foreclose to get rid of the second lien. So, just stop making the payments and let the first lender foreclose. Maryland, unfortunately, is a deficiency state...which means the lender can pursue the borrower for the deficiency...the amount owed over the amount of the foreclosure sale. But, there is not need to file bankruptcy yet. Whether or not the bank will pursue a deficiency judgment depends upon their assessment of the collectibility of a deficiency judgment. So, if you can convince them there is nothing for them to get, and that if they were to pursue a judgment, you would simply file for bankruptcy protection and get the judgment discharged—and even if you have no intention of doing so, it is still good leverage with the bank because they do not know whether or not you would… then it is unlikely the lender will spend the time and money necessary to get a judgment they believe is uncollectible in the end. If they do in the end decide to pursue the deficiency, you can always file bankruptcy at that time to discharge the judgment.



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Customer: replied 1 year ago.

Additional facts that may be pertinent: the 2nd lien was in my husband's name only. He filed for bankruptcy about 18 mos prior to his death and was discharged from the 2nd mortgage.

Expert:  Richard replied 1 year ago.
Thanks for clarification. The bankruptcy would have eliminated his and his estate's personal liability for the second loan. And, of course, you have no personal liability for the second loan because you didn't sign it. But, the bankruptcy would not have discharged the loan itself and the lender's lien on the property. So, the lien survived the bankruptcy and thus would only be discharged by a foreclosure or the lender agreeing to release it. And, the lender simply has no incentive to release the lien for nothing.
Richard, Lawyer
Category: Real Estate Law
Satisfied Customers: 47087
Experience: 32 years of experience as lawyer in Texas. I'm also a Real Estate developer.
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Expert:  Richard replied 1 year ago.
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