Dear Liz: Is there any way to expedite the foreclosure process? My wife bought a townhome shortly before we were married. Long story short, it didn't fit our family once we got married and had a baby. We bought a larger house and tried renting the townhome but couldn't cover the mortgage payment. We attempted a short sale, but the bank refused a good offer, so we let it go into default. We even offered to do a deed in lieu of foreclosure, but the bank refused unless we provided financial information for me, too. Since I'm not named on the mortgage and wasn't even around when she got the loan, I refused. We've mentally and financially prepared for foreclosure and now just want the process complete. The bank, though, doesn't seem to be in any kind of hurry. The process is now entering the third year with no action on their part, and we haven't even been to the property in well over a year. We've told them expressly that we aren't fighting them on the foreclosure. At this point we just want to move on.
Answer: Offering a deed in lieu of foreclosure — in which your wife hands over the keys in return for being released from the loan — was probably your best bet to speed things along. If you don't want to provide the financial information the mortgage company is requesting, you're stuck with waiting this out.
It's unfortunate, because many lenders prefer deeds in lieu as a cheaper, faster way to get control of properties they're going to wind up with anyway. The idea is that the homes probably will be in better condition than if an angry borrower or squatter trashes them, plus the costs of formal foreclosures are avoided. As foreclosure times have lengthened, some lenders have even sent out letters to underwater homeowners in default urging them to consider a deed in lieu transfer.
One thing you should investigate is whether the lender can come after your wife for a "deficiency judgment." If it is allowed in your state, your wife could be liable for any leftover debt that isn't paid off with a foreclosure sale. Talk to an attorney familiar with credit and foreclosure laws in your state.
Avoid depositing money at low-rated bank
Dear Liz: I have all my money (less than $150,000) in one small bank. I love my bank, but Bankrate.com's Safe and Sound report shows the bank having only a single star. I asked someone at the bank about it, and this person said the rating wasn't important. Is it?
Answer: Of course it is. Your deposits are under the $250,000 limit protected by the FDIC, but a weak bank can fail, which can be disruptive to depositors. The bank that takes over typically doesn't have to abide by the policies or interest rates promised by the failed bank. If regulators can't find another bank willing to take over, you may have limited access to your money for a few days until your deposits are refunded to you.
A bank with "very questionable asset quality, well below standard capitalization and lower than normal liquidity" — phrases Bankrate.com uses to describe your institution — probably isn't the best place to have your money.
Look to rent from smaller landlords post-foreclosure
Dear Liz: My wife and I went through a foreclosure last year and need to rent an apartment. We have no credit card debt and over $30,000 in savings on an income of $75,000. We know that our credit will be an issue on apartment applications because of the foreclosure. What can we do to improve our chances of getting a decent apartment in a safe neighborhood?
Answer: Although foreclosures may not carry the same stigma they did before the real estate bubble burst, they still wreak havoc on your credit scores. Your scores will need three to seven years to completely recover, and that's if you inflict no further damage. Paying your bills on time and using credit responsibly will help you rehabilitate those numbers.
In the meantime, you can increase your odds of finding a good place by looking for mom-and-pop landlords, rather than applying at apartments managed by huge corporations. The big companies usually rely on credit scores to screen out applicants, while a smaller landlord may be more flexible. Offering to make a bigger deposit or to pay several months' rent in advance might help persuade them, said Stephen Elizas, author of "The Foreclosure Survival Guide."
Questions may be sent to 3940 Laurel Canyon, No. 238, Studio City, CA 91604 or via http://www.asklizweston.com. Distributed by No More Red Inc.