The Scary Notice Taped to Your Door. Pfft!
The bank first taped up the scary "your home is going to be sold at auction in three weeks" papers on my door in March, 2010. The actual auction didn't take place until August, 2011. But of course, at the time, I was sweating bullets.
What's interesting was that I never really formally requested postponements of the auction dates. I would call in to get updates throughout my third attempt at a loan modification and they would tell me in ominous tones, "Mr. Downey, I see here you have an auction date for April 29. That's in a week. What are you going to do about this today?" I would call back the next day and a different person would tell me in the same manner, "I see here you have an auction date of May 5."
This continued all the way until September when I got a letter from Bank Of America politely informing me they had become my new mortgage servicer. It turns out First Franklin had "charged off" my second mortgage and sold my first mortgage to Bank Of America, or so I think... Who knows really? They don't seem to know themselves.
A collection agency started calling me for the second mortgage. First I had to explain to them that I live in California, which is a non-recourse state. They had an address in Indiana where I haven't lived in eleven years from an old credit report and begged to differ. I said, "read the property address you are calling about. It's in California. A non-recourse state."
If you used a second mortgage to purchase your home and you live in a "non-recourse" state they can't come after you for it. Furthermore if you have negative equity in your home, they can't foreclose on it over the second if you owe more on your first than what the house is worth. I explained all of this to the collection agent who changed her tune and offered me "a very generous settlement amount for pennies on the dollar" to "clean this from your credit." I declined.
I've never heard from them since. And why should I? I agreed to pay back the bank for loaning me money to buy my house and also agreed that if I didn't, the bank could have the house themselves. Why consent to more than that?
Make the Bank's Lack of Organization Their Problem, Not Yours
After months of being frustrated by the bank's poor organizational skills (yeah, yeah, they are overwhelmed by all of the people losing their homes; whose fault is that again?) I decided to turn the tables. Poor organization can be your friend!
I would take my time to send them documents. I wouldn't return phone calls for a few days. If I didn't like the attitude of the person on the other end, I'd hang up on them and call right back. I mean, you get a different person anyway. Why not?
The first letter I got from Bank Of America said essentially, "We are your new loan servicer and your first payment is due as of December, 2009." I got this letter in September, 2010. When I called them they said they didn't have my files yet.
By the time I was fully in their system and they realized I was nearly a year behind, it was October, which happened to be the month they instituted a foreclosure freeze to do their own "internal investigation" about potential wrongdoing.
When they turned the foreclosure faucet back on I went through their loan modification process (which was said to be different than my last lender's), then they ran me through HAMP, then we talked about a short sale, then I was sent to their "deed in lieu of foreclosure" department. Then on August 9, 2011 they finally took my house to auction.
Nobody bought it and it went back to the bank.
What Happens After the Auction?
I'm told that if investors buy it they will eventually show up on your porch, give you a call or write you a letter. They'll tell you they've purchased your home and they are prepared to offer you some "moving expenses" cash to get outta Dodge.
If the bank takes your house it's more or less the same thing. A realty company came by my place on BOFA's behalf.
In either case the bank or the investors could evict you, which you can fight. This process will cost them money and give you even more time in the house -- anywhere from thirty to ninety days, I've heard. It makes more sense to them to give you cash to get out faster so they can be sure you won't trash the place on the way out or let the lawn turn brown.
If you decide to stay this extra bit of time, be aware that an eviction looks much worse than a foreclosure to a landlord.
In my case it took the realty company a few days to show up and (surprise, surprise) they had to wait on Bank Of America to finish up some details before they could work everything out with me. I'm not saying I worked out a "cash-for-keys" agreement. I'm pretty sure those agreements have a non-disclosure mechanism. But I hear they're offering about $5,000.
I handed Bank Of America's representatives the keys nearly two months after the day they took the house to auction.
But What About My Credit Score?
American Express lowered my spending limit for a few months when I stopped paying my mortgage. A few months later they raised it again. I kept all of my credit cards and auto loans current. When it came time to rent a house I was accepted by the first landlord at the first rental property I looked at with the only application I turned in. I simply explained the entire situation to him in our first conversation. He wanted to see my bank statements and ran a credit report. That was it.
It's my suspicion that a foreclosure is going to be much less detrimental when it comes time to getting credit to do anything -- including buying another house -- than it used to be. Think about it. If people won't rent to folks who've lost their homes, who will they rent to? It would be McDonald's deciding they won't sell food to people who are out of shape.
The place I'm renting is costing me less than half my monthly mortgage and property tax bill used to be.
What Will the Kids Say?
My three-year-old daughter loves our bigger house and our nicer neighborhood. She announced recently that, "One time I saw an ant sleeping on my bike in the garage so we had to get a new house." Our dog loves the new house, too.
Finally, What Will the Neighbors Say?
The honest ones will ask you for advice. The proud ones will probably end up with papers taped to their doors, too.
Follow Ryan J. Downey on Twitter: www.twitter.com/SuperheroHQ