# Desperate Florida investor



## mepiroya (Jul 25, 2008)

Hi All,
I owe $300K on a mortage for a condo in Florida which market value now is $190K. It is rented but every month I have to pay about $1,500 out of pocket to cover mortgage, HOA, etc. The monthly mortgage payment includes PMI and it is interest only type for 1 more year, then it will go up. I do not care about my credit score as I live abroad and do not plan to go back to US for at least 10-15 years. However I do care about deficiency judgements as I still keep some savings in US banks.
Any suggestions?
mepiroya


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## twostep (Apr 3, 2008)

You and many others speculated in real estate and the market is down. You can ride it out, sell short or risk issues down the road.


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## synthia (Apr 18, 2007)

You don't say whether the rent covers most of your monthly outlay, or only a small fraction of it. Either way, you really don't have a lot of options. And what will happen if you lose your tenant and it's empty for a while? Also, do you know what sort of shape the property is in? I've read of buildings that aren't being maintained because most of the owners are in foreclosure and not paying maintenance.

One option would be to let the property go in foreclosure. However, if the property is sold for less than the amount due on the mortgage, the difference is regarded as a loan foregiveness, and you will owe income taxes on that amount. So, if the property did indeed sell at auction for $190,000, your forgiveness amount would be $110,000, all of which is taxable US income.

Have you talked too your lender about possible refinancing options?


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## twostep (Apr 3, 2008)

Cynthia the days of a lender touching an upside-down mortgage are gone. 80/15 - 80 true mortgage, 15 equity line is about the max you can count on. 

He owes 300k on property appraised for 190k - there is no refi unless he brings considerable additional collateral to the table.


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## twintubber (Jul 25, 2008)

mepiroya said:


> Hi All,
> I owe $300K on a mortage for a condo in Florida which market value now is $190K. It is rented but every month I have to pay about $1,500 out of pocket to cover mortgage, HOA, etc. The monthly mortgage payment includes PMI and it is interest only type for 1 more year, then it will go up. I do not care about my credit score as I live abroad and do not plan to go back to US for at least 10-15 years. However I do care about deficiency judgements as I still keep some savings in US banks.
> Any suggestions?
> mepiroya


Get your savings out , then just give the keys back.


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## synthia (Apr 18, 2007)

But they are going to lose anyway, and a refi might be a way to keep the loan open. The last thing a bank wants to do is foreclose. It's worth asking. After all, a cheap phone call on Skype is all that it will cost.

The problem with moving money out of the US and then turning in the keys is that means foreclosure, and a debt to the US equal to whatever the loan forgiveness works out to be. That debt will never go away, and interest and penalties will climb and climb. If the OP never intends to return to the US, he might be OK. But moving money out of the country just before abandoning the property will probably be construed as a deliberate fraud. Unless, of course, he can come up with the money to pay the tax. That might be the cheapest option, because the income tax on, say, $110,00 will be less than $7000, if that is the only taxable income for the year.


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## RICHNTRISH (Jun 4, 2008)

So are you saying that if the property is in negative equity and the owner defaults on the loan , then the bank forecloses , that the owner does not have to repay the shortfall back to the bank after the bank has sold the property . He only has to pay tax on the negaive equity to the goverment as if it was an income ?


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## twostep (Apr 3, 2008)

It is not THAT easy to walk away from bad debt. It is somewhat easier for someone who has no intentions of ever returning to the States. 

Credit history is part of everyday life. From renting a place, getting utilities hooked up to a job. It will rear its sometimes ugly head. There is a persistant rumor about a seven-year-limit of bad debt on a credit report. Bad joke!

The small print of loans tend to have verbiage along the line of "other collateral may be attached without given notice ...". The accounts the poster mentioned may not be so liquid after all.


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## Fatbrit (May 8, 2008)

twostep said:


> It is not THAT easy to walk away from bad debt. It is somewhat easier for someone who has no intentions of ever returning to the States.
> 
> Credit history is part of everyday life. From renting a place, getting utilities hooked up to a job. It will rear its sometimes ugly head. There is a persistant rumor about a seven-year-limit of bad debt on a credit report. Bad joke!
> 
> The small print of loans tend to have verbiage along the line of "other collateral may be attached without given notice ...". The accounts the poster mentioned may not be so liquid after all.


Bad debt is removed from a credit report 7 years after the last account payment. There is an exception -- tax debt is on for 10 years. This is the reason that collection agencies try to get you to pay 100 bucks or so -- to re-age the debt. So after 7 years of not paying it, it goes!

On other stuff, deficiency judgements were until recently rare -- the lender just wrote it off. Whether they'll make a comeback is uncertain. They're certainly state specific as well -- just to complicate matters. Regardless, if you just walk, they have 90 days to file after the property is sold off.


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## twostep (Apr 3, 2008)

Acurate negative information can be reported for seven years - but

Bankruptcy can be reported for 10 years
Reportings because of a job application for a job with a salary of over 20k has no limitations
Reportings because of an application for credit or life insurance of over 50k has no limitations
Information because of a law suit or a judgement can be reproted for seven years or until statue of limitations runs out - whatever is longer
Default info on US Government insured or student loans can be reported for seven years depending on guarantor actions
Tax liens stay on seven years after they have been satisfied

The reporting period starts when a payment is late or when an account went to collections. Payments made thereafter have no influence on this.


I have been on the compliance, commercial side and HR in banking. You can read a credit report like an open book long after the famous 7-year reporting limit.


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## Fatbrit (May 8, 2008)

twostep said:


> Acurate negative information can be reported for seven years - but
> 
> Bankruptcy can be reported for 10 years
> Reportings because of a job application for a job with a salary of over 20k has no limitations
> ...


It goes from your credit report after seven years. The same credit report your employer reads, your mortgage company reads, your life insurance company reads, etc.


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## synthia (Apr 18, 2007)

So, if the OP isn't coming back for a long time, it really doesn't matter.


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