Foreclosure consequences?

[carrott7256]

What is the name of your state (only U.S. law)? IL

Hello there. I wish someone could shed light on my case. We can no longer pay our mortgage and now is thinking of going to foreclose the house. The mortgage is on my name only. We used to have a 2nd mortgage but because the interest rate on that one was kind of high, we decided to pay it off using equity loan. We even paid off some of our credit card debts with this equity line. My husband is a stay home dad, I have been working nearly 7 days/week just to pay off the mortgage and equity loan.

Now, if i stop paying my mortgage and equity loan, what will happen then? Im pretty sure deed in lieu of foreclosure wont work since i have an equity loan. if the the 1st lender takes the house, what will happen with the equity loan? Aside from getting the foreclosure on my credit, what are the other implications of no longer paying your mortgage and equity loan?

If my husband gets a job during this process, will they come after him and force us to pay the mortgage/equity loan?

please help.

Thanks!

[FlyingRon]

Some terminology: You don't foreclose. You default on the loan by not making the payments. The lender forecloses.

An "equity loan" is still a "second mortgage." While you may have gotten more favorable terms, you really didn't change the legal situation by that refinance.

If you stop paying either loan a foreclosure will likely follow. Illinois mortgages are with recourse, so the lender could come after you for the difference between what the house sells at foreclosure and what they were owed. While your husband is not liable for your debts, it can be quite sticky because as soon as any asset is put in a common form (like a joint bank account) they can be snatched up to satisfy the judgement.

Yes a deed-in-lieu and/or short sale is complicated by the presence of multiple loans on the property (although if with the same bank it might get easier).

I'd recommend that your husband get a job to help you pay your present obligations. I know it will be unpleasant, but there are tons of families where both parents have to work to make ends meet. If you are almost scraping by now, even a part time job may give you some breathing room.

[carrott7256]

Thanks for the clarification in terminology.

It's actually hard for my husband to get a job because we have a baby that he baby sits and 2 other children. We decided that it will be better for once of us to be home because baby sitting or child care would be more expensive.

I realize that the lender can report the difference as an income to us, so what happens to the equity loan then?

is it possible that even after the 1st lender foreclose the house, we are still going to end up paying of the equity loan?

Thanks

[FlyingRon]

The foreclosure doesn't make either debt go away. As soon as the house is foreclosed you are immediately responsible for paying the full amount of BOTH loans. The second may be willing to allow you to make payments, but that is something you will have to negotiate.

[carrott7256]

ok. Thanks a lot.