Preforclosure Packet

[preech]

What is the name of your state? TX
I have a money pit I have been trying to sell for some time with no luck. I no longer live in the city and can't afford the payments on the house. I called the bank and they sent me a "preforeclosure packet". In this they request 2 years tax returns, pay stubbs, financial statement, etc. They say I have 15 days to return and then they will make a gecision in 45 days. What is there to decide? I can't pay for this other house. Do I have to fill out this documentation? How will filling this out help me? Can they say yes you can afford this money trap keep on paying? What should I do? Any and all help is greatly appreciated.
Thanks,
Preech

[pty]

I assume the preforeclosure packet is to review for either a sale short and/or a deed-in-lieu. This is standard information that’s required to review a loan for those options. One of the basic requirements for a short sale and/or a deed-in-lieu is that there’s a hardship situation, meaning that you truly can’t afford the payments. The mortgage company is not going to just take your word for that—they want to see some proof/documentation. The tax returns and pay stubs help to verify your income and the financial statement (which I assume is a listing of income and debts) is used to determine rather or not you are capable of making the payments.

If you want the mortgage company to review the account for either of these options, then yes, you have to provide the requested documentation.

Can they deny your request? Yes, they can, and they will if you don’t meet their requirements for these programs. Why would they deny it and opt to foreclosure instead? Because if they agree to allow a presale or a deed-in-lieu, they give up their right to seek a deficiency judgment against you for their loss. Giving up that right is not something that they take lightly.

And I have to add this, just so you are aware--there are other requirements for these options and other reasons that it could be denied. For example, the hardship must be something that was beyond your control. So, let’s say that you got laid off and the only job you could find was at 60% of your previously salary, then that was a loss of income that was beyond your control. But, if you voluntarily left your job and accepted another position at 60% of your previous salary, then normally that would not be considered beyond your control (unless there was a special/unique situation that caused you to do that). So, just be aware that there are other factors that the mortgage company considers.

Should you send in this information? That’s entirely up to you, but as I said, if you don’t send it in, the mortgage company will not even consider these options. If you do send it in, the worse they can do is deny your request.

My standard disclaimer —I am not an attorney, but I did work in mortgage servicing, and a number of those years were spent in the loss mitigation department dealing with short sales and deed-in-lieus. However, I am speaking in general terms here, because each mortgage company is different in the programs that they offer and in the requirments for those programs.