Complicated Situation. What to do?

[kbewell]

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

In 2005 I purchased a home with 100% financing (80/20). I got married in 2009. Starting in 2009 we started to file a joint tax return. I lost my job in 2010 and been unemployed for the past year, and been in default for the last year as well. I never put my wife on the mortgages or the title of the home.

I met with a financial counselor to discuss the options and determined that my wife being added would not had done anything related to a loan modification as she just doesn't make enough. A modification would only work if I was to find work.

In May 2011, I was facing a foreclosure date and I had requested approbal to conside a short sale, but never heard a response from the lenders so I was forced to rent one day before the foreclosure sale. I didn't want to be evicted, since that hurts the credit file even further (we wouldn't be able to rent). I later found out that the lender had extended the foreclosure auction. They are reviewing the short sale package currently.

Here's the questions:

1) The lenders are requesting tax returns, should I supply the returns? My concern here is the lenders are not currently aware I'm married and does this open my wife up to any risks?

2) Can the lenders pursue my wife at all?

3) Does us moving out into a rental impact the tax forgiveness?

Thank you for the help!

 

[tranquility]

1) The lenders are requesting tax returns, should I supply the returns? My concern here is the lenders are not currently aware I'm married and does this open my wife up to any risks?

If you never refinanced the home, what possible reason are they asking for tax returns?

2) Can the lenders pursue my wife at all?

If the loan was only 100% of value and has not been refinanced, the loan is non-recourse under California law. They can't "pursue" anyone.

3) Does us moving out into a rental impact the tax forgiveness?

Even if you needed to rely solely on the Mortgage Forgiveness act, I'd say no.

 

[FlyingRon]

Further the "forced to move into a rental before the foreclosure sale to avoid eviction" makes no sense. Once the sale happened you'd have plenty of notice to get out (if necessary) before being evicted.

I'm equally confused. If you were foreclosed upon, why is the lender requesting your tax returns? It's done with. It would appear this (as tranq stated) a non-recourse loan. Even if they were going after you for the deficiency I don't know why they would care.

 

[kbewell]

If you never refinanced the home, what possible reason are they asking for tax returns?

If the loan was only 100% of value and has not been refinanced, the loan is non-recourse under California law. They can't "pursue" anyone.
Even if you needed to rely solely on the Mortgage Forgiveness act, I'd say no.

The tax returns are being requested, since they are considering a short sale.

Yes, I never refinanced the loan ... these are the original loans.

Thanks for the reply.

 

[tranquility]

The tax returns are being requested, since they are considering a short sale.

You have no idea what is going on. You need to see someone who can read your paperwork and tell you. You cannot have already been foreclosed and they are "considering" a short sale.

 

[kbewell]

You have no idea what is going on. You need to see someone who can read your paperwork and tell you. You cannot have already been foreclosed and they are "considering" a short sale.

Initially I left out that the foreclosure had been postponed, the lender is currently reviewing for a short sale. As part of the short sale they are asking for the tax returns.

 

[tranquility]

Are you saying you completely moved out for only one day?

 

[kbewell]

Are you saying you completely moved out for only one day?

I moved out the day before the initial foreclosure auction date in May 2011. I've been out ever since, but did find out that the auction was postponed (it's actually been postponed every single month since).