My question involves a mortgage in the state of: NEW YORK AND GEORGIA
I’m in a deep mess and it seems to be getting worse every time I try to fix it. I made this outline with questions at the end. I appreciate you taking out the time to look at it.
March 2006 - My father, being in real estate, assisted me in purchasing an investment property that he promised to help me manage. I signed a contract on a single-family house in Georgia for $153,000.
April 2006 – My father told me he has a friend (AR) in New York who is need of a co-signer for a home loan (of $361,000) because “his credit is bad, but he is working on fixing it.” He suggested that while AR is putting down the down payment, I co-sign the loan that would further boost my credit and we have both of our names on the deed. AR would refinance the loan when his credit repaired within a year. With that condition, I agreed to co-sign for the loan. However, a few weeks later, my father told me AR can’t co-sign because the bank won’t approve the loan with his name on it. I questioned how I would get approved for over half a million of real estate within two months with a starting salary of $60,000 but My father reassured me that he’ll time the closings within two months of each other before the mortgages are reported to the credit agencies. At the end of the month I closed on the Georgia house with Bank of America, with a mortgage of $121,000 and a junior mortgage at (a much higher rate) of $22,000.
June 2006 - At the beginning of the month, I closed on the New York house with Wells Fargo, with a mortgage of $361,000.
AR moved into his home and made his payments of $3,100 directly to Wells Fargo. Meanwhile, I struggled to locate tenants for my Georgia property since I didn’t live in the area and paid a majority of the mortgage out of my pocket. I was in a Masters program so took out additional loans to pay off the junior mortgage for the Georgia house. Periodically I would ask my father about refinancing AR’s house he would continue saying “not right now.”
December 2008 – AR defaulted on his loan repeatedly. My father told me he doesn’t want to be involved and it is solely my problem. (Background: My father has a history of gambling/money laundering/bankruptcies and so believe it or not, he has repeatedly screwed me over. Unfortunately, this time, I have a strong feeling that my father and AR had some unresolved financial dealings going on and my father used my credit as a way to delay paying him back and eventually hoped that he would forget about the loan.) So while my credit was getting ruined I tried to work with AR for the next year to let me do a short sale on the house. Even though I worked extensively with the bank on paperwork for the short sale, AR always stalled and NEVER let me show the house to prospective buyers.
January 2010 - With the loan having been defaulted for over a year, I gave up on trying to contact AR and just hoped Wells Fargo would foreclose on the house so I could get it off my credit report after 7 years.
August 2010 – I started medical school and so do not have any further income.
October 2010 – I had problems with collecting rent from my tenants in Kennesaw for months in Georgia, where I was paying out my pocket. Once they stopped answering my calls and refused to open the door even when I visited, I gave up on that house too. I figured since the house value has dropped it won’t lower my credit any more than it has already been hurt.
February 2012 – Bank of America sends me a 1099C(?), cancellation of debt for my Georgia property for the value of approximately $30,000 stating that the assessed value of the property is $88,000. I contacted the bank and they said the house is in the auction process but is not sold yet so I still may have the right to sell it. My balance on the property was probably around $123,000 which is what it seems to be worth. I also did some research and discovered than AR moved out of the New York house and has been collecting rent of about $1700 without ever telling me and never made an additional payment towards the Wells Fargo mortgage. My parents went to speak to AR and he refused to cooperate in any way. We sent an eviction letter to the tenants and AR , then scared, has agreed to hand over the deed to let me do the short sale.
If I get a cancellation of debt from the New York house foreclosure, it is going to be much larger because he is over $100,000 in arrears in the last three years. My understanding is that I may have to report that as income but does it get cancelled out when I also report the loss on the same property? I believe that can be done, but only for primary residences so I would have to pay tax on the cancellation of debt from at least one of the properties. Is this correct?
Since my credit is ruined so much, I looked into declaring bankruptcy but I have a savings account which has my parents savings in it and so do not want to jeopardize that – so that is not an option. At the same time, I’m afraid of these banks foreclosing and trying to come after me in other ways (1099s, liens on my savings accounts). Is this something I should be afraid of or will my all my savings and checking accounts in various banks be protected from these two creditors?
Right now I have no incentive to deal with either of these problems, hoping they will just go away but they seem to be coming back to haunt me over and over again and I don’t know how much worse it can get. (Probably a lot more.) Is it even worth it to go through all the effort now to do a short sale on both houses? I may avoid foreclosure on my credit report but the damage from 18+ months of default on the properties has already hurt my credit so much. I’m not sure how much a foreclosure would hurt or short sale would help?
Is there ANY way that I can have Wells Fargo remove the negative credit reporting? Possibly, with an explanation of the circumstances, or proof showing that it was AR’s house completely, or that I should not have been approved for the loan to begin with or how about in exchange for me doing a short sale on the house so they avoid going through the foreclosure process?
Also, do I have any chance of negotiating with Bank of America to do either short sale or modify my loan balance with them in exchange for removing their negative reporting?
I’d like to know if I have any chance at suing AR. I understand that I willingly signed the loan and that is my biggest a mistake. But I’ve paid for it with so much: money, my credit being ruined, the mental stress of him being not being cooperative and finally him collecting rent on a house that technically we both own for over 3 years which he could have been using for possibly modified mortgage payments.
I am unsure if whether or not I should take the deed from him yet. Because if he gives it to me, I can proceed with a short sale but then its my house, my loan and I feel like I cannot go after him for anything. At least right now he’s a joint co-owner of the house on the deed.
Also, would I be able to sue my old tenants for abandoning the property without ever paying me the rent. I don’t have their social security numbers (did not write them on the lease), but I could probably locate them to serve them.
I understand these are long shots but I’m looking for some VERY creative advice on 1) getting out of this mess and 2) repairing my credit 3) recovering any of the damages I’ve suffered.
PLEASE HELP ME. I've been dealing with these issues for almost 6 years now and feel hopeless. I'm in medical school right now, getting married in 4 months and want to fix all this before I start my new life.