QUESTION
Can the bank come after me if my wife defaults on her mortgage? My name is not on the mortgage. I am the sole provider.
Asked on Feb 15th, 2013 on Foreclosures - Ohio
More details to this question:
My wife owns a house that it's solely in her name. I bought a bigger house since we outgrew the first one. I am the sole provider as she is home with 3 children. We had an offer that is $27,000 short of what she owes. The raltor wants us to try a shortsale with the bank. The bank is asking information about me and they want me to write a letter allowing them to use my income to determine if we can do a short sale. Also, they want to see bank statements and income taxes filed in the last 3 years. She can't file for bankcruptcy because I make more than $85,000 a year. Do I allow them to use my income? What happens if she stops paying the mortgage? Can they put a lien on the new house? The mortgage of the new house is in my name. Thanks,
1 ANSWER
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Generally, I don't recommend short sales. They provide little or no benefit to the borrower. To the contrary, the borrower, who in this case is your wife, could be faced with forgiveness of indebtedness income. That is the difference between what she owes on the mortgage and what they receive from the sale. The IRS considers that income and the mortgage company will likely issue a 1099c requiring that she report that as income.
However, if she simply allows the house to go to foreclosure, there should be no forgiveness because the debt was not forgiven. It is then unlikely the mortgage company would pursue any deficiency as they generally settle for whatever they get from the property.
If you are determined to proceed with a short sale, your income information does not make you liable. Rather, it is merely a way of determining theoretically whether the mortgage company could have pursued your wife. It is an academic exercise.
Answered on Feb 15th, 2013 at 5:50 PM