[2008] Foreclosure Theory

[Talent312]

Even in those states where they do allow it, many lenders don't bother with it due to the cost and the fact that there probably are not many assets left after a foreclosure. This may be different with a timeshare where the borrower may have a home. Though in this market many people don't have any equity in their home so there isn't much for the lender to go after.

Fair enuff.
However, Florida is not a debtor-friendly state (except for homesteads). Deficiency judgments are routinely entered. After the sale, the attorney files a motion that shows the amount found to be due under the mortgage, the amount of the auction, and the difference. Judgment for the difference is usually entered summarily, absent a showing of irregularity.

 

[gatkerson]

I own in California, Wyndham is based out of Florida. So what does all this mean, simple man terms.

 

[Talent312]

I own in California, Wyndham is based out of Florida. So what does all this mean, simple man terms.

The law of the state where the property is located applies. I am not familiar with California foreclosure laws; however, I did find this interesting statement from www.assetforeclosure.com:

"California is famous for its one-action rule, in which a lender must carefully elect one action to take against the borrower if the borrower defaults. If the lender forecloses the deed of trust out of court [with a 'power of sale' clause], the lender has chosen one action and may not bring a lawsuit to recover a deficiency, which would be a second action."

"If the lender chooses to sue the borrower and obtain a foreclosure order and if the proceeds of the judicial sale of the real estate are not sufficient to repay the loan balance, then [the lender may pursue] a deficiency for the balance. Such a suit is permitted as the lender’s one action."

 

[gatkerson]

Thanks for doing that research!! So basically what that means is that if Wyndham forecloses on me then they cannot sue me, whereas if they sue me and then foreclose then I have to repay the deficiency?

So those of you following this forum, do you think that my original theory might be true?? I stop paying on the loan, Wyndham forces me into foreclosure but doesn't sue me for the deficiency, Wyndham takes back the deed, I sign a gag order and take a hit on my credit and am free of the timeshare? Again, I am only basing this on the lack of information I am able to find about those who have been through the foreclosing of a timeshare.

 

[Talent312]

... So those of you following this forum, do you think that my original theory might be true?? I stop paying on the loan, Wyndham forces me into foreclosure but doesn't sue me for the deficiency, Wyndham takes back the deed, I sign a gag order and take a hit on my credit and am free of the timeshare?...

Now that I know a little something about California procedure, I admit that your scenario seems a tad more plausible. However, several things would have to fall into place: (1) Your mortage (deed of trust) would have to contain a "power of sale" clause permitting the holder to use the out-of-court option, and (2) Wyndham would have to perceive that such option was preferable to the lawsuit option.

Have you approached Wyndham about taking a deed in lieu of foreclosure?

 

[gatkerson]

I tried to talk to Wyndham's foreclosure department and they wouldn't even speak to me unless I was in default. I can't get anything out of them (Wyndham) about foreclosure and the process.

 

[Mel]

If you owe $35,000 and the fair market value of the unit is only $9,000 I suspect Windham would choose to go through the court. If they forclose out of court, and take the week back, they still have to resell it, so even if they can resell those points for $40,000 assuming the price has risen, they still have to pay commission and other sales costs.

If they file suit against you, and get a judgement, the court is likely to assign a value to your unit - and even if the court goes high, and values it at $20,000 you still end up owing Windham $15,000 more.

Which do you think Windham is likely to pursue? The unit back, or the unit PLUS $15,000?

If you really want to find out where Windham stands, you could let yourself get behind enough that they will talk to you. At that point you can decide whether to let them forclose, or whether to pay the back payments and get up-to-date.

Remember also that your personal situation over the next 8-10 years isn't guaranteed. You might need a decent credit score sometime in the near future, and a $15,000 judgement isn't going to help. If they offer a way out without taking a credit hit, I would take it.

 

[gatkerson]

So does this article have anything to do with my situation?

http://www.forbes.com/feeds/ap/2008/09/22/ap5456636.html

The article talks about "Wyndham has reported higher level of defaults since late last year and has increased its provision for loan losses."

But yet still can't find anyone out there willing to talk about it.

 

[timeos2]

Bad time to look for breaks

So does this article have anything to do with my situation?

http://www.forbes.com/feeds/ap/2008/09/22/ap5456636.html

The article talks about "Wyndham has reported higher level of defaults since late last year and has increased its provision for loan losses."

But yet still can't find anyone out there willing to talk about it.

Whats to talk about? If you don't pay and let it go to default they will, most likely, take steps to collect and then, if you still don't honor your contract then they will most likely foreclose and go after every dollar they can. The law is on their side. They have no reason to talk about it as what will happen is clear. Looking for outs isn't going to make them talk or act. Risking your credit will. Then you will find out how serious they are. The current poor state of the economy makes it all the more likely they will push HARD for every dollar as sales are apparently in the tank. They need current owners to pay up to keep cash flow going.

 

[Mel]

Also in the current economy, risking a big hit to your credit score is probably a bad idea. As the economy tanks, businesses will have to make cuts, and your job may not be as secure as you think. You could lose your job - then you need to find a new job, with that poor credit score looming. Or you could be shifted to another job, and have to move - and get a new mortgage. Not only will those 250 points result in a higher mortgage rate, but a forclosure on your record may make the banks think twice before offering you credit, even if it is secured debt.

Any of the major developers are likely to pursue every avenue to collect the debt, particularly right now. As John mentioned, they need the cash flow. 99% of those who bought from the developer did so through a presentation, and were prequalified. The whole point of the tour qualification is to show you have the means to pay. In most cases, those who had the means to pay when they purchased either still have the means to pay, or have some sort of assets that can be seized. You may feel squeezed, and not want to pay, buy you have the means. You might need to cut back on other expenses, but you signed a contract, and are responsible for your debt.

Take this one step further, for those willing to walk away when they have a paid-off unit. The thought is that the developer got all his money, so you're not really hurting anyone - but you are. If you still owe the developer, the developer is the one most likely to forclose, in which case the developer is responsible for the maintenance fees. If you don't owe the developer, it is the HOA who has to forclose. When that happens, you are simply shifting the burden of your fees to all the other owners. When it costs $30,000 to maintain a condo for the year, and that cost is split among 50 owners, each only has to pay $600. But drop that to 40 owners, and each is now responsible for $750, and if the fee goes high enough, it may cause others to decide to default, causing an even worse effect.

 

[alexadeparis]

There must not be a ton of lawyers on this board. I am not licensed in CA, so do not construe this as legal advice, however, if you have real property (house, vacant land, etc.) then in most states, a creditor can secure a judgment in their home venue (their home county or state or whatever you agreed to when signing the contract) and then record the judgment in your county recorder's office (usually even if from another state). This will attach a lien onto your house that must be paid whenever you sell it, even if years later.
So this foreclosure scenario is not really a good idea, you will end up owing more than you do now because of court costs, collection fees, etc, and you will be without the use of the TS. If the points aren't working, then exchange the week into something else.

The ONLY way to completely get rid of any deficiency after foreclosure is to file for Chapter 7 bankruptcy (if you have to file a Chapter 13, you will repay at least a portion.) I would suggest, as someone else did, that you get behind, (by holding back payments but not spending the money in case they leave you no option but to get caught up), and ask them if a deed in lieu of foreclosure is possible because you are unable to make payments.
If it's not, ask them if you can have someone else assume the loan, and if they say that's possible, see if you can find someone who will in fact assume it. Otherwise, refinance this timeshare on a 0% or low interest credit card, at least you will save some interest.
Just my 2 cents.

 

[Floridaski]

Why not try to rent out your weeks to cover costs

Just a thought, you could more then likely rent out the weeks to help cover your expenses. You are more then likely NOT going to cover all your expenses, but it could help. You would have to reserve the weeks and then post on Tug or Red Week. We own at Morritts, thankfully it is paid for and we only have MF. But, in the current economic environment this specific timeshare is worth hardly anything on the open market.

So, we just rent out the weeks via red week and I cover my costs. It is a hassle, I have to reserve the "good weeks" one year prior, post the weeks and then field all the calls or e-mails. But at least I am not losing money on the deal. Wyndam has some very nice properties and you may be able to cover some of your monthly expenses in this manner. It will not be easy, but it is possible. It is more then likely to late to reserve winter weeks now, but it may be possible - you just need to look at red week and see what resorts bring in the highest rental dollars. Perhaps you could get that $600 per month reduced to an amount that you can live with. Good luck and there are many people here who can help you with the rental aspect of the weeks. You are in a tight spot and hopefully you can come up with an answer. But, I would not think Wyndam will do you any favors.