When do we let our underwater home go back to the bank?

We currently owe $50,000 more on our house that its sale value. We have asked both of our home loan companies for modifications (4x) and have been denied (home equity helped for 2 yearsbut won’t help any more). We can no longer afford to make the $1600 monthly payment on a take home income of $2950. Should we just quit paying and wait for them to either work with us or evict us? If they start foreclosure, how long can we stay in our home?

Asked on March 14, 2011 under Real Estate Law, Minnesota


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

1) The bank *never* needs to work with you--it's purely voluntary if they choose to do so.

2) As soon as you default on paying either or both notes, a lender could begin foreclosing. There's no set timeline for this--it depends on when they start foreclosing, on whether it's a contested or uncontested foreclosure, on whether there are any paperwork irregularities, on how busy your courts are locally, etc. As a practical matter, they could start quickly, but he process could take a few months to a few years, depending on all the circumstances.

3) Once the home is foreclosed and someone else owns it after the foreclosure sale, they could bring an eviction proceeding, which will typically take another 4 - 8 weeks, start to finish.

Note that under certain circumstances, a lender in MN *may* be able to seek a "deficiency judgment" against you for amounts owed under the mortgage but not paid by selling the home in foreclosure, below I'll insert a link to some information about his. You may wish to consider bankruptcy as an option in your situation and should probably consult with a bankruptcy attorney.

Here's the link: https://www.revisor.mn.gov/statutes/?id=582.30

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