Foreclosure & DVC Points

[BoardwalkSuzy]

I know someone who has an investment beach rental property in foreclosure (NO bankruptcy proceedings) but just a situation requiring a walk-away from the exorbitant costs where the rent doesn't cover a fraction of the mortgage payments, taxes, insurance, hoa pmts, and maintenance. It's a single foreclosure for a way underwater property but she also owns DVC points. Is there any risk that the lending bank for the investment can come make claims against her DVC points as an asset (no debt associated with the DVC points that are paid in full)? I'm hoping not.

Don't know much about foreclosure, but I advised her to put DVC points into Living Trust along with her home, as I was always taught to do this, but don't think that necessarily provides creditor protection, just protection from years of probate nightmares. Don't know what banks are doing these days in the foreclosure world and if they can make claims against other assets especially if they were not listed on the original laon application as an asset. She's worried about the possibility of losing the DVC points, and hoping someone on Disboards knows if her points that are paid in full could be at risk too?

 

[mike9950]

Hi Suzy,

I noticed that you are in California. A few points to consider:

1) If your friends loan was a "purchase money" loan in California, meaning they used the loan or loans to purchase the home and did not refinance either since they bought the home there is nothing the lender can do to collect any additional funds. The loans are no longer collectable and you are 100% safe.

2) I highly doubt that the lender would look to foreclose on a timeshare even if it is paid off. Generally speaking timeshares are worthless (not DVC, but others)... In addition, the lender would have to find the asset, sue the borrower, gain legal rights to the asset and then sell the asset. It would be a lot of work for the lender (costly) with barely any, if any return at the end.

I'm sure someone else can advise on putting your points in a trust, etc.. However, I bet they are going to be okay.

I hope this helps and good luck to your friend with their situation.

Michael

 

[BoardwalkSuzy]

Michael,
Thanks for reply. Friend is in NC but think it would probably be similar to CA. She'll be glad to hear that she is probably safe with her DVC points!

 

[wcjoey43]

yes she will be safe

 

[sweetdana]

I would have her speak to an attorney. Different states have different rules. Also homestead loans, (primary mortgages) and purchase money loans work WAY different than cashout refis, second mortages and investment homes work much different than primary residence homes.

A seperate factor would be the possible 1099 that would be given to her at the end of the year for the part she didn't pay. IRS can take pretty much anything, even if the bank choose not to .. The IRS could for sure. Maybe she had the funds to pay the taxes, but not the funds for the property. I do not know, but these are things to consider. I HIGHLY recommend her getting professional advice.
The more $$ she is requiring the bank to take the loss on the more likly they will want there money.. IE is it is under water 10K, it is not the same as if she is underwater 50K. or Worse. The more $$ the bank is going to lose the more they will try to get something. GOOD luck, it is tough.. I hope it works out.