Ocwen Condo Foreclosure in Limbo Leaves Me Worried About HOA Fees and Mortgage Modification – Frank

“Dear Steve,

Condo in foreclosure since May 2011, mortgage previously with GMAC, now taken over by Ocwen. Retired in January and wrongfully assumed I could just start making payments on the mortgage.

Halt, you must go through a modification with Ocwen to stop the foreclosure. Agreed and sent all paperwork and info they requested.

Ocwen rep calls weekly to check up on me and inform about progress.

Property worth half of what I owe, needs work.

Have not paid HOA dues for years, yet holding back on that until mortgage issue resolved. Also owe on credit cards for years. Credit rating shot. Have no savings, SS payments less than a grand a month.

The Ocwen rep keeps telling me they haven’t decided. Am I getting a delay tactic or runaround here? As in, they actually want to foreclose instead of loan modification? Went through bankruptcy about 15 years ago, unsure if worth pursuing now.


Dear Frank,

If we begin with the reality that no lender is required to modify any mortgage for any reason, then it helps to explain what is going on.

But even if you did get your mortgage modified, what then? You still have a deeply underwater mortgage, repairs that need to be made, and years of unpaid HOA fees that could potentially lead to a lawsuit and future foreclosure.

A modified mortgage isn’t going to solve the property value problem, paying for repairs, and HOA exposure.

While you may have retired it sounds like you simply might be be able to afford to stop working yet if you want to keep the condo. Especially if your are relying on month Social Security payments of less than a $1,000 to tide you over.

I’m optimistic about your future but I’m not optimistic it will turn out well unless we address the larger issue of getting you to live within your income. That should be our primary focus.

The two primary ways to do that are to get you to reduce your living expenses to fit within your income and/or for you to go back to work and supplement your income with a new paycheck.

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There are two ways to deal with the condo with bankruptcy. One would be for you to stay there and enter a chapter 13 bankruptcy. You’d make payments for up to five years and you’d have to make your regular mortgage payment plus some to get your mortgage caught up and you’d have to pay some towards the HOA fees.

But that does not really seem to resolve your income problem and still leaves you exposed to repairs and future HOA and mortgage payments.

You could file a chapter 7 bankruptcy and discharge your mortgage and past HOA fees but if the bank does not take the property back, which they don’t have to with a bankruptcy, you will be left owing future Home Owners Association fees until the title is no longer in your name.

do nothingIn a chapter 7 bankruptcy your obligation to pay the debt back is eliminated but the property remains in your name and you still owe property taxes, HOA fees, etc.

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So if you really think you would not be able to afford to keep the property, even if your mortgage was modified, which may be doubtful based on your limited income, then the other logical option would be for you to do nothing and stay in the condo, not making payments at all. You’d just sit and wait for someone to foreclose on you and take the property back. It might be years before they do that.

Once someone takes the title to the property back then you could file a chapter 7 bankruptcy and eliminate your obligation for the past mortgage and past HOA fees. Since the property would not longer be in your name you would not incur future HOA fees. Then you could walk away without any further liability.

That would give you the best shot at a fresh start and second chance to get out from under the condo burden which seems immeasurable for you.

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If you still wanted to explore further mortgage modification option, you can use the links below for more information. But before you leap to do that, I’d seriously contemplate the do nothing approach.

It seems the worst case scenario might be the HOA sues you but if your income is only Social Security they would not be able to garnish those wages. If they went for a lien against the condo then it would be discharged in a chapter 7 bankruptcy.

You can click here to find a local bankruptcy attorney and talk to them for free about your specific situation. Get the facts and then you can make an informed and educated decision if bankruptcy is right for you.

Please post your responses and follow-up messages to me on this in the comments section below.

Damon Day - Pro Debt Coach

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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