I'm new to the site and will explain the dilemma/opportunity that I am in. I want to see if anyone has even come near to the situation I'm in and if you have any advice. As I stated in my opening thread, I was a person with semi decent credit and no money back in 2005 when i ran across a program teaching to invest in homes and put tenant buyers into the homes for a lease option or Rent to Own. I knew nothing about real estate but was hungry to learn. I bought two homes quickly with 0% down on the first, and 5% down on the second home. I then got a partner, taught him what I knew and had him purchase three (He had better credit, and got better terms.) We filled all five homes quickly and quit claimed the homes into an LLC. Then we sat back and waited for them to buy out the houses. We are now over two years into the investments and after some evictions here and late payments there, all five homes are filled once again and cash flowing around 700.00/month total. Not to bad. We have around a 20,000.00 profit built into the sales prices on each home. I don't personally care if they buy out any time soon, as long as they keep paying their rent, I'll take it. In the meantime I quit my full time job and built my own business from nothing and have proudly been growing for a year and a half now. I haven't bought any more homes in that time because to the bank, I have like half a million dollars in mortgages and technically no job. They would just sort of laugh at me. As you know, the rules have changed and stated income is now frowned upon.

Now that I've completely bored you with the back story, let me get to the FUN part (all caps means I'm being sarcastic!)

My partner calls me three weeks ago and tells me he is in debt up to his eyeballs, and has gone to a bankruptcy attorney to file for Chapter 7 bankruptcy. He tells me this means we are going to lose the three homes that have mortgages in his name. I told him do not act rash, how can we fix this?
He says,"It's too late I filed last month, I just figured I'd let you know."

First instinct was to visit him and introduce him to the family Louisville Slugger.

However, I'm usually a positive guy, so there has to be a way to fix this, right?
For the sake of not always typing the "partner", I'll call him "Adam" because that's the douchebag's real name. (Sorry couldn't resist)

I call Adam and ask, are the payments all current because he was the one taking care of all of the payments on the homes and doing the banking (I know, this is my fault, I should have stayed more on top of the situation)
Actually no, he hasn't paid on the three mortgages since January. So we have a situation where the three homes that we have together are in default, and each home has a family in it, paying rent each and every month like they are supposed to, and he has spent the money elsewhere. (I said this was the FUN part right)
Other facts:
- All three homes have first and second mortgages (to avoid PMI)
- Two of the homes have first and second mortgages through Countrywide.
- The third home has a first with Countrywide and a second through a different bank.
-The two homes that are completely through countrywide have been quitclaimed over to the LLC.
- The deed on the third home is still in Adam's name as he "never got around" to doing the quit claim.
- All three homes are worth around 120,000, and that's about what we owe on each one. (Not much equity if any)

What I've done since this all happened is call Countrywide, got permission to Countrywide from Adam to talk to me about his accounts and have gotten them to agree to let me assume the loans by simple assumption providing I can get a letter from the bankruptcy court stating that Countrywide has permission to change the name on the loans. Sounds a little too easy to me, but at least they pointed me in a direction, so that's what I'm doing.

After all that, here are my questions? (drum roll please)

Do you think I have any chance at all of getting Countrywide to assume the loans to me, without having me qualify, and still get them to discount the mortgages? Would it hurt to ask?

As I told them on the phone when they told me there was nothing they could do because the loans were un-assumable.

"In 12 - 20 months these three homes are going to foreclose and go to Auction and I will be at that auction and I will buy all three homes for about $70,000.00 each, so I will get the homes anyway. If you give them to me now, just by simple assumption, I'll pay the current debt of 120,000.00 on each house." They quickly agreed.

Once I get the letter from the bankruptcy trustee stating that the bank has permission to change the name on the loans, I think I'll sort of be in the driver's seat. If I walk away, it doesn't negatively affect me or my credit. (I lose a few thousand from down payments)
So do you think this is an opportunity to try and get them to discount the notes before assuming them to me? Wouldn't they be crazy not to?

(I'm sorry I have to go take a nap after typing all that, I'll understand if you need one as well!)

This post is rehashed from another site. did you not find the answer you were looking for there. all you did was copy and paste. its hard to forget about the family louisville slugger comment.

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Sounds like you are learning some key lessons the hard way. Tough break and you can come back harder and stronger the second time at it. Just don't give up and re-evaluate where you are now and what you have to do to make the best of the current situation. As for your partner he should have had a conversation with you about what was going on with him prior to filing for bankruptcy. That shows you the importance of being on the same page with any partners in business. It seems we all have to be screwed once to learn that! Keep your head up and do what you do best!

You caught me. I threw this up on a few different forums that I'm in, cause I don't really know what I'm doing, and I'm looking for advice. You got me redhanded!!!

You evidently are already talking with the loss mitigation department at Countrywide. With this said, you are on the right desk sort of speak. I would have asked Adam to start a short sale procedure with countrywide. They are more apt to be cooperative in this manner than most mortgage companies I have worked with. If you can get this done, then the process will tell them what the current market value of the homes are and they will take a loss if that is what the market is saying.

HOWEVER; keep in mind that in a short sale the previous owner can still be liable for the short fall in funds. You mentioned the LLC, is this LLC in both your names, your name? if so, then the short sale would only make sense on the home that is only in Adams name (as far as you go).

Now, if you can get them to short sale with a written forgiveness - then you're good to go, but that scenario doesn't make a whole lot of sense for them (you can try). Countrywide is becoming even more flexible as they are restructuring for obvious reasons and need a lot of things off their books, but they can't give the farm away to save the outhouse.

Good luck.

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I am on the LLC. The idea here was to take Adam out of the LLC, but if I understand correctly, I can't take him out until the bankruptcy is over. I was under the impression that by walking away from the whole mess, or even shortsaling these deals, the default will apply to Adam and the LLC, not me personally. Most people I have talked to (lawyers, real estate professionals, other investors, etc.) have told me to walk away because there is no equity in these homes.
I personally am in a situation where at the present time, I am unable to qualify to buy more homes, and thinking that the fact that there is no equity in these homes bodes well for them being bounced out of the bankruptcy and me being able to assume them. Since there are paying tenants in these homes, there is value in them, seeing as I was planning on holding them. Plus, these are good people who are trying to fix their credit to be able to buy these homes. Adam was only thinking of himself and his family when he filed for Chapter 7. I don't want to have to tell these people that they have to leave because of my screw up in partner choice.

After spending countless hours perusing these forums and reading countless books, I have a new plan and that is to try and get Countrywide to discount the mortgages instead of just assuming them over to me. If I can shave just a small amount off of each loan, that will create some equity in the homes which will benefit me in future sales of these properties.

I greatly appreciate all of the help you guys are giving and have given. You have no idea....