Poll: Underwater

[CaP'N GRuNGe]

As others have said, try the short sale route. I guess it's not as damaging on your credit as a full blown foreclosure.

[muck]

These are different situations entirely:

 

1) Guy loses job / business and can no longer pay mortgage after exhausting savings and retirement to remain current. No real prospects of change financially in the near future. He's done all he knows to do to honor his committments. Deed in lieu of foreclosure, short-sale or foreclosure are only real options.

 

2) Guy has job / business in tact and can pay but is underwater and has no idea how long it'll take to get back to break even on his house. Neighborhood is just fine safety-wise, convenience-wise, etc. Other than they can get the same house for less money down the street or in the subdivision over, there is no reason for them to sell or refinance their house. This guy should stay put (or sell, pay off the mortgage and get a better deal down the street).

 

3) Guy has job / business in tact and can pay, but is underwater and all the foreclosures are dramatically affecting lifestyle. If the impacts to lifestyle are surface (i.e., none of our neighbors have BMWs any more, just us), then I have little sympathy. If the new neighbors are spraypainting the side of your house and shaving your dog, leaving threatening VMs and bullet casings on the hood of your car, then mail your keys to the bank and wish them well. I'd call the cops and get out of dodge.

 

********************************

 

All three of these are happening throughout the country ... each one deserves different levels of scrutiny and sympathy (imo). This is why I voted "Puddy".

Edited May 10, 2010 by muck

[matt770]

By explaining why I don't agree with what he seems serious about doing? Sorry, but I don't buy his rationale. Certainly he must have expected someone to take issue with this whole deal when he posted and then defended the notion.

 

I am agonizing over this decision. I couldn't care less about equity or breaking even. It sure as hell isn't a lifestyle issue -- it's not like I just want to take advantage of the bargains out there and trade up to a house with a pool. After a while it gets almost unbearable to see the woman you love cry because her friends are having kids and she's embarrassed of where she lives and is afraid to walk outside.

 

Sure, I made the decisions that put us here...and it is because I feel like such a failure as a husband that I have her living in such a hell hole that I am considering something this drastic. The thought of it sickens me. The question is, does living here for 7 more years sicken me more, and will I still even have a wife?

[MrTed46]

What does your wife say?

[TimC]

What does your wife say?

 

Shut up and get me a sammich, Matt.

[geeteebee]

Two questions:

 

1. In your state, what is the recourse lenders have against borrowers who default on their mortgage?

 

2. What has your lender's response been when discussing defaulting, renegotiating and/or short sale?

[SayItAintSoJoe]

I am agonizing over this decision. I couldn't care less about equity or breaking even. It sure as hell isn't a lifestyle issue -- it's not like I just want to take advantage of the bargains out there and trade up to a house with a pool. After a while it gets almost unbearable to see the woman you love cry because her friends are having kids and she's embarrassed of where she lives and is afraid to walk outside.

 

Sure, I made the decisions that put us here...and it is because I feel like such a failure as a husband that I have her living in such a hell hole that I am considering something this drastic. The thought of it sickens me. The question is, does living here for 7 more years sicken me more, and will I still even have a wife?

 

Dude you're being too hard on yourself. Nothing in your story suggests that.

Edited May 10, 2010 by SayItAintSoJoe

[Perchoutofwater]

Unless I really, really feared for the safety of my family, I would ride it out, because it is the right thing to do. You signed a contract. You made the decisions that placed you in the position you are in today. I do think you are being too hard on yourself, and not to talk bad about someone I don't know, but your wife is terribly shallow if she won't have her friends come over because she is embarrassed about her home. Buy some firearms. Let the neighbors see you loading and unloading the firearms out of your vehicle several times. That will more than likely discourage the malcontents in the neighborhood from messing with you.

[Azazello1313]

Unless I really, really feared for the safety of my family, I would ride it out, because it is the right thing to do. You signed a contract. You made the decisions that placed you in the position you are in today. I do think you are being too hard on yourself, and not to talk bad about someone I don't know, but your wife is terribly shallow if she won't have her friends come over because she is embarrassed about her home. Buy some firearms. Let the neighbors see you loading and unloading the firearms out of your vehicle several times. That will more than likely discourage the malcontents in the neighborhood from messing with you.

 

or it will encourage them to break in and steal them

[Perchoutofwater]

or it will encourage them to break in and steal them

 

Then you get to shoot them legally and problem is solved.

[matt770]

Two questions:

 

1. In your state, what is the recourse lenders have against borrowers who default on their mortgage?

 

2. What has your lender's response been when discussing defaulting, renegotiating and/or short sale?

 

1. Just looked this up. In MD the lender can sue for the difference. Not sure if they could go after my 401k (my only asset). I'm guessing yes, and probably garnish my wages too. So looks like walking away is moot now. We do have an alarm system and two firearms, so I guess we'll hope for the best.

 

2. They offered to refinance at a lower interest rate. Have not discussed the short sale option (yet), my understanding is that most lenders are reluctant to go this route unless you're in a financial hardship (I'm only talking about a short sale where the lender agrees to eat some of the loss).

[Azazello1313]

Then you get to shoot them legally and problem is solved.

 

won't do much for his property value

[Perchoutofwater]

won't do much for his property value

 

But it will make him feel like more of a man according to those on the left, because people that carry must be covering up some type on inadequacy.

[Gopher]

I voted Puddy, as I don't think there is a perfect or "correct" answer from the others. From experience, I can tell you that it's a very tough situation. Ours was slightly different in that I took a promotion and moved as a result. So, we didn't have the "advantage" of being able to live in the house for free, as we had to start renting our new place as soon as we stopped making payments on the old. Here's a brief timeline of how mine went down:

 

- Bought the house for 308K in April 2004.

- Had it appraised for re-finance in summer of 2006... Value had gone up to around 375K. Took out a 2nd/HELOC at that point, just to cover the refi costs (roughly 8,000).

- Offered a promotion in fall of 2007... Seemed like a no-brainer, as the offer included a significant increase in compensation, and what would normally be a very attractive relocation package (including home buyout by my employer).

- Since the home buyout is based on current value, we had to do another set of appraisals. Rather than doing them immediately, my wife and I (I have to admit that this was 90% her) made some home improvements, thinking it would improve the value. This process took about six months, as we were both working at the time.

- Finally had the buyout appraisals done in spring of 2008... Talk about devestation. Value had gone from 375K to around 200K in under two years.

- May 2008 - Realtor submitted first proposal to bank for short-sale, based on my employer's offer to buy the house for 200K.

- January 2010 - Bank accepted short-sale offer for $125,000 cash, from a private investor.

 

The entire process was a nightmare. Looking back, we should have done the buyout appraisal ASAP (as soon as I accepted the promotion), instead of waiting six months, while we did home improvements. Don't get me wrong... Like I said, my wife did most of the work on the improvements... Repainted the entire house, new doors/closet doors inside and out, etc. Meanwhile, I removed an above-ground pool (that had been there for decades... we were told that removing it would have no adverse affect on the home value, and might actually IMPROVE it) in the back yard. The house looked ten times better, after the improvements, than it did before... the realtor said so as well. The problem was that, while we spent six months working on improving the value/appearance of the house (which under normal conditions may have increased the appraised value by 20-30K), the value of the home dropped by 12-15K per month, due to the economy/housing market.

 

Another reason why it was a disaster was the bank... To say that Countrywide is disorganized would be a tremendous understatement. I can't tell you how many times they asked us to submit documents that we had already submitted to them. Literally dozens. Then, Countrywide was bought out by BofA... I think they're even worse than Countrywide was. At one point, we were told that our short-sale proposal was at the "final step" in the process... essentially, waiting for one last signature, or whatever. A week later, we were told that they had submitted the wrong file, whatever that means. Basically, the way they explained it was that they submitted another customer's short-sale proposal for our home, or vice versa. Ridiculous. Meanwhile, after 12 months of getting nowhere on my employer's short-sale offer for 200K, my employer said that they regretfully had to withdraw the offer, due to the current economic circumstances.

 

So, we ended up having to do ANOTHER appraisal in 2009... It came back at a whopping $140,000, so my realtor listed it for approximately that amount. Got 3-4 offers within the first couple of weeks... all for less than 140K (ranging from 80K to 125K, if I remember correctly). Submitted the best offer to BofA... same old circus. Lost files, need this re-faxed, need your updated financial information, etc. Needless to say, January 5, 2010 might be the happiest day my wife and I have experienced since our wedding day. Huge burden lifted by hearing the short-sale was finally accepted. Unfortunately, BofA still has yet to get their act together... One of their departments still calls me regularly, asking about the balance on our account. When I call them to find out why this is happening, the department I speak with says that they show the file as closed, and that the other department just needs time to catch up.

 

So... To make a long story short (I do apologize for the length of this post, if you're still reading), choosing whether or not to stick with a house, walk away, try a short-sale, or whatever, has pretty significant consequences. The short-sale route isn't as easy as it sounds... In theory, you're asking the bank to take an offer for less than what you owe, but it's far more complicated than that. Our credit is currently ruined. In some ways, that's a good thing... The decision to spend only what we have in the bank is a lot easier when most of your credit card accounts are closed by your creditors. We probably can't even consider buying another house for at least 2-3 years, depending on how fast we can repair the credit. On the other hand, it's a lot better than a Chapter 13 bankruptcy would be (7 years). And, the bank could send us a 1099 for the difference between what we owed, and what the short-sale amount was... for us, that's roughly 200K. Imagince getting a 1099 for 200K, and having to pay income taxes on that amount, as if it were income. However, I'm fairly confident (I've made lots and lots of phone calls to attorneys, CPS's, etc. over the oast 2-3 years) that we would not have to do so, given that the property in question was our primary residence from 2004 to 2008.

 

I've often wondered what we would have done, had I not gotten the promotion. The house value would have gone to shit, the neighborhood would have continued to go in the crapper (sounds like your situation), and we probably would have just stayed in the house until the point where we would have HAD to walk away (or go the short-sale route), just to get out of the area. In the four years that we lived there, it went from a quiet, older neighborhood, to one where we heard gunshots 2-3 nights per week, minimum. So, I guess I've learned a lot of lessons from this experience, but I'm not sure what I would have done differently, to be honest. I guess just be very careful of where you buy a house, especially if you're not familiar with the area.

 

From a moral standpoint, I had a hard time with this as well... walking away from a financial obligation is something that I basically don't agree with. So, it was hard for me, initially, just to accept the fact that we might have to do so. In that sense, I still feel that I would have preferred to have met my original obligation, in terms of paying monthly payments until it's paid off, or we sell the house. In the situation we were in, though, that wasn't really feasible. That doesn't mean that it doesn't bother me... It bothers me a little bit less, though, after our experience with the bank. They treated us like crap for nearly three years, before finally coming to an agreement. So, I guess I would say that I feel worse about the short-sale, due to my obligation to do my part to protect/stimulate our economy, than I do because of my obligation to the bank, if that makes sense.

 

Good luck.

Edited May 10, 2010 by Gopher

[matt770]

Unless I really, really feared for the safety of my family, I would ride it out, because it is the right thing to do. You signed a contract. You made the decisions that placed you in the position you are in today. I do think you are being too hard on yourself, and not to talk bad about someone I don't know, but your wife is terribly shallow if she won't have her friends come over because she is embarrassed about her home. Buy some firearms. Let the neighbors see you loading and unloading the firearms out of your vehicle several times. That will more than likely discourage the malcontents in the neighborhood from messing with you.

 

I agree with what you're saying, but we're both embarrassed to have people over. Or to put it differently, prefer to take the opportunity to visit friends and family and get away from here, rather than subject them to this. The people next door have junk all over their property and keep two dogs in a plywood box which bark nonstop. Now that it's getting warm out, all you smell is sh!t when you walk outside. We used to have an annual bash in the summer with about 30 people and don't plan to do it this year. I don't want to subject them to that.

[Gopher]

I agree with what you're saying, but we're both embarrassed to have people over. Or to put it differently, prefer to take the opportunity to visit friends and family and get away from here, rather than subject them to this. The people next door have junk all over their property and keep two dogs in a plywood box which bark nonstop. Now that it's getting warm out, all you smell is sh!t when you walk outside. We used to have an annual bash in the summer with about 30 people and don't plan to do it this year. I don't want to subject them to that.

Our neighborhood got worse and worse over time... Then, one morning, I heard what sounded like chickens on the other side of our fence. Sure enough... neighbors brought home what sounded like at least a half-dozen chickens.

[detlef]

Sorry to come off the way I did but, in all honesty, if you're feeling like crap about things and are feeling like a failure, then slinking away and defaulting on your mortgage is not going to help that. It is in these times, when our opinion of ourselves is lowest, when we need to man up and find an honorable way out of our problems.

 

I would certainly explore any and all of these options that people have been throwing out. Because you have a good paying job, you do have options that others who might find themselves in your situation don't.

[geeteebee]

Our neighborhood got worse and worse over time... Then, one morning, I heard what sounded like chickens on the other side of our fence. Sure enough... neighbors brought home what sounded like at least a half-dozen chickens.

 

 

Gopher-In going down the path you did, did you continue to make mortage payments each month?

[moneymakers]

Listen to me

 

Rent it out to Section 8 Housing

 

 

Buy another house at bargain price in great location.

 

1. you get to leave your neighbors a great present when you move.

2.the rent is guaranteed by the government

3.government pays top dollar rent- great chance of a positive cash flow.

4.u get new house at bargain price in different neighborhood.

5.. If it dont work out u at least tried.

[matt770]

I voted Puddy, as I don't think there is a perfect or "correct" answer from the others. From experience, I can tell you that it's a very tough situation. Ours was slightly different in that I took a promotion and moved as a result. So, we didn't have the "advantage" of being able to live in the house for free, as we had to start renting our new place as soon as we stopped making payments on the old. Here's a brief timeline of how mine went down:

 

- Bought the house for 308K in April 2004.

- Had it appraised for re-finance in summer of 2006... Value had gone up to around 375K. Took out a 2nd/HELOC at that point, just to cover the refi costs (roughly 8,000).

- Offered a promotion in fall of 2007... Seemed like a no-brainer, as the offer included a significant increase in compensation, and what would normally be a very attractive relocation package (including home buyout by my employer).

- Since the home buyout is based on current value, we had to do another set of appraisals. Rather than doing them immediately, my wife and I (I have to admit that this was 90% her) made some home improvements, thinking it would improve the value. This process took about six months, as we were both working at the time.

- Finally had the buyout appraisals done in spring of 2008... Talk about devestation. Value had gone from 375K to around 200K in under two years.

- May 2008 - Realtor submitted first proposal to bank for short-sale, based on my employer's offer to buy the house for 200K.

- January 2010 - Bank accepted short-sale offer for $125,000 cash, from a private investor.

 

The entire process was a nightmare. Looking back, we should have done the buyout appraisal ASAP (as soon as I accepted the promotion), instead of waiting six months, while we did home improvements. Don't get me wrong... Like I said, my wife did most of the work on the improvements... Repainted the entire house, new doors/closet doors inside and out, etc. Meanwhile, I removed an above-ground pool (that had been there for decades... we were told that removing it would have no adverse affect on the home value, and might actually IMPROVE it) in the back yard. The house looked ten times better, after the improvements, than it did before... the realtor said so as well. The problem was that, while we spent six months working on improving the value/appearance of the house (which under normal conditions may have increased the appraised value by 20-30K), the value of the home dropped by 12-15K per month, due to the economy/housing market.

 

Another reason why it was a disaster was the bank... To say that Countrywide is disorganized would be a tremendous understatement. I can't tell you how many times they asked us to submit documents that we had already submitted to them. Literally dozens. Then, Countrywide was bought out by BofA... I think they're even worse than Countrywide was. At one point, we were told that our short-sale proposal was at the "final step" in the process... essentially, waiting for one last signature, or whatever. A week later, we were told that they had submitted the wrong file, whatever that means. Basically, the way they explained it was that they submitted another customer's short-sale proposal for our home, or vice versa. Ridiculous. Meanwhile, after 12 months of getting nowhere on my employer's short-sale offer for 200K, my employer said that they regretfully had to withdraw the offer, due to the current economic circumstances.

 

So, we ended up having to do ANOTHER appraisal in 2009... It came back at a whopping $140,000, so my realtor listed it for approximately that amount. Got 3-4 offers within the first couple of weeks... all for less than 140K (ranging from 80K to 125K, if I remember correctly). Submitted the best offer to BofA... same old circus. Lost files, need this re-faxed, need your updated financial information, etc. Needless to say, January 5, 2010 might be the happiest day my wife and I have experienced since our wedding day. Huge burden lifted by hearing the short-sale was finally accepted. Unfortunately, BofA still has yet to get their act together... One of their departments still calls me regularly, asking about the balance on our account. When I call them to find out why this is happening, the department I speak with says that they show the file as closed, and that the other department just needs time to catch up.

 

So... To make a long story short (I do apologize for the length of this post, if you're still reading), choosing whether or not to stick with a house, walk away, try a short-sale, or whatever, has pretty significant consequences. The short-sale route isn't as easy as it sounds... In theory, you're asking the bank to take an offer for less than what you owe, but it's far more complicated than that. Our credit is currently ruined. In some ways, that's a good thing... The decision to spend only what we have in the bank is a lot easier when most of your credit card accounts are closed by your creditors. We probably can't even consider buying another house for at least 2-3 years, depending on how fast we can repair the credit. On the other hand, it's a lot better than a Chapter 13 bankruptcy would be (7 years). And, the bank could send us a 1099 for the difference between what we owed, and what the short-sale amount was... for us, that's roughly 200K. Imagince getting a 1099 for 200K, and having to pay income taxes on that amount, as if it were income. However, I'm fairly confident (I've made lots and lots of phone calls to attorneys, CPS's, etc. over the oast 2-3 years) that we would not have to do so, given that the property in question was our primary residence from 2004 to 2008.

 

I've often wondered what we would have done, had I not gotten the promotion. The house value would have gone to shit, the neighborhood would have continued to go in the crapper (sounds like your situation), and we probably would have just stayed in the house until the point where we would have HAD to walk away (or go the short-sale route), just to get out of the area. In the four years that we lived there, it went from a quiet, older neighborhood, to one where we heard gunshots 2-3 nights per week, minimum. So, I guess I've learned a lot of lessons from this experience, but I'm not sure what I would have done differently, to be honest. I guess just be very careful of where you buy a house, especially if you're not familiar with the area.

 

From a moral standpoint, I had a hard time with this as well... walking away from a financial obligation is something that I basically don't agree with. So, it was hard for me, initially, just to accept the fact that we might have to do so. In that sense, I still feel that I would have preferred to have met my original obligation, in terms of paying monthly payments until it's paid off, or we sell the house. In the situation we were in, though, that wasn't really feasible. That doesn't mean that it doesn't bother me... It bothers me a little bit less, though, after our experience with the bank. They treated us like crap for nearly three years, before finally coming to an agreement. So, I guess I would say that I feel worse about the short-sale, due to my obligation to do my part to protect/stimulate our economy, than I do because of my obligation to the bank, if that makes sense.

 

Good luck.

 

Holy crap, what an ordeal. We're not hearing gunshots yet, but there have been a lot of break-ins. The drug dealers two doors down are quiet for the most part, and are actually nice people. They have a lot of "visitors" though, many of whom blast their stereos.

 

Congrats on actually getting your short sale to go through. I've heard they can be a nightmare as it sounds like yours was.

 

I know that when we do finally move out of here, it will be the happiest day of our lives. The interim hardships will hopefully build character and give us something to be really grateful for when we do finally move. It's easy to forget how blessed we are when things seem hopeless. We could be living in a tin shack with raw sewage running through the streets, as millions around the world do. They would trade places with me in a heartbeat.

[cre8tiff]

Listen to me

 

Rent it out to Section 8 Housing

 

 

Buy another house at bargain price in great location.

 

1. you get to leave your neighbors a great present when you move.

2.the rent is guaranteed by the government

3.government pays top dollar rent- great chance of a positive cash flow.

4.u get new house at bargain price in different neighborhood.

5.. If it dont work out u at least tried.

 

Ok, as much as I hate to say it, Moneymakers is right. This is a good solution.

[matt770]

Listen to me

 

Rent it out to Section 8 Housing

 

 

Buy another house at bargain price in great location.

 

1. you get to leave your neighbors a great present when you move.

2.the rent is guaranteed by the government

3.government pays top dollar rent- great chance of a positive cash flow.

4.u get new house at bargain price in different neighborhood.

5.. If it dont work out u at least tried.

 

And when they trash the place, who is responsible for the repairs?

[PaulOttCarruth]

Listen to me

 

Rent it out to Section 8 Housing

 

 

Buy another house at bargain price in great location.

 

1. you get to leave your neighbors a great present when you move.

2.the rent is guaranteed by the government

3.government pays top dollar rent- great chance of a positive cash flow.

4.u get new house at bargain price in different neighborhood.

5.. If it dont work out u at least tried.

 

Good info here. It sounds to me like you're stressing more about the neighborhood and it's implicaitons on your family than you are about the idea of being financially underwater. Rent it out for 3-5 years and see where the value is at.

[Gopher]

Gopher-In going down the path you did, did you continue to make mortage payments each month?

Yeah, for as long as we could. Basically, I took the promotion in September '07. My new work location was about 70 miles from home, and across two bridges (including the Bay Bridge)... I did the commute for about a year, spending an average of 3-3.5 hours daily in the car. When our patience ran out (as well as the relocation money, which I used to stay near my work once or twice a week), we moved. Once we had to start paying rent on a new place, we stopped making the payments.

 

I guess that's what I mean, when I say that I would have liked to have met our financial obligation... This was never about finding the best way to "walk away scott-free" for us. If it was, we would have stopped making house payments long before we did. Regardless, there's just a lot of factors to weigh, when making such a decision... financial implications, credit implications, moral/ethical stuff, as well as most importantly, keeping your family, and the relationships within that family, whole. That's the part that I didn't get into, but that took it's toll on my wife and I, as well. In the long run, I think we're stronger because of this experience, but it wasn't easy.

[Square]

Listen to me

 

Rent it out to Section 8 Housing

 

 

Buy another house at bargain price in great location.

 

1. you get to leave your neighbors a great present when you move.

2.the rent is guaranteed by the government

3.government pays top dollar rent- great chance of a positive cash flow.

4.u get new house at bargain price in different neighborhood.

5.. If it dont work out u at least tried.

MM typically sounds crazy to me, but this idea might have some merit. I have a relative that used to rent out 4 houses to the government program. They had guaranteed rent. They had to do some paperwork and pass inspections annually but if you can qualify for the program, you would at least have money coming in on the property. Giving your family the opportunity to find a better place.

 

On a side note, I'd talk to your wife about counseling or anti-depressants if this is really affecting her. 40K is a lot of money to lose if you short sale (the kind where you just sell it and take the hit) but divorce isn't cheap at all. So if things are really getting that shaky, make sure you two are taking care of each other. I know from some personal experience that a depressed wife is a time bomb in your marriage. Good luck.