Loans, Debt & Credit - View Single Post

ontheedge · 11-06-2009, 01:36 AM

Hi! I found this forum last week and have found it very helpful. I think I have a pretty good handle on what my options are, but I thought I'd see if anyone had any suggestions. My story got pretty long. But, I do summarize my financial situation below after a big bold heading.

I closed escrow 5 years ago, the day after Thanksgiving. My financing was 80/20. My house is now worth about 60% of what I paid.

I refinanced the Heloc 3 years ago when the rate hit 9.5%. The value of my home had increased by over 20% and I added $10,000 in high interest credit card debt and still a bit below 80% LTV. (Oh the good ol' days!) I don't know for sure, but after reading a thread here, my guess is that that loan is not non-recourse. It's a 30 year fixed at 7.25%.

The Countrywide/BoA first has been 5.25% interest only. It readjusts on December 1 to 1 year libor + 2.25%. Based on the current Libor, the rate will go down to 3.5%, but my payment will increase by $170. That would have been no problem if my husband hadn't lost his one stable client in June. Fortunately, I have a well paying stable job and we always cosidered his income our slush fund. But, it was also supposed to be the back up for Jan 1, 2010 when our first readjusted payment would be due.

I have a lot of credit card debt and when the rate on one card caused my monthly payment to skyrocket, I took a loan on my 401K (at least I'm paying interest to myself). That's a $350 payment every month. And I still have $456 a month in credit card payments. Most of that is at permanent rates of 3.99% or 4.99%. But a BoA card now at 0% goes to 9.99% in April 2010 and another card's introductory rate goes up in April 2011. I've been playing the balance transfer game for years. Not as easy these days!

Yes, I've made some bad decisions and have been living above my means for the last 20 years. Despite my best intentions 5 years ago, old credit card habits are hard to break. I did cut back.

In the face of my increased mortgage payment, I've for the first time created a budget and a plan to have the credit cards paid off in 5.5 years (by paying only $50 per month over current minimum). It'll be tough, but if there are no big surprises, I think and hope we can scrape by.

I'm current in all mortgage and debt payments. My biggest worry is the annual adjustment on my mortgagge. If I could just get a modification to a 40 year at 5% or 30 year at 4.25%, I could scrape by. But, I don't qualify for HAMP because the mortgage on my first is less than 31% of my gross income.

So, here's the down and dirty:

Monthly Gross Income: $6250
Current 1st mortgage + insurance & prop tax: $1707
1st mortgage + ins & tax beginning 1/1/10: $1886
2nd mortgage: $567
Monthly 401K secured loan: $303
Monthly credit card debt: $456 (+$50 to payoff in 5.5 yrs instead of 97 yrs at minimum payments!)
Credit Rating: Around 750. Not too shabby... for now.
Value of house: Approx. 60% less than when I bought it with 100% financing which I later added $10k to in refi of 2nd.
I don't know who the investor is on my loan, but it's not FHA or Freddie Mac (or is that FannieMae?).
I like my little 825 sq ft 1923 bungalow, 1/2 finished basement, big yard, roses and fig tree and don't have any desire to move. I am prepared to stay put at least until the value of my home slowly creeps up to what I owe.

My plan after research on mortgage mods and credit card settlement:

1. Call BoA and tell them that I know I don't qualify for HAMP, but want to request an in-house mod. Isn't it in their best interest to immediately get a higher rate than they would as of Jan 1 and enable me to continue to pay my mortgage into the future and not default on my mortgage or BoA credit card? I've read enough on this forum to predict the likely answer. But, it's worth asking, right? When I'm not taken seriously by a phone rep. or their supervisor, maybe try an email to VP's office.

2. If that doesn't work (and even if it does), I do my best to keep to my budget and keep up on all payments. If I can't do that, my fist default will be on the BoA credit card because it's the one whose low rate expires first. Before default, I try to get BoA to lower the rate. Fat chance until I've been late for a while. Don't pay anything more until they offer an acceptable settlement (40-60% maybe). Let each credit card fall one by one. If mortgage rate goes too high next year, try for a mod again.

3. Consider bankruptcy, but only as last resort.

I'd really appreciate any advice and input, especially about how to approach the bank.

Also, I noticed on the loan app I signed at closing that the broker inflated my income even though I gave him my pay stubs (it was a no doc loan). How much leverage might that give me with the bank? I'm a paralegal and should know to review what I sign more carefully.

Lessons learned:

1. Never again listen to real estate agents and mortgage brokers who tell you real estate values may level off, but never go down significantly, especially in the SF Bay Area, and you'll have no trouble refinancing in 5 years. And don't beleive them even after doing web research and finding out that the few people saying the bubble is going to pop and values are going to sink into Mariana's Trench are called "kooks."

2. Remember that you probably can actually manage another $100 a month for a 30 year fixed if YOU JUST WROTE A BUDGET!

3. Always listen to your mother when she says "take the fixed rate", especially if she'll probably help when you call her and say you're $100 short on your mortgage payment.

4. BUDGET BUDGET BUDGET!!!!!!!

5. Hindsight is 20/20!

11-06-2009, 01:36 AM	#1 (permalink)
ontheedge Junior Member Join Date: Oct 2009 Location: Oakland, CA Posts: 2 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	My story and my plan. Any advice? Hi! I found this forum last week and have found it very helpful. I think I have a pretty good handle on what my options are, but I thought I'd see if anyone had any suggestions. My story got pretty long. But, I do summarize my financial situation below after a big bold heading. I closed escrow 5 years ago, the day after Thanksgiving. My financing was 80/20. My house is now worth about 60% of what I paid. I refinanced the Heloc 3 years ago when the rate hit 9.5%. The value of my home had increased by over 20% and I added $10,000 in high interest credit card debt and still a bit below 80% LTV. (Oh the good ol' days!) I don't know for sure, but after reading a thread here, my guess is that that loan is not non-recourse. It's a 30 year fixed at 7.25%. The Countrywide/BoA first has been 5.25% interest only. It readjusts on December 1 to 1 year libor + 2.25%. Based on the current Libor, the rate will go down to 3.5%, but my payment will increase by $170. That would have been no problem if my husband hadn't lost his one stable client in June. Fortunately, I have a well paying stable job and we always cosidered his income our slush fund. But, it was also supposed to be the back up for Jan 1, 2010 when our first readjusted payment would be due. I have a lot of credit card debt and when the rate on one card caused my monthly payment to skyrocket, I took a loan on my 401K (at least I'm paying interest to myself). That's a $350 payment every month. And I still have $456 a month in credit card payments. Most of that is at permanent rates of 3.99% or 4.99%. But a BoA card now at 0% goes to 9.99% in April 2010 and another card's introductory rate goes up in April 2011. I've been playing the balance transfer game for years. Not as easy these days! Yes, I've made some bad decisions and have been living above my means for the last 20 years. Despite my best intentions 5 years ago, old credit card habits are hard to break. I did cut back. In the face of my increased mortgage payment, I've for the first time created a budget and a plan to have the credit cards paid off in 5.5 years (by paying only $50 per month over current minimum). It'll be tough, but if there are no big surprises, I think and hope we can scrape by. I'm current in all mortgage and debt payments. My biggest worry is the annual adjustment on my mortgagge. If I could just get a modification to a 40 year at 5% or 30 year at 4.25%, I could scrape by. But, I don't qualify for HAMP because the mortgage on my first is less than 31% of my gross income. So, here's the down and dirty: Monthly Gross Income: $6250 Current 1st mortgage + insurance & prop tax: $1707 1st mortgage + ins & tax beginning 1/1/10: $1886 2nd mortgage: $567 Monthly 401K secured loan: $303 Monthly credit card debt: $456 (+$50 to payoff in 5.5 yrs instead of 97 yrs at minimum payments!) Credit Rating: Around 750. Not too shabby... for now. Value of house: Approx. 60% less than when I bought it with 100% financing which I later added $10k to in refi of 2nd. I don't know who the investor is on my loan, but it's not FHA or Freddie Mac (or is that FannieMae?). I like my little 825 sq ft 1923 bungalow, 1/2 finished basement, big yard, roses and fig tree and don't have any desire to move. I am prepared to stay put at least until the value of my home slowly creeps up to what I owe. My plan after research on mortgage mods and credit card settlement: 1. Call BoA and tell them that I know I don't qualify for HAMP, but want to request an in-house mod. Isn't it in their best interest to immediately get a higher rate than they would as of Jan 1 and enable me to continue to pay my mortgage into the future and not default on my mortgage or BoA credit card? I've read enough on this forum to predict the likely answer. But, it's worth asking, right? When I'm not taken seriously by a phone rep. or their supervisor, maybe try an email to VP's office. 2. If that doesn't work (and even if it does), I do my best to keep to my budget and keep up on all payments. If I can't do that, my fist default will be on the BoA credit card because it's the one whose low rate expires first. Before default, I try to get BoA to lower the rate. Fat chance until I've been late for a while. Don't pay anything more until they offer an acceptable settlement (40-60% maybe). Let each credit card fall one by one. If mortgage rate goes too high next year, try for a mod again. 3. Consider bankruptcy, but only as last resort. I'd really appreciate any advice and input, especially about how to approach the bank. Also, I noticed on the loan app I signed at closing that the broker inflated my income even though I gave him my pay stubs (it was a no doc loan). How much leverage might that give me with the bank? I'm a paralegal and should know to review what I sign more carefully. Lessons learned: 1. Never again listen to real estate agents and mortgage brokers who tell you real estate values may level off, but never go down significantly, especially in the SF Bay Area, and you'll have no trouble refinancing in 5 years. And don't beleive them even after doing web research and finding out that the few people saying the bubble is going to pop and values are going to sink into Mariana's Trench are called "kooks." 2. Remember that you probably can actually manage another $100 a month for a 30 year fixed if YOU JUST WROTE A BUDGET! 3. Always listen to your mother when she says "take the fixed rate", especially if she'll probably help when you call her and say you're $100 short on your mortgage payment. 4. BUDGET BUDGET BUDGET!!!!!!! 5. Hindsight is 20/20!