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The Professor · 01-01-2009, 01:03 PM

In the previous real estate downturn ('89-'94), I worked on the lender side of things, and I believe I can provide you with their view of things. As you may recall, during this period we witnessed the savings and loan crisis. Key to a lender staying in business is having a positive balance sheet. The same is true today. The problem with "workouts" like you suggest is that they will trigger an immediate loss recognition. Lenders (and investors) don't want to recognize that loss today, believing if they can delay it they can remain solvent and survive. So in essence, what you and other borrowers are facing by dealing with investors unwilling to negotiate a workout that will work (particularly if it suggests a principal write down), is that the lender doesn't want to face the loss at this time.

I repeatedly suggest on this forum that you take a business like approach in seeking a solution to your problem. That business like approach may be concluding that it just isn't worth the fight to keep a home that is so underwater. It that is your decision, it should be made with the idea of maximizing the benefit to you during and after the foreclosure period. The primary benefits that accrue are your ability to live in the home without paying the lender. Depending upon circumstances and the relative speed with which the lender reacts, this time period appears to run somewhere between 8 months (from the date payments cease), and a year, based upon the postings I've read on this site. Additionally once the lender completes the foreclosure they may be willing to offer "cash for keys" to avoid having to go through the eviction process and having a method of assuring the home will be turned over to them in good condition.

I also strongly suggest that you consult with an attorney skilled in real property law and debt collection practice to confirm that this is an approach you want to utilize. An obvious concern, discussed in a number of threads on this site, is the impact of a foreclosure on your credit report and how that will impact your ability to rent suitable housing. I encourage you to read those threads. I think it will ease your concerns about these issues.

Take care,

Daniel

01-01-2009, 01:03 PM	#7 (permalink)
The Professor Senior Member Join Date: Jul 2008 Location: 49er Gold Country Posts: 1,543 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Confused on how to proceed in California In the previous real estate downturn ('89-'94), I worked on the lender side of things, and I believe I can provide you with their view of things. As you may recall, during this period we witnessed the savings and loan crisis. Key to a lender staying in business is having a positive balance sheet. The same is true today. The problem with "workouts" like you suggest is that they will trigger an immediate loss recognition. Lenders (and investors) don't want to recognize that loss today, believing if they can delay it they can remain solvent and survive. So in essence, what you and other borrowers are facing by dealing with investors unwilling to negotiate a workout that will work (particularly if it suggests a principal write down), is that the lender doesn't want to face the loss at this time. I repeatedly suggest on this forum that you take a business like approach in seeking a solution to your problem. That business like approach may be concluding that it just isn't worth the fight to keep a home that is so underwater. It that is your decision, it should be made with the idea of maximizing the benefit to you during and after the foreclosure period. The primary benefits that accrue are your ability to live in the home without paying the lender. Depending upon circumstances and the relative speed with which the lender reacts, this time period appears to run somewhere between 8 months (from the date payments cease), and a year, based upon the postings I've read on this site. Additionally once the lender completes the foreclosure they may be willing to offer "cash for keys" to avoid having to go through the eviction process and having a method of assuring the home will be turned over to them in good condition. I also strongly suggest that you consult with an attorney skilled in real property law and debt collection practice to confirm that this is an approach you want to utilize. An obvious concern, discussed in a number of threads on this site, is the impact of a foreclosure on your credit report and how that will impact your ability to rent suitable housing. I encourage you to read those threads. I think it will ease your concerns about these issues. Take care, Daniel