Chase- Should I Walk Away?

[Looking for Answers]

Well, I am new here and have been reading threads and posts since I signed up! Here is my situation in summary:

Bought a townhouse (Phoenix AZ) in 8/05 for 230,000, put 50,000 down, and owe about 174,000.
Chase owns my loan which is a 30 year with a 5year arm. Currently appraising at 104,000. Two others have been on the market on our complex for 6+ months and are listed at 114,000.

I married in 9/08, and we bought a bank owned home which we currently are occupying. My husband and I both work, however, he took a pay cut in January from 42,000 to 21,000. We are currently renting our townhouse, but are paying the difference of $400 a month.

We have been talking about walking away (from the townhouse), as a business decision, because we can no longer swing all our bills and the $400 a month (plus insurance and other related expenses). I am concerned about my credit score (currently 767) and all other stigmas attached with a foreclosure. I am 23 years old and am worried about a foreclosure following me for the next 20 years.

When I walk away, what should I expect for the foreclosure process? Can they do anything to the home that I am living in now? What are the chances that Chase will do a Deed in Lieu of Foreclosure?

Any input would be great! Thank you

[Moe Bedard]

Hello and thanks for sharing your story.

This is a tough decision, but if you choose to walk away, your credit will take an approx. 300 minus hit. It will stay on your credit for 7 years and it will be tough to buy another home for 3-5 years.

Starting effective June 1, 2008, for loans to be considered by Fannie Mae from any potential borrowers, their credit history must be cleared from any foreclosure activities for at least 5 years. Whereas before, Fannie Mae required borrowers 4 years for their credit history to re-establish.

Arizona’s “anti-deficiency” law could apply. Essentially, if the Arizona’s “anti-deficiency” law applies, the residence may be foreclosed on by the Lender. However, the borrower’s other assets, again, the borrower’s bank accounts, cannot be used to satisfy the debt, or in other words, the deficiency remaining between the foreclosure sale proceeds and the outstanding loan amount.

Here is a section of the bill

33-814. Action to recover balance after sale or foreclosure on
property under trust deed

A. Except as provided in subsections F and G of this section, within
ninety days after the date of sale of trust property under a trust deed
pursuant to section 33-807, an action may be maintained to recover a
deficiency judgment against any person directly, indirectly or contingently
liable on the contract for which the trust deed was given as security
including any guarantor of or surety for the contract and any partner of a
trustor or other obligor which is a partnership. In any such action against
such a person, the deficiency judgment shall be for an amount equal to the
sum of the total amount owed the beneficiary as of the date of the sale, as
determined by the court less the fair market value of the trust property on
the date of the sale as determined by the court or the sale price at the
trustee’s sale, whichever is higher.

Also

G. If trust property of two and one-half acres or less which is
limited to and utilized for either a single one-family or a single two-family
dwelling BY THE TRUSTOR UNDER THE DEED OF TRUST FOR AT LEAST SIX CONSECUTIVE MONTHS AND FOR WHICH A CERTIFICATE OF OCCUPANCY HAS BEEN ISSUED is sold pursuant to the trustee’s power of sale, no action may be maintained to recover any difference between the amount obtained by sale and the amount of
the indebtedness and any interest, costs and expenses. THE TRUSTOR IS
RESPONSIBLE FOR DEMONSTRATING THAT THE TRUST PROPERTY WAS USED BY THE TRUSTOR AS A ONE-FAMILY OR A SINGLE TWO-FAMILY DWELLING FOR AT LEAST SIX CONSECUTIVE MONTHS.

Here is the AZ law:

Arizona Foreclosure Law

Judicial Foreclosure Available: Yes

- Non-Judicial Foreclosure Available: Yes

- Primary Security Instruments: Deed of Trust, Mortgage

- Timeline: Typically 90 days

- Right of Redemption: None

- Deficiency Judgments Allowed: Varies
In Arizona, lenders may foreclose on deeds of trusts or mortgages in default using either a judicial or non-judicial foreclosure process.

Judicial Foreclosure

The judicial process of foreclosure, which involves filing a lawsuit to obtain a court order to foreclose, is used when no power of sale is present in the mortgage or deed of trust. Generally, after the court declares a foreclosure, your home will be auctioned off to the highest bidder.

Non-Judicial Foreclosure

The non-judicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust. A "power of sale" clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of the their default. In deeds of trust or mortgages where a power of sale exists, the power given to the lender to sell the property may be executed by the lender or their representative, typically referred to as the trustee. Regulations for this type of foreclosure process are outlined below in the "Power of Sale Foreclosure Guidelines".