Am I foolish for thinking of walking?

[johnnyblaze313]

I will start with some facts.

Purchased the home in '02 @ 85k on a 30 year adjustable rate with a yearly cap of half a percent. I now owe 70k on the home with my rate currently at 5.75%.

I called country wide in december after being laid off to see if they could at least lock my rate, they took all my info and had me write a hardship letter but said I should still be able to afford the home on unemployment.

I'm back at work now so all has been well but theres talk of another layoff coming in a month. So I called country wide again last week the guy on the phone offered me a streamline mortgage 15yr at 4.25% rate locked but $4,800 to close. Still better terms than I'm on now, I'm really considering this.

Now here's my other option maybe. My neighborhood is full of homes that are basically identical to mine (same floor plan) for 15-30k now, so my thoughts are just walk out of this one and go get a 20 thousand dollar one that I can pay off in 3-4 years. My mom tells me this is crazy and to just ride it out the prices will come back plus she says is it worth ruining my credit? Also she thinks they will garnish my wages to get the money anyhow, is this true? Couldn't I just file banckruptcy?

I feel it is worth it to me I got robbed and I have a chance to save a ton of money. Just in the interest alone would be close to 100k, plus I work in a failing industry (automotive) so if I can get home paid off at least I wont have to stress layoffs anymore.

So what do you think? 1.Go with the streamline 2. Walk and get me one of these cheap homes?. 3. Keep trying to get a renegotiation?

Hope to hear lots of opinions and thanks for any help.....

[dthom]

At least try to get a modification if you can. Walking away may sound easy but it should be your very last resort. Auto industry is in bad shape, as we in Michigan all know, but we have to believe it will come back at some point. If we here in Michigan didn't believe that we would all be walking away from our homes since almost everything here depends on how the auto industry is going. We are just outside of Detroit, so it has hit our area really hard.

Try contacting NACA on the internet or call them at 1-888-302-6222. They may be able to help you out.
Walk away only as a last resort! It is your home, fight for it.

[tandm]

johnny~

your credit will hit the floor if you foreclose so would you be able to qualify for the $20k home? If so, no, I don't think you're crazy. But that's the question... you may not be able to get the loan for the less expensive version of your home because your credit's tanked.

[FLgata]

Originally Posted by tandm

johnny~

your credit will hit the floor if you foreclose so would you be able to qualify for the $20k home? If so, no, I don't think you're crazy. But that's the question... you may not be able to get the loan for the less expensive version of your home because your credit's tanked.

Not only that but Realtors in my area are saying that it is very difficult for people to buy second homes right now, regardless of credit score. I guess the banks are being very cautious because they are afraid of people doing just what Johnny suggested. They refer to this as "Jump and Dump".

[Dan Bailey]

johnnyblaze,
Glad you found the forum and posted.
Here is a link to some of the implications of forclosure:The affect on your credit from foreclosures, short sales and deed-in-lieus

Also, if thinking of walking away from your home, you may want to visit the "deed in lieu/walking away" section of the forum. Prof. Shays has some excellent insight into the process .

[johnnyblaze313]

Thanks for all the replies, I was assuming I would be able to get another loan for the second house first but yes I have heard it's very difficult to get another loan right now. If I can talk mom into this being the right move I could probably put it her name.

I have completed the naca registration but was having a hard time scheduling a counseling session, I'm going to work on that today.

dthom I haven't lost faith in the auto industry I think they will pull through this, they have to. But I only got 5years seniority so it's prolly going to be a bit bumpy for me over the next few years while this all levels out.

Thanks again everyone, this forum rocks!!! Really a great wealth of knowledge and wonderful community you guys have built here.....