Briefly- My mortgage was with Countrywide, now BofA- In 2006 due to simultaneous hardships (illness and job loss that lead to significant credit card debt) I refinanced and entered into 2 mortgages (one with Countrywide and a second with another lender) for what equaled 100% of my then home value of $500,000. I knew that money would be tight for but planned to sell the house in summer 2008 once my son graduated highschool- we all know the rest of how this nightmare has played out thus far
Fast forward to 2010- stuck in 2 horrible mortgages (6.8% on the first and 9.8% on the second)- home is now valued at $350k-credit card debt is extraordinarily high again but this time due to living expenses since everything I earn goes to pay the two mortgages- it's been a horrible spiral. To date I have paid everything on time but foolishishly took money out of my 401k to do so and it's just about gone.
Bank of America will not modify my mortgage so I visited an attorney that is significantly involved in the mortgage and banking crisis that I found on the internet to see if he could either help me get a reduction in principal and a lower interest rate with BofA or had any other ideas to stop the nightmare and get back into decent financial shape.
After explaining my current financials he suggested go BK and going for a fresh start suggesting that once I did a BK he could negotiate with Bof A to keep me in my home and get rid of the 2nd mortgage but admitted he wasn't the BK expert. He gave me the name of a BK attorney and said to get a second opinion before deciding what the best route is.
I met with the BK attorney who told me I make too much to qualify for a Chapter 7 and that I should walk away from BofA here's what he suggested:
-Stop paying 1st mortgage immediately
-Continue paying second mortgage, all insurance, all other bills including credit cards
- I forget why but for some reason he insisted that by paying the second mortgage will slow down the foreclosure process and as he put it 'keep the second happy'
-Use cash left from not paying 1st mortgage which is the huge one to build a savings for moving expenses and simulataneously pay off credit cards over the next 2 years.
-According to this attorney foreclosure in NJ by BofA is running at 2 years or longer and he suggested I could accomplish alot with those 2 years of funds in my pocket rather than throwing my money away while eliminating credit card balances.
-In 2 or so years as a foreclosure nears I could make the decision to allow the foreclosure since back in 2006 the plan was to move anyway and rent somewhere else OR use attorney #1 to negotiate a new modified mortgage with BofA to keep me in the house as the last thing BofA wants is another foreclosed house sitting.
Needless to say I inquired about how badly my credit would be hit and he suggested that while foreclosure certainly hurts credit if I pay everything else off I could qualify for another mortgage in as little as 2 years because I would have proven a strategic mortgage default (in other words- it will appear to be an isolated instance since I would be debt free by that time and do make good money).
That said I do have questions for anyone that may have done this or something similar:
-Won't my credit card companies who I know check credit reports frequently panic when they see I'm not paying mortgage and close my cards? OR since I am paying them more since I won't be paying my mortgage will they be happy they are getting paid and leave me and my cards alone? PS, I don't necessarily want to use my cards I DO want to pay them off and keep them if possible.
- Can and Does BofA contact employers to try to garnish wages if mortgages go bad and no BK is filed?
- I travel frequently for business and have a corporate credit card. Will this get back to my employer? Or will my card remain open with no issues since theorectically ultimately the employer is responsible if I ever defaulted (which I never would)
Please note that at 50 years old I have been financially responsible for my entire life but as laywer number 1 pointed out to me this is a business transaction that has gone bad, does BofA care about you?
Any experience by others who I done similar and what were the consequences including unexpected ones....as great as these laywers are I also haven't lost sight that this isn't their life and they may not know or care about all of the longer term potential consequences of walking away from a mortgage because their jobs stop at accomplish either the modification or BK or foreclosure.