10 weeks to Auction - need advice!

[georgW]

This forum has some great information, and I appreciate the information I've found here so far. I have read some really great advice, but I also have questions related to my own situation. I pray this recession/depression will be over soon.

Here's a bit of my story: Home purchased mid 2006, $280k. Current value $140k - good ol Arizona! 1st mortgage is $224K, 2nd is $56k both are interest only loans, both will adjust to prin+interest in 2011, a ways off, but still going to happen. If I can't afford the interest only now, how willl I afford the "real" payment later?! This is what the cust serv for the 1st (Provident Funding) told me on the phone, so why would I even try or fill out and send in this packet if they have their minds made up? Should I try anyway?

Missed 4 payments already, beginning Dec 08. Family business got super slow over the fall/winter, construction company - bad business to be in these days in AZ, but it was great two years ago along with the value of this house! 1st mortgage sent me a modification application as well as a foreclosure auction date scheduled for early June. I did the hardship letter, filled out their application, I have bank statements ready, tax return, BUT I have not faxed it in yet: do I really want to do this? Or should I just walk away from a house that's not worth half, but what will happen if I do? My credit is already in the pits, so no worries there.

The immediate future is looking good on the business now as we picked up some solid contracts, but the cash flow is slow currently. I'm late on everything from credit cards to car payments. Considering bankruptcy too. I can afford to pay the 1st payment soon $1200/mo., but not the $6600 I need to stop foreclosure. Should I send in this modification packet, I just don't believe they will help. I think they just want to know what $ I have/make and right now and I won't look good by the bank statements I have. I don't even think I would qualify for this house and I know I didn't before! They already told me that if I can't afford the interest only payment, how do I expect to afford anything "real" if they modify it? Should I send it in anyway to see what happens? Or just start packing?

Recourse/non-recourse?: I never had 20% down. But I don't have an 80/20 loan, I don't think. The 2nd is actually a HELOC at WF. But it was the 20% down or appeared to be. The 2nd papers were signed a few days later to pay back the 20% I never had, that was loaned me to fund my 1st loan for a few days, following? Creative financing with the help/suggestion of the loan officer, who now says "you shouldn't have bought a house you couldn't afford!". She's the one who told me the house was worth $340K at the time and I could always refinance before the loan adjusts. Anyway, back to the next question; is the second loan, or heloc, going to be recouse even if it was actually the down payment, but it doesn't appear to be? Will I be sued for the heloc (because they will not get paid from an auction sale or even a normal sale due to the value now) Will I be sued for it if I do walk away or if I go ahead and apply for a modification and get denied and foreclosed on anyway? This is my primary residence, only home I own. I live in Arizona. Thanks for your help.

And honestly, if you were in my position, what would you do?

[overallthisbs]

you need to get your facts straight, knowledge is power and some research will make you feel much better about your situation, it did for me. Empower yourself by learning.

in your case, you are in AZ, so I don't know the laws there, I am in CA.

I would reccomend paying for a session with a good local lawyer whom can tell you your rights on walking away from the house. He / she should be able to tell you if it is recourse or not based on AZ laws. If the only recourse the banks have is to take the home it may financially smart to walk away, but other things come into play here, is this your dream home? do you want to live there forevor.

You need to think this all through, get your facts straight and weigh both the financial business decision aspects of this as well as any emotional aspects of this decision. Then weigh them and make the decision. But until you get some knowledge on your specific situation it will be hard to make an informed decision.

[RimToRimHiker]

GeorgeW. You are so right about this being a great forum. Definitely has helped me tremendously. Just knowing others are in the same boat is somewhat comforting. Sad but comforting.

Do as overallthisbs suggests, spend the $$$ to see a lawyer. I did and it was the best $100 I've spent in a long time. Knowledge is definitely power. I laid the facts out to the lawyer. I, too, am in AZ. Currently about $100K underwater. Bought 2 years ago Jan. Have 80/20 loans. Both originated at the time of purchase. Lawyer thought walking away or a short sale were my best bets. He said considering how far underwater I am and how the lenders are very reluctant to do any type of principal reduction, he suggested I skip going for a loan mod. He said the lender will end up with all kinds of financial info that they may try to use against me later. I'm 2 payments down. Decided not to go for a short sale. I think the likelihood of it selling are slim and none. Just going to stay put until the foreclosure is finalized. We hope to make it through the summer. We're paying off credit cards and saving up for when we do have to move on.

I'm not a real big fan of lawyers but I've slept much better knowing what my rights are.

The actions of the loan officer getting you into a HELOC to payback an imaginary 20% down payment sounds very fishy. Bet the AZ agency who oversees loan officers would find that very interesting.

And the "you can refinance before the loan adjusts" must have been the mantra of every mortgage person handling loans during the real estate run up. We heard the same thing. The mortgage broker we had is now no where to be found.

Good luck to you GeorgeW.

[georgW]

Thanks for the advice. I do want to go and see an attorney, I really need to seeing that my car will be re-poed in 45 more days the bank told me.

RimtoRimHiker, can you tell me what kind of attorney I am looking for, there's 100s of them, and who do you trust through all this, ya know?

Well, the loan officer happens to be a relative of mine and the broker is now out of business as well. Bet the AZ agency who oversees loan officers did find a lot of interesting files when they shut that broker down! She did loans for almost everyone in our family, and most of them are going bad now! Are they coming down on the borrowers for signing bs paperwork. Sad thing is, half the stuff wasn't filled out before I signed it, what a fool I am/WAS-this was a learning experience for sure!!!

I do not want to turn over my financials to the lender, it's my gut feeling/fear that, like you say, they could use it against me later somehow. Stated income, ha! What the heck was I thinking agreeing to this crap in the first place? I just wanted a house darn it, just like everyone else, and no, it's not my dream house, but it is mine, for 10 more weeks anyway!

[RimToRimHiker]

I asked that same question when I first joined the forum but was told it was not allowed. Several people here on the forum suggested I go online to the AZ Bar Association. I scrolled down through the umpteen hundreds of lawyers. I narrowed it down to lawyers in my area who specialize in real estate foreclosures and started making calls. I selected a guy that has a very small operation. At our appt I told the lawyer my whole scenario. After he made his recommendations, he told me him and his wife are in an underwater situation. They bought a townhouse during the boom. It's currently up for sale as a short sale but they've stopped making payments and will let it be foreclosed if it doesn't sell. Thought it was kind of cool I was dealing with someone with first hand knowledge.

[overallthisbs]

gw, you need to talk to a lawyer, it may be possible that you can delay foreclosure depending on what is found out about the paperwork you signed, it may buy you some more free time in your house plus it will give you a better idea of what your rights are, best of luck.