Save it or Leave it?

[HartGirl]

As everyone's story is a little different in here... here is mine.

I'm 27 years old and purchased my 2/2 Hayward Hills, Ca condo in April 2007 for just under $400,000. I have an FHA 10/30 fixed loan at 6% with Bank of America. (First ten years interest only). I currently live here with my boyfriend and his two kids are here part time.

Since my purchase my father passed away and the construction company he owned and I took over has not been doing as well and I'm closing it down. My 100k a year income dropped to 56k and now I'll probably be on unemployment in a few months. The complex I'm in currently has one unit that originally listed for $300k in February and had an open house yesterday for $218k. There is another going through foreclosure right now. I had my first non-payment last month. It's just too much to handle right now.

I'm sure I could work towards a modification but I'm not sure how much they are going to reduce payments or principle. This is not the place of my dreams and I have no desire to struggle to stay here. Is it worth it to attempt modification or just let the place go? If I go for modification will it drag out the foreclosure process time?

Also, BofA will not take a Deed in Lieu of foreclosure without a short sale attempt first. Should I look into this route and how long does that take?

[The Professor]

Welcome to the forum HartGirl. Given what you mentioned in another posting, keep those HOA dues current. As to your decision moving forward, from what I've been able to ascertain based upon outside sources and discussions here on this forum there is no practical difference on the effects on your credit score if you choose to go either the deed in lieu or foreclosure route. My sense is it makes more sense to retain possession and follow the foreclosure route since you gain the benefit of residing on the property without having to make payment (other than the HOA dues).

A short sale on the other hand may provide some benefit in not damaging your creditworthiness as much. Problem is that there is generally lots of effort without results in a great many instances. This is particularly true where you have multiple and/or unrealistic lenders.

The good news, and I suspect you know this, is the likelihood that you do not have personal liability based upon the purchase money nature of your loan and the protection afforded from California Code of Civil Procedure Section 580b.

These are challenging times for all and I hope that you find the answers to your questions here. As always I suggest before making a final decision that you meet with an attorney knowledgeable in California real property law and debt collection practices to review your purchase and loan documentation to advise you on whether your purchase qualifies under CCP Section 580b.

Take care,

Daniel

[HartGirl]

Thank you Daniel.

Do you know how much less a short sale will damage credit and how soon after a short sale can you purchase a home again?

My loan is a purchase money so I am not worried about that. I do think meeting with an attorney is a good idea though. I'm guessing there are some affordable attorneys right now but do you have suggestions for finding one?

[The Professor]

Talk to people in your industry (construction). I'm sure there are some good ideas on qualified and qualty in terms of legal representation. As to the short sale reduction in impairment to credit, if is difficult to measure the impact primarily because it is difficult to measure the extent of damage resulting from foreclosure. My guess is none of these negatives will adversely impact your credit as much as most people believe because so many borrowers are experiencing this. The result will be a lessening of the negativity given that in many instances walking away will be viewed as the business like thing to do.

Daniel