Out of Egypt

[Boneman]

Sometimes I feel bad, and sometimes I feel bad for feeling so bad. I suspect that there are a few people who have similar mixed up feelings.

We love California. We love our house. We work hard, live well and look forward. And now... even with all these warm fuzzies we live with regret.

My wife and I both work and we earn a very good income. We were crushed in the dot com collapse and vowed never to sink so many dollars into something so volatile as the stock market in general and tech stocks in particular. We lost pretty much all of what we had in those days and decided to diversify any future funds across many different segments of the markets and focus more on good old, solid real estate... oooh boy.

Was I greedy to invest, or being prudent with what I'd been blessed with? Was I simply ambitious, or just plain foolish? I don't know. I'm not asking to be analyzed, or pitied or understood... really. I guess I just want to talk about it.

Because now I am just tired.

We bought a nice vacation home. The builder was closing out the last phase of a community and they were offering a very attractive bundle of incentives to sell the last eleven homes. We put down around $25k and took advantage of the $100k in savings offered by the builder. Some of the homes in the neighborhood (same model) had sold in the mid $600k range and we picked up ours for just over $500k thinking we would enjoy it for a few years while our kids were still at home, then sell it for a profit at some later time when our kids were off to college. Big mistake.

To our surprise--- real estate (like tech stocks) can go down just as readily and just as quickly as it goes up. Why should this surprise anyone? Ask the experts and kiss Freddie's Fannie while you are there.

Oh- being diversified in the market turned out to be a joke on us too. Instead of watching all of our eggs break in one basket, we got to watch all of our eggs break in a bunch of baskets. lol...

Anyways--- jibba jabba.

These same houses in this nice neighborhood where we bought--- many of our neighbors have lost their homes for one reason or another. Many have faced job loss, or other financial difficulty and they have walked away. Some of those homes were foreclosed upon by the lenders and resold by the banks subsequently. The same models that sold two-three years ago in the mid $600- to mid $700k range, the banks have been offering and selling in the low $300k range.

It's depressing.

I can't imagine when the home we bought might be worth anywhere close to what we paid for it. There are several dozen bank-owned properties for sale at these 50% off prices in this one small gated community.

We do not need this home. We bought it as a complete luxury/lifestyle purchase that we are now overcome with guilt for even thinking so highly of ourselves and our situation to have bought something so extravagant essentially on a whim.

We are humbled by the situation and circumstances of others much worse off than we are, and absolutely ridden with guilt for hanging on to a place that we do not need, no longer want, and simply cannot sell.

Should we walk?

Tired of the rat race, the show, the game, the shame.

[The Professor]

Frankly, there isn't enough information provided to suggest an answer. Please respond to the following questions:

1. In what state is the home located (my assumption is California but I don't act on assumptions)?
2. For each loan on the property, identify the lender, the loan balance, and whether the loan was created at the time you purchased the home and the entire loan proceeds were used to buy the home.
3. Did you intend to occupy the home as either a primary or secondary residence at the time you bought it?
4. What is your estimate of the home's current fair market value?

Daniel

[kent302]

There is a common link to the economic mess. It is not simply the irresponsible flippers or the get-rich-quick gamblers that went over their heads. Call it what you will, greed or incompetitance at unprecedented levels.

Of course the banks were guilty, but the government had its hand in it too. They, (Congress/President/Fed/Treasury), made money available to the banks essentially at 0% after inflation, in the guise of stimulating the economy after 911. The banks took advantage of a no-lose situation and minted mortgage loans with free money. Boy did they ever, first to prime folks and then to anyone that can scribe an X. The invented “innovative products” like No-doc, 5/1/1, OptnArm…

Meanwhile, the regulators that were supposed to put the check and balances to the excesses were dismissed or got in on the game. Hedge funds and a shadow banking industry invented CDO, MBS… to circumvent the remaining safeguards and fantasy computer models to get them AAA ratings. They discovered a way to mint money.
They were making so much mulah hand-over-fist and wouldn’t have stopped until someone shot their head off, which eventually happened.

I've decided to cross over to the dark side and take remedial action for myself.

-kent

[Boneman]

Professor Shays- thank you in advance for your time and attention. I do intend on seeing an attorney of course, but greatly appreciate the opportunity to better understand my situation and options prior to engaging with a law firm directly.

1. In what state is the home located?

The home is in the Palm Springs area.

2. For each loan on the property, identify the lender, the loan balance, and whether the loan was created at the time you purchased the home and the entire loan proceeds were used to buy the home.

Both loans are with (serviced by) Countrywide. The first is a -30 year convertible ARM which offers several payment options- interest only, an accelerated 15-year amortized, or the 30-year amortized payment

There is a first mortgage owing of $404k at 4.75% (currently making payment of $2200 -the Interest Only option)

There is a second loan they call a 25-year Grad Payment ARM with a balance of $46,857 at 7% (payment of $273 -again Interest Only)) It has the same payment options Interest Only, 15-year or 30-year amortization.

We are current on all of our obligations.

3. Did you intend to occupy the home as either a primary or secondary residence at the time you bought it?

Yes- it was bought as a secondary residence. We use it as a weekend getaway, vacation home. At the time of purchase we considered leasing the home out in the winter (snowbirds) months and there are several properties in the community that do just that, but of course now there is a huge surplus of such properties available.

4. What is your estimate of the home's current fair market value?

We paid $505k for the house and put down approximately $40k I guess.

The same model on our same street is currently offered at $320k after the airline pilot who bought it similarly as a get away place, got away. Though that house has not yet sold at that price, there have been other similar homes in our neighborhood that have sold (lowest $280k-- highest $350k)

[Boneman]

Hi kent- I appreciate you saying that. I'll share a little bit about our buying experience, that is likely a pretty common scenario for many facing an upside down world today.

We had a nice little fifth-wheel set up at a beautiful RV resort in Palm Springs with several pools, tennis and pitch and putt golf course. We owned the lot there and enjoyed it on weekends as we live only 2 hours away in San Diego.

One day while out there, we saw a full page advertisement in the local newspaper announcing a builder's blowout sale of the last eleven homes in the final phase of a gated community on a golf course. For fun, we went to check them out. The builder was offering numerous options, upgrades and incentives ($100k) in ammenities such as a backyard pool, free golf, interest rate buy-downs, down payment reductions and so on...

There was the builder's sales representative there hosting the open houses, and also two broker representatives from Countrywide Home Loans.

The Countrywide people descended like crows on bread when we expressed some interest and considered 'upgrading' our situation considerably. Calculator in hand they quickly crunched the numbers and showed us how crazy we would be not to take advantage of this 'free money' from the builder, the recent softening interest rates, the numerous payment options they had available, the instant approval they could give us on the spot...

Well, you get the picture. It was sooo easy to buy... so we did. In truth- we thought we were stealing the place and felt bad for all the neighbors who had previously paid $600 and up for the same house we were buying- and we were getting the pool ($40k) that they had not got as part of the deal, and so on...

I love the place, don't get me wrong. I love it. I do not need it.

I love my family. I see the error of my ways- the mentality that said- 'I can afford it, therefore I deserve it and therefore I should have it.' I suckered myself into buying into a lifestyle with little or no margin and now I am acknowledging that though it seemed a fine way to live, it is really no way to live at all.

As neighbors, family and friends suffer with painful situations brought about by illness or job loss- should I continue my no-margin luxury living that takes away any chance of helping those around me, any hope of creating a buffer zone or rainy-day fund should ill fall upon us too?

I feel ready to leave the desert, in the desert and hunker down at home.

[snapple candy]

Boneman,
You are a wonderful, honest writer and I so feel your guilt in the words you write. I can tell that you care about your fellow man and what they are going through. Please dont feel guilty for what you have. Feel grateful for what you have and stop beating yourself up for taking what appeared to be a great deal in what sounds like a beautiful place. Just because you may have more than many around you, doesnt make you less deserving of what you have. You have been humbled by what you see around you, and I think that is a gift that has allowed you to see life thru a different set of glasses.

[Boneman]

Snapple, those are very kind words. Thank you.

That is the emotional side of it. There of course is a very practical side to all of this and that is the perspective we are trying to approach it from, despite our personal feelings. I've written here to others, not to despair or suffer undue angst over the decisions that are best for their families, but when forced to face those same sort of decisions myself, it is easier said than done.

We could afford the home we bought, that is true-- but now, because there have been so many foreclosures in immediate proximity to the home we bought, it becomes impractical I think, to hold on to the property. This was among the reasons that others, like the pilot down the street and the nice family across the park from us have decided to hand the properties back to the lenders and wash their hands of it all.

I came to this site thinking that there were likely some alternative programs, where a bank would work with a solvent borrower to remedy a bad 'upside down' situation through negotiation and loan modification in order to construct a deal that might make economic sense.

I've contacted Countrywide and been told that there are no options available. They will not even lock in the loan at a fixed (rather than floating adjustable) rate for us, never mind consolidating the two loans, or heaven forbid looking at some sort of principle reduction.

They would rather have people walk away entirely, ruin their good credit, take the property back incurring all kinds of expenses, then sell the property to someone else entirely many months later for pennies on the dollar ----- all this rather than negotiate with the guy who has never missed a payment, and would love to keep it, if it didn't seem like a waste of money to do so.

Ugh!

Thanks for listening to my ranting and venting, whining and wishing.

[snapple candy]

Yes, none of this all makes any sense. All so broken. The bottom line is that when you pencil it out, from a business standpoint, it really is better to walk away. It is sad. I try very hard to keep my emotions in check over this, especially as I walk around my home knowing it might just come to end. I have lost so much including the 85K of my own money in this house. I am broke and cant find a decent job. Sht, I can even find a minimum wage job. Maybe because I am professional and no one wants to hire me. Overqualified. WAMU been jerking me around for 11 mths now. Child support is they only thing keeping a roof over my kids and my heads and food on the table and I am thankful for that. If only WAMU could just give me an affordable payment, I could hold on to this. I think in the end, these banks will pay a price for what they have done to so many. It really is hard to come to terms with this and see the reality of all around us. Survival of the fittest, and as I was reminded this morning. When the going gets tough, the tough get going. I better get going. Thanks for listening to me whine too.

[dogatemy]

Originally Posted by snapple candy

Survival of the fittest, and as I was reminded this morning. When the going gets tough, the tough get going. I better get going. Thanks for listening to me whine too.

Hang in there. This is a dark time for everyone in the economy but it will get better. Just be thankful these are bad times for everyone. Good luck and keep posting!

[The Professor]

Boneman:

Part of question 2 wasn't answered. In it I asked, "whether the loan was created at the time you purchased the home and the entire loan proceeds were used to buy the home."

Please answer this for both loans.

Daniel

[Boneman]

My apologies... I didn't understand what that meant exactly. Yes, these loans were created at the time we bought the home, for the home. Yes, the entire proceeds from both loans was used for the purchase.

[Enough Already]

Boneman,
This is a great post. I think you've captured the feelings of many in our situations.

We've decided to walk away, and effective immediately start living way below our means. All this other stuff, the "bling" etc, just doesn't matter. It's all a pointless show, and an empty, meaningless pursuit. We won't forget it.

I wish you luck in deciding what is right for you, and success in getting there. Please keep us posted as you go.

[kent302]

Boneman, you said:

"We bought a nice vacation home. The builder was closing out the last phase of a community and they were offering a very attractive bundle of incentives to sell the last eleven homes. We put down around $25k ..."

If you go with the letter of the law, (see below for non-recourse CA), only primary residences are non-recourse. So purchase money or not, that door is closed. Not to make light of your situation. I am also jacked by the turn of events lately.
We love our house too, but we rolled the numbers out to 5-10 years out.
Hard reality slapped us in the face.
The fact of the matter is, the lender had took the profit and left the room with little risk. The homeowner and the investors are the real risk takers.
Upside down recourse loans for folks with assets to lose is serious matter.
If I were you, I'd view the 25K as a small loss and find a good attorney to limit larger losses.

You should search here or google "one-action rule" how it may relate to your situatiion as 2nd loan lien holder can be tricky.

-kent

===============non-recourse CA rule=================
THE PURCHASE MONEY RULE: In California, a lender who loaned you money to BUY your home, which you ORIGINALLY moved into as your primary residence, cannot do anything other than foreclose. This means if the foreclosure sale does not pay all “purchase money” loans, those lenders cannot sue you for the unpaid balance. Most importantly, this includes second mortgages used in many 80/20 100% financing deals. If you REFINANCED any of these loans, or paid down purchase money HELOC and drew down on it again, this rule does not apply.

[Boneman]

I'll do some digging on that- thanks. If so, that would be very discouraging for us in our situation. Kind of no way out...

Wouldn't surprise me at this point.

[Enough Already]

Boneman,
Although a non-recourse loan is most ideal you're not stuck. We are in FL, a recourse state, and we have recourse loans. We've decided to walk anyway, and face the consequences down the road.

Deficiency judgments aren't common at this point, but I'm sure that will change. If it worst happens and they come after us we will try to negotiate a settlement with the mortgage company/collections agency. It seems that these debts can be settled for 5%-15%. Either way, we are getting out.

I'd recommend you make an appointment with a good real estate attorney to find out what your options are. We felt much better after finding a competent attorney to work with.

EA

[Boneman]

Thank you for that info EA. I guess I'll quit putting off making that call to a lawyer...

Our neighbors (a few doors down) out there in the desert just told us today that they have not made their payment since January. They haven't had so much as a phone call from their lender. wow

The house down the street that is the exact same model as ours, reportedly has had a water leak inside, so now there is the associated fear of mold damage. Word on the street (our street) is that you could probably pick that place up for around $165k.

So sad.

Here's the thing that is bugging me. The banks don't care. This neighbor of mine is trying to raise a family, working hard, but his wife recently lost her job and he pays alimony to an ex-wife in addition to his in-house obligations. Before he stopped making payments he tried to negotiate a loan modification and was turned down (because he was still current). The banks face NO real losses-- the government (YOU) are picking up the tab for their losses, so the no longer really have any skin in the game. In short-- from their perspective -- too bad, so sad... FOR YOU.

[Enough Already]

Wow. No calls in almost 4 months! I've heard of others on the forum with similar experiences. We have been called, and called and called. It's to the point now where we are going to start directing the calls to our attorney's office. It's gotten to be a bit too much.

The banks don't seem too eager to work with people and it sounds like they're too disorganized to be effective anyway.

I can't tell you how much sleep I've lost over this mess. Prior to our decision to walk away we had always paid all of our bills, on time, no matter what. I hated to say goodbye to our great credit score, but we decided our peace of mind and sanity was worth the hit to the FICO.

Between finding a good attorney, and decided to look at it a business decision I've been sleeping pretty well these days. I still have anxiety, and doubts sometimes, but know it the right thing for us.

Talking to an attorney will be key for you, and hopefully it will help to set your mind at ease.

[Boneman]

Glad to hear you are working through it EA. I do appreciate your encouragment and understand where your heart is at. We have never missed a payment of any kind either and this is a bitter pill to swallow. Frankly, my credit score is not my concern.

I hope they set it at zero and that through this I learn to pay with cash going forward.

My wife for the first time today, through tears, admitted that the situation really looks insurmountable and that we might be best parting with our little loveshack.

[KarenF]

Originally Posted by Boneman

My wife for the first time today, through tears, admitted that the situation really looks insurmountable and that we might be best parting with our little loveshack.

Yea...I know...I'm right there, right now....

It's not just a house...it's a home. It's life, it lives, it breathes, it is. My blood, sweat, and tears covers it.

Heat breaking, heart wretching stuff....feels like a wound that will never heal sometimes.

[Enough Already]

I'm sorry. I didn't mean to sound cold. It is heart wrenching, and so sad.
Please, don't get me wrong. I love our home too, but faced with our real estate reality I know that home is really where we make it. Home is with my husband, our children and the rest of our family and friends. Knowing that keeps things in perspective. For me, keeping my eye on what's truly most important helps keep me sane.

[KarenF]

I've realized that sometimes you have to force yourself to be cold so it doesn't hurt so bad. I find myself forcing the logic aspects of it...I can save money now, I will have a clean slate, I won't have to worry about a yard, etc....

I'm about to surrender to a deed in lieu myself. After fighting for months, first being told I "had" to be late, then being told I don't qualify, then being served foreclosure papers when I was doing what the lender told me to do, I don't have the strength to fight it anymore.

I'm convinced that this country has turned into one that only rewards bad behavior and embraces the corrupt. The mortgage deregulation was nothing more than predatory lending on a massive, massive scale.

[Boneman]

Well, we finally had a sit down with a real estate attorney. It cost us $350 but I will call it an investment toward peace of mind. Over the next few days they will have a close look at our loan and purchase documents and then as part of a walk away plan, he will be sending our lender a letter informing them that he is representing us and will act as our point of contact for all future communication. We are hoping this eliminates phone calls and letters during this process.

In a nutshell our intent is to cease payment on the second, knowing that the lender is unlikely to do anything. We will hope that they offer to settle it, but don't really expect them to do anything at all. Since both the first and second are now Bank of America loans (formerly Countrywide) there is a chance that they will negotiate their position singularly.

If we can get them to take a reduced buy out on the second it will reduce our risk if and when we let the first go. If they will not settle the second, then it will make that decision to let the first go that much simpler.

I hate this.