Military member, underwater condo in Arizona, 80/20, please advise!

[airforceguyinphx]

Greetings all. I've been reading through the various threads and I'm confident I can get solid advice here. Here's my situation.

I'm an active-duty Air Force member stationed in Phoenix. I purchased a 1br/1ba condo in Sep 2007 with an 80/20, zero down. PHH services the first loan, USAA the second. The HELOC was entirely purchase money.
1st: 95k
2nd: 24k
Since these loans are still in their infancy only about $2k of principal has been paid off.


The condo I purchased was relatively new in their apartment-condo conversion. There are 160 units, varying from 1br/1ba to 3br/2br. With still 99 unsold units the developer declared bankruptcy, and a "group of investors" from NY purchased these remaining 99 units. From what I can tell by looking at MLS listings over the past year, at least half of the other units went into foreclosure. We had the first ever HOA meeting a few months ago, and there were about 5 owner/occupiers there, including myself...

The investors took over the sales office and have turned it into a rental office. The sign on the road no longer says "X Condominiums," instead it now says "Y Apartments." The only condos in this development on the market are bank-owned foreclosures. The only sales in the past year from these foreclosures have been between $28k-40k. I know one private investor has bought at least a dozen at these prices and is renting them out.

I'd like to point out that as bad as this situation is, I know it could be worse. The HOA dues are being paid by the investment group, so the grounds are still being maintained. The rental business here seems to be doing fairly well, as there don't seem to be many empty parking spaces. I inquired at the sales office and found out that 1br/1ba units are renting at $640/month. So even if I wanted to rent this out I would be taking a hit.

Losing 60-80% of the value is no laughing matter. I've been at a loss for what to do. My monthly mortgage payments + HOA dues total right at $1000. I can afford to make this payment, as my monthly pay is around $3200 after taxes. I have not fallen behind on any payments, and my credit rating is excellent - before this purchase my FICO score was 796.

I have the feeling that at this point I'm just throwing my money away. I'm sure this will remain an apartment complex for many years. And I thought most mortgage companies won't finance loans in a community like this with such a high percentage of renters. I have already called the primary loan company regarding a loan mod. They can't anything as this property is too far underwater. USAA, the HELOC servicer, told me they can't do anything either. I asked USAA (loss mitigation dept) what would happen if I foreclosed, and they told me the HELOC would turn into an unsecured personal loan at (or above) 12%. Financing $23k at that rate is not desireable. I took their word that this would happen until I started reading posts here. I was not aware that in AZ, a HELOC used as purchase money is non-recourse. Can someone please confirm this for me? Or is it in my best interest to try and settle with them for 15-20%? They also told me that I would lose membership with them. I'm not too concerned about this now, as I just switched to Geico and actually saved quite a bit of money They do service my auto loan, which still is around $8k, so I'm also wondering what would happen to that. Any thoughts?

What advice can anyone give me? Do I attempt a short sale, a deed in lieu (if that's a possibility, admittedly I need to read more about that), or simply stop paying and walk away? I only plan to be here for 3 more years. Maybe I should keep paying and hope somehow the value goes back to the $120k I purchased at?

I'm single and only 29 years old, so I don't think a foreclosure would affect me nearly as bad as if I was 40 or 50 and in this situation. I am also interested in how the above options would affect credit in the near future. What would apartment renting be like, or auto financing? I can get by another 3-5 years with my current car...

In summary...

1) Is my HELOC non-recourse? Do I have to do anything to ensure USAA doesn't send it to collections? Or, if I walk, should I offer them something? What would happen to the auto loan they service for me?

2) Do I attempt a short sale, a deed in lieu, or simply stop paying and walk away? Or keep paying and hope for the best? (Knowing if the worst happens and I end up foreclosing anyway, I could have gotten it out of the way 3 years earlier)

3) What will apartment shopping be like for me with so much negative on my credit report? Or are rental agencies understanding of the current crisis and willing to rent?

4) If I foreclosed now, when is the soonest I would be able to buy again? What about using a VA loan?

5) Do I need a lawyer for any part of this process?

This is my first purchase. When I returned from an overseas long tour two years ago, everyone was screaming "buy now!! the market is great for it, prices have bottomed out!!" This has turned out to be my worst nightmare. To top it off I live in a bad part of town (Maryvale). Of course I didn't know anyone when I moved here, so nobody gave me any advice. My buyers realtor didn't even try to dissuade me from the area. What really ticks me off is that I'm responsible with my money, but somehow I've gotten myself into this black hole. I've never made a late payment on anything, and I pay my SINGLE credit card bill in full every month. Now I'd just like to make the right financial choice and move on with my life. I'm sure many out there can relate.

Thanks for any and all advice!

[Enough Already]

Hi Airforceguy,

There are many people in AZ in similar situations. In all cases it's best to have a consultation with a real estate attorney to verify everything, but from what I know it sounds like your loans would be non-recourse in AZ.

If that's the case there doesn't seem to be any reason for you to try for a short sale. The banks normally try to stick you with a "soft note" for the balance, and you have to disclose you financial info to them.

Check out this thread: Short Sellers Beward (and any of the AZ threads too).

Again, do consult with a real estate attorney to verify everything, but it seems that you're a good position if you decide foreclosure is what's right for you.

Good luck and please keep us posted!

[Irish Gal]

Hey airforceguyinphx,

Welcome! So sorry to hear about your situation but it sounds like you are thinking about all the right things. I feel for you, with investors having completely taken over the place. I would be livid to have bought where it turned into a friggin apt complex!!!!! I would get out any way I could. Esp if it were in a bad area. You're being hit on all fronts. Down market, the place isn't even a condo anymore, you're losing $350 a mo and it's not in a desireable location. If it were me, and it was confirmed that I was covered under non-recourse, I'd walk. Most folks who decide to walk live rent-free for months, save, save, save and then try for "cash for keys" (around $3k) from bank once the foreclosure is complete. You could save around $12K until the process is complete. A foreclosure and short sale are considered by FICO to be the same re negative reporting. Short sales primarily benefit the banks and the realtors, and are a headache for the average distressed borrower. But, it's a personal decision. It really depends on the legal status of your loan(s). Also, as you read here, you will see many folks who plan to walk or who walked already had no problem getting into a rental post foreclosure, as many property mgmt co's are now actively advertising things like "foreclosures welcome." The key is to keep the rest of your credit profile clean (which you are doing). If the only ding on your report is the foreclosure, most landlords and/or prop mgmt co's will understand in this awful housing crisis and it shouldn't be a problem. Esp in AZ, where it's a housing wasteland, just like in CA. Also, as a military person with steady, guaranteed income, you are attractive to any landlord. The hardest part about thinking about a foreclosure is overcoming the mental hurdle of the "how the heck did my life get to a foreclosure ?" Once you get to the "business decision" stage, it's a no-brainer.

As a side note, I have 2 (young) relatives who live in the metro Phoenix area and both bought houses during the bubble. They decided to sell within a few yrs (one via divorce; the other was single and had buyer's remorse after he bought). Both had successful short sales w/ no deficiency judgments. I think they both had non recourse notes. Both are now happily renting although their credit got dinged. But they, like you, have stellar credit in all respects except the short sale. One relative (1st short sale attempt) signed a six mo contract (don't do that!) w/ an absolutely useless real estate agent who wasted six mos of his life. That agent had no clue how to do a short sale. Once that contract was up, he hired a short sale wiz and she got his home sold w/in a few mos. The other relative had a rent-to-own tenant who did follow through and eventually buy the house. So, short sales can work. But, in the end, they can be quite a headache and not as easy or beneficial for the distressed homeowner esp if the bank tries to pursue for the deficiency. If you do one, make sure a real estate lawyer reviews the closing docs to release you from all loan and personal liability. Period. Otherwise, don't do it.

I agree w/ EA to try and have your specific situation reviewed by an AZ atty experienced in real estate and debt collection to ensure your situation is indeed non-recourse. Many lawyers today will provide a short, free consult to discuss your real estate situation (maybe even over the phone). Once you get the confirmation stamp on that, you can decide from there. As you are new, I would also read, read, read here. The more you read and learn here, the answers will start coming to you. Keep throwing out questions too. This site is loaded w/ AZ and CA folks who are lucky to have made their financial/housing missteps in the most forgiving states where there are anti-deficiency laws. Other people are not so lucky. Also, I would read up on Professor Shays posts in the Foreclosure thread. He was a lawyer in his previous life and now teaches foreclosure classes at a comm. college in the Sacramento, CA area. He is a wealth of info for people here. There's also a lot of smart, and sometimes funny folks here who share a lot of their wisdom in dealing w/ these jerky lenders who do nothing but cause problems for many folks. There's also a great thread here by an old member called Cactus7777 "My AZ journey" or something to that effect. He shares his housing dilemma and ultimate foreclosure story which occured in the metro Phoenix area. He is a smart and hilarious story teller. Great thead.

Good luck and keep us posted!

[airforceguyinphx]

EA: Our thoughts are pretty similar here. As backwards as it sounds, I think I'm in the best possible position for a foreclosure. I financed with 0 down, I'm fairly certain both loans are non-recourse, and since I'm single with no kids I don't have to worry about an aspect that many others here do. Thanks for the response, and I will definitely be contacting an attorney.

Irish Gal: Yeah, I'm pretty pissed about how my condo turned into an apartment. I didn't mention in my first post, the original sales agent I met in this complex with my broker was fired for some type of loan fraud. She was helping illegals purchase condos. I wish I had run away when I found that out...

I read Cactus7777's post in it's entirety - it took me over an hour, but there is a ton of useful info there. I also like seeing the timeline, and I'm sure it will come in handy if I do indeed end up in that situation. I wish there were more people here who have been through this process posting with their experience.

One thing in particular that is different between Cactus7777 and my situation - I am gainfully employed and I have no problem making the payments. I'm sure an attorney could best advise me, but can anyone tell me what I'm going to end up telling the loan companies when they ask me where their money is? Is it as simple as saying "this loan is too far underwater," or will I have to fabricate some other type of hardship?

Another thing...I was not aware a FICO score affected an auto policy. Can someone with experience comment on the expected impact? I have an immaculate driving record, and my 6-month premium is around $550 for full coverage.

I wasn't sure before reading through various threads how a foreclosure could affect credit cards. My understanding now is to expect my CC will be cancelled. I always pay my balance off, so I doubt there would even be a reduction in credit line, just a cancellation. My limit is only around $3k, which is more than fine with me. I live within my means. However, if I go through with foreclosure, I will miss the peace of mind knowing I have access to those funds if needed. Also, the theft protection, as well as no ridiculous holding fees from gas stations, will be missed. Someone in the UK actually racked up about $600 of fraudulent charges on my CC earlier this year, and it was promptly handled. I've heard that's not always the case if someone gets ahold of a bank check card. Furthermore, what about car/hotel rentals? Am I going too far with this line of thinking? Is there a chance my credit line will just be reduced a bit? Oh, my current APR is 8.24%, am I correct in assuming that will jump at or above 20%?

I have questions regarding how to best stop payments. I have an allotment going straight to a USAA checking account, and from there PHH and USAA direct debit my 80/20 and auto loan. I've checked out PHH's online website, and any change to direct debit payments must be done over the phone. Is it as simple as telling them to stop withdrawing my payment? Same question for USAA. My money goes in on the 1st of the month, and the 80/20 are debited the same day. The auto loan doesn't come out until the 15th. I'm just wondering how to get away with paying only the auto loan. Do I need to set up a new bank account somewhere and change debit details for my auto loan? But then USAA has the new bank info. What's the solution here?

One more thing. If I do foreclose and save up funds while staying in the condo without paying rent, do I need to hide this money somewhere? I'm just worried if I have $10k sitting in an account somewhere, someone will seize that money. Is this a possibility, or are non-recourse loans just that: lenders SOL?

I will definitely be seeking a consultation with an experienced lawyer, but I'd like to understand as much as possible before going into that meeting. That way I can walk in with my understanding printed up, and be advised yes/no as to if I'm correct. Also, this will let me stay focused on the important questions and keep things short. So, again, thanks in advance for any advice!

[Enough Already]

Hi Airforceguy,

Check out these two thread (in the order listed). These were posted by AZ Meltdown. Like you, he also could afford his mortgage, but made the business decision to walk away:

http://www.loansafe.org/forum/deed-lieu-foreclosure-do-you-need-help-walk-away/2394-mortgage-writedown-only-way-i-will-stay.html

http://www.loansafe.org/forum/deed-lieu-foreclosure-do-you-need-help-walk-away/4997-final-chapter-mortgage-writedown-only-way-i-will-stay.html

[desertrat]

I am in a working with the same lenders - PHH in first position and a purchase money HELOC through USAA, but in CA.

I canceled the auto-debit with PHH via phone with no problems, even let them provide me with the mailing address for sending payments. I also canceled the autopay I had set-up between my USAA checking and the HELOC.

I understand you will still have the car loan through USAA, I would think you could adjust your allotment amount to just cover that payment, if you still want to have a checking account with USAA. At some point you will lose your membership, as the rep has already told you. FYI, this should not change your auto loan in anyway, the loan is for a fixed amount and duration set at the origination.

PHH is pretty laid back and does not call me at all, but USAA will use an auto-dialer to call you every day, many times. From my experience, if you try and do a short sale, USAA will expect you pay off any deficiency via an unsecured loan, even though you HELOC may be non-recourse.

[airforceguyinphx]

EA: Thanks for directing me to those threads. Many questions I haven't even asked or thought about have been answered there.

Desertrat: Thanks for volunteering that information. I'm sure there are many USAA members in the same boat as me, probably many at the same base as me, who are in the same situation. I'm glad I found this site. I've learned so much about the non-recourse laws and foreclosure process in AZ that I'm confident I have all the information to make the best decision. I'm also happy that I found everything now, with enough time to be proactive and address this before a PCS forces the issue. Am I correct in assuming from your statements that you did a short sale? What resolution did you reach with USAA? Do you know if membership is permanently cancelled, or is there hope 5-10 years from now for reinstatement? Also, was USAA calling you at work, or only at the contact number you have listed on their website? I have already removed my work and cell phone numbers and only list my home phone. I'm just hoping they won't dig through their history to find alternate numbers to reach me at...

-------

This afternoon I talked with the original RE agent who helped me purchase my condo, and I told her everything. She agreed foreclosure is probably the best financial decision, but that I would need to speak with a RE attorney and CPA to ensure my understandings are correct. She agreed to provide me with a CMA (competitive market analysis) in a couple days, something that I asked for after reading about it in previous threads. I figure this is good info for both the attorney and CPA to fully understand my situation. I am in the process of writing up my understanding of how the process will play out, as well as my understanding of federal tax implications (rather, exemptions) under MFDRA 2007, and the non-recourse nature of these loans provided under AZ state law (A.R.S. 33-814G), to bring with me on these consultations. This should ensure I don't miss asking any important questions while keeping my meetings short. Attorneys are expensive! I'll be sure to post updates for people to read, in the hope that my experience can help the next guy in my situation who stumbles upon these boards like I did. And by all means, if anyone has any other advice to add, please join in! Thanks again everyone!

[Enough Already]

Airforceguy,
It sounds like you're getting all of your bases covered. One other thing, if your mortgage is with the same bank as your checking/savings account you will want to move all of your money to a new account, with a new bank. There have been people who kept accounts with the banks that held their mortgages, and the bank can and will take $$ from your account. So, to be safe it's best to just open a new account with new bank.
Keep us posted!

[airforceguyinphx]

Quick question...I seem to remember reading somewhere here that to qualify for debt forgiveness exemption under the MFDRA I need to have owned and lived in my property as my primary residence for at least two years. I can't seem to find this anywhere in the MFDRA website though. Can someone point me in the right direction? Also, if this is the case, my payments commenced on/about 1 Sep 2007. If I stop making payments a month early (and the foreclosure process taking as long as it does) will I still qualify as having lived/owned this residence for the full two years? Or should I keep making payments past the two year mark? Thanks!

[desertrat]

Air Force Guy:

Am I correct in assuming from your statements that you did a short sale? No, I am still pre-foreclosure, but considered a short sale as the best possible solution for me, both lenders and a buyer. However, when I researched the issue with USAA, they were adamant that regardless of my state's law, I would have to sign an unsecured note for any shortfall after the sale. After speaking with the call center supervisor, I dropped the effort and will just let the foreclosure come.


What resolution did you reach with USAA? None yet, I speak to them every Saturday, but the people I speak with are call center dialers that have a very limited script.

Do you know if membership is permanently cancelled, or is there hope 5-10 years from now for reinstatement? Not sure, I imagine I would have to pay off the loss USAA incurred to re-instate my membership.

Also, was USAA calling you at work, or only at the contact number you have listed on their website? Only the phone number at listed on the website. No effort to contace anyone else either.

Overalll, USAA seems to make huge threats, mainly that I will be held responsible for any loss, but they will have to file a lawsuit in CA after the foreclosure to collect and I will just counter that the loan is a purchase-money loan and the lawsuit has no merit.

Good luck

[airforceguyinphx]

Originally Posted by desertrat

Air Force Guy:

Am I correct in assuming from your statements that you did a short sale? No, I am still pre-foreclosure, but considered a short sale as the best possible solution for me, both lenders and a buyer. However, when I researched the issue with USAA, they were adamant that regardless of my state's law, I would have to sign an unsecured note for any shortfall after the sale. After speaking with the call center supervisor, I dropped the effort and will just let the foreclosure come.


What resolution did you reach with USAA? None yet, I speak to them every Saturday, but the people I speak with are call center dialers that have a very limited script.

Do you know if membership is permanently cancelled, or is there hope 5-10 years from now for reinstatement? Not sure, I imagine I would have to pay off the loss USAA incurred to re-instate my membership.

Also, was USAA calling you at work, or only at the contact number you have listed on their website? Only the phone number at listed on the website. No effort to contace anyone else either.

Overalll, USAA seems to make huge threats, mainly that I will be held responsible for any loss, but they will have to file a lawsuit in CA after the foreclosure to collect and I will just counter that the loan is a purchase-money loan and the lawsuit has no merit.

Good luck

Thanks for the info! This is pretty much how I figured things would play out. Although I'm wondering if their legal team would actually follow through with filing a lawsuit. The way the non-recourse laws are written (here in AZ, which I understand are basically the same in CA) make it seem pretty clear they won't be able to collect. Have you already met with an attorney and verified your understanding of the law? If they do file, do you plan on hiring an attorney for the court proceedings, or will you just represent yourself? Of course I understand an attorney is in a better position to defend you, but then again it seems pretty straightforward (so why spend the money?).

For anyone following this thread, I've been busy compiling the AZ laws, MFDRA info, and predicted timeline, specific to PM 80/20 loans here in AZ, that I plan on posting here after meeting with a competent RE attorney that can verify their accuracy. This may save others the headache of spending hours reading through many posts, piecing together what is applicable to them. I've probably spent at least 24 hours on this board in the past week. I've certainly learned a ton about the different scenarios and agree that everyone's situation is unique, but anyone in AZ considering walking away from an underwater property with PM 80/20 loans should keep an eye this thread.

Professor Shay, if you happen to read this thread, do you have any suggestions regarding how to deal with the lawsuit threats from the junior lienholder?

I'm also wondering - can the junior lienholder sell collection rights to a third party even though they have no recourse? I can deal with the FICO hit, but I think calls from debt collectors for the next few years would become really annoying (and may raise my blood pressure!). I've had the same home phone number for two years, and I'm still gettings calls for whoever used to have this number. I always tell them to remove my number, and I've had it for two years, but they never stop...

[desertrat]

Air Force Guy,

I haven't met with an attorney because I feel that anything the attorney told me would simply be his/her opinion based on the set of facts I present at that time. There is no way any attorney can provide you with an iron-clad promise that the advice they provide will prove true.

I believe the junior lien holder can absolutely sell collection rights, however, is there any collection rights that can be enforced? The party that wants to collect will have to file a separate lawsuit totally unrelated to the foreclosure and if that happens, I will then engage an attorney to present my defense based on the CA law and my unique set of circumstances.

There are probably lots of debt collectors that will buy our purchase money second liens at great discounts because they know some people simply will not be aware of the law and will pay if pressured. I plan to make myself aware of the law and be such a difficult party that the debt collectors will find it not worth the trouble to pursue.

There is a thread in the Countywide forum about a person that went through a CA foreclosure and the 2nd came after her and she fought back and won. This example, plus the fact that I have not seen any post about a purchase money second lien obtaining a deficency judgement gives me some comfort.

[desertrat]

Link to Countrywide forum post i mentioned: Countrywide HELOC not close-out after foreclosure

[CW California]

Prof. Shay had also posted a letter to send to collectors on a non recourse to get them to cease contact.

[Irish Gal]

Originally Posted by CW California

Prof. Shay had also posted a letter to send to collectors on a non recourse to get them to cease contact.

Dear Collection Agency:

I am in receipt of the attached letter, which frankly confuses me. The debt you reference was a secured loan on my former California residence. I say "former" because I no longer own it because the first lender foreclosed on the home. While I suspect you already know the applicable law here in California relating to limitations associated with the second secured lender's sole remedy, I suggest that you should be mindful of the language in California Code of Civil Procedure Section 580b, which prohibits deficiency judgments with limited exceptions where “purchase money” securities are involved. For this purpose, “purchase money” means a third-party lender advancing funds to a buyer to be used to pay all or part of the purchase price of a dwelling of not more than four units to be occupied in part or entirely by the buyer.

Given that the proceeds of the loan in question were used to pay part of the purchase price of my former California residence, I suggest that there is simply no debt owed since the creditor failed to exercise their sole remedy of foreclosure. I must insist that you immediately cease any and all collection activity or any other actions that impair my reputation and creditworthiness. If you fail to do so, I will have no choice to exercise my rights and remedies, both under Federal Fair Debt Collection Practices laws, and similar California state laws.

Sincerely,

[airforceguyinphx]

Thanks to everyone for adding to this thread. I actually found that letter a few days ago and saved it in case I needed it in the future. But thanks for posting it for anyone following this thread to see!

Desertrat, again, thanks for answering my questions. I'm sure USAA will keep playing hardball and may sell the debt to a collection agency. My intent is to send them a letter detailing the non-recourse nature of the loan (after the trustee sale), and hopefully stop them before selling it off. I suspect their legal team is well aware of the AZ laws and would choose not to pursue this through the court themselves. I wonder if it's even worth offering them 5% of the $23k outstanding if they agree not to sell off the debt and just settle it for that. I doubt they would accept, but $1k to prevent years of harassment from debt collectors might be worth it, regardless of the fact the debt collectors wouldn't be able to collect.

I am meeting with an attorney in the morning, so I should be able to add more to this thread tomorrow.

[desertrat]

Air Force Guy,

It will be interesting to see how our experiences with USAA are the same or different. I just started a new threat basically asking for advice on the plan of action you just outlined above - writing a letter to USAA after foreclosure to make sure they know the loan is non-recourse and they can't pursue. Keep us posted.

[airforceguyinphx]

I met with an attorney this morning, and everything I've learned here is true...to summarize...

Purchase money loans (to include the creative 80/20, conventional + HELOC) are non-recourse. USAA won't be able to get around this, and neither will the debt collection agency they'll likely sell the note to. However, since I know the laws and my rights I can tell USAA or the debt collectors to stop calling after the trustee sale or I can (and will) file a complaint with the AZ Attorney General for harassment. USAA, or a debt collector, will call and make threats about the credit impact, and they will threaten to sue, but these are empty threats. They may even try to 'guilt trip' the money out of me.

I was advised to do a short sale because things will be "cleaner" on my credit report, but I doubt USAA will agree to a writeoff. I don't even think I could get a RE agent to bother because 6% of the $35k it might sell for isn't a whole lot, and knowing USAA will probably not agree to the short sale will just waste everyone's time. Also, it's possible the way foreclosures affect your credit score will be changing. So many people are in this same boat that the banks will be losing out on major money they could make on GOOD loans (read: not hyperinflated properties) to people who have a steady income. Many people are choosing to walk away because they are smart and informed and choose to not throw good money after bad.

I will keep paying HOA dues because the HOA will sue to collect, and they will win. After the trustee sale I will send them a copy of the recorded document via certified mail.

The cancellation of debt income will be forgiven by filing a Form 982.

I do not have to pay the county taxes. I was wondering about this because they are included in my monthly payment to my first mortgage.

I asked what to tell USAA when they call in the time before the foreclosure, and I was quite surprised by the answer...don't even talk to them! It doesn't make any difference anyway, the outcome will be the same. But I'm sure they'll get me on the phone at some point, so I'll just ask that they communicate via mail instead. Not too worried about that anyway.

I can expect to vacate the property 6-8 months after missing my first payment. I was advised to have an apartment rented by the day before the trustee sale, but I don't see any point in that. I'll just wait until I am contacted and hope to work out a "cash for keys" deal. With the money I will have saved I will easily be able to rent storage space if I can't get an immediate rental. I can live in a cheap hotel for a week or two until that's sorted out.

I'll probably have my credit limit on my credit card reduced, but there's a good chance the card won't be cancelled.

Not really sure what to expect for car insurance. I don't think it will be very dramatic anyway. And I can definitely live with paying a slightly higher premium if it means I can get out of this financial black hole I'm in!!!

I don't have to worry about protecting my bank accounts. Of course I have stopped allocations to USAA, because they probably can take delinquent money out of my account. But otherwise it would be illegal for them to withdraw money from any account I have not authorized them to touch.

Of course the attorney gave me his card, but he told me he doubted I would ever need his services again. The law is pretty straightforward with this in AZ. This was a free consultation too, and we talked for an hour! I should probably send over a fruit basket or something...

I'll be around this forum for many more months (certainly until at least this is over) and I'll be posting updates. Desertrat, I'm looking forward to comparing how our situations play out. They should be the same because the laws in AZ and CA are so similar. Everyone else - thank you SO MUCH for pointing me in the right direction. And of course, Moe and Prof Shay, you guys are heros.

[gravymark]

Airforceguy,

I'm in the same boat as you but haven't posted until now. I'm in AZ as well, have a 80/20 with different banks, and my trustee sales date is next week. I stopped paying in Jan. I in fact did try a shortsale, received offers immediately and they were submitted to the banks 2 months after I stopped paying so sometime around March 16thish.

My two banks are GMAC and Wells Fargo with Wells having the 20% loan. Neither bank has agreed to the short sale on paper, but Wells agreed verbally to a lump sum from GMAC of which GMAC denied. In the end, it'll cost GMAC a ton of extra money to foreclose the house. I tried to help the banks out but in the end, I told them to take the house.

Would I try the short sale route again....HELL NO. In AZ whats the point as long as the loans are non-recourse? To save the banks some cash so they can get a bailout? Screw them.

Oh, i'm also in the AF and to be honest, the reason I tried to the shortsale route was my security clearance for the AF. If you haven't hit your 10 year review yet like me, I don't know what to say. I've talked with security managers, Shirts, Chiefs, Commanders, Generals, you name it. The base is starting to see a lot of people going through this and that Soldiers ACT or whatever its called that they developed to help us, isn't going to help us. No funds have been released for that ACT and they have no idea when and if they will until they hammer out more details, but even then a lot of us won't be able to even qualify because of the time frames or years purchased or lack of orders with a string of other contingent factors.

Anyways, as far as what all those people said about the security clearance it boils down to this....if you're not showing reckless credit principals meaning purchasing cars, running up debt, purchasing another home THEN foreclosing, you should be fine. Just be ready to explain what happened. If you're after your 10 year review, you're safe.

If you'd like to talk more let me know.

G

[Irish Gal]

Originally Posted by airforceguyinphx

I don't have to worry about protecting my bank accounts. Of course I have stopped allocations to USAA, because they probably can take delinquent money out of my account. But otherwise it would be illegal for them to withdraw money from any account I have not authorized them to touch.

These are separate banks from your mortgage holders ? I did read here somewhere that if one has a checking/savings account at a bank that also services a mortgage, the banks usually have some legal clause (buried) in their banking contract that gives the bank the right to grab your money (for anything owed on anything) w/out your authorization to do so. I forgot what the legal term is. Some folks here thought they were covered by just stopping auto payments when they had checking accts at the same banks that carried their mortgages. They mistakenly thought the banks could not just grab their funds w/out their ok. Wrong! But, I'm assuming your accounts are with separate banking institutions. In that case, they can't touch those accounts w/out your ok.

[airforceguyinphx]

Originally Posted by gravymark

Anyways, as far as what all those people said about the security clearance it boils down to this....if you're not showing reckless credit principals meaning purchasing cars, running up debt, purchasing another home THEN foreclosing, you should be fine. Just be ready to explain what happened. If you're after your 10 year review, you're safe.

I got some info about this a few days ago actually, from a trusted source. I plan on contacting my security manager and voluntarily disclosing the situation to put in my clearance file, right from the beginning of missed payments. The government is looking for subterfuge when it comes time to renew the clearance. Being upfront is the correct action here. I'd love it if you could post here again after the trustee sale and let us know how things play out - if you're approached and offered "cash for keys" and how soon they want you out after the sale.

Irish: I think my previous posts may have been a little confusing. I have a checking account with USAA that I use to pay the mortgage, HELOC, home/auto insurance, and auto loan. The exact amount of these charges is what is deposited monthly, and the rest of my pay goes somewhere else. I have since cancelled this allocation. I will use their automated system to direct debit a separate account for my auto loan/insurance payments. I won't authorizate them to deduct that account for the HELOC, and if they did anyway they would probably be breaking laws. I will probably have to resort to using a coupon book and mailing in a check every month once they terminate my online priviledges...in that case I'm sure I'll finally figure out how online bill pay works and use that so I don't mistakenly forget to send a check...

[pattona]

AFG-I'm glad a fellow soldier posted the caution about your security clearance because I was going to as well. Also keep in mind that it could affect civilian employment requiring a security clearance. If you are thinking about leaving in the next 7 years (how long it stays on your credit report) you might want to talk with someone who specializes in transitioning into civilian employment.

Anyway thank your lucky stars you didn't use your VA elegibility. I understand you only get one VA foreclosure.

Thank you for serving our country!

[airforceguyinphx]

Just a quick update...First missed payment 1 August. The 1st servicer has already made a couple "courtesy calls" to remind me that late fees will accumulate after the 15th. I acknowledged my understanding of this but didn't go any further. I don't intend to volunteer any information until they start asking questions. I'm wondering if it's better (or legal) to lie and promise to mail a check...my goal is to stay for free as long as possible. I'm curious about what would happen if I was upfront and told them I will not be making another payment. Would they file the NOD sooner if I made it clear I wanted them to foreclose?

I was hoping someone could comment on the affect to future credit after foreclosure. If I wanted to finance a vehicle, when is the soonest I would be able to do this? My car has 85k miles and is 5 years old, so I think I can get by for quite awhile with this. Would financing not be an option for the full 7 years the foreclosure is on the credit report? Or, perhaps after a few years, will financing become an option but at a ridiculous rate? I'm pretty determined to make my next vehicle purchase with 100% cash, but many things could happen that would make me buy a car sooner (theft, accident, whatever) so I'd appreciate it if someone could comment here.

[Enough Already]

Hi Airforceguy,

Thanks for the update. I can't give much info on your question about being able to get a car loan. My bet is that you've guessed right, you can probably get a loan after foreclosure, but at a really high rate. If you need a new car you may want to do it now, before your credit gets hit (I believe they start reporting you to FICO as early as 30 days late).

We also plan to pay cash for future cars.

Please keep us posted.

Thanks!

[rockysox]

In same situation as AZmilitary guy with condo. Only mine is a conventional with no second but I have a mortgage on another home (different lender) that I plan on moving back into. Does anyone know if most condo's are non-recourse and can anyone give me advise. Had tenants in house that moved but I cannot afford both mortgages. I plan to walk from the condo but hope they can not come after my home.