Walking away in Utah... Anyone done this or know anything about it?

[La Biondina]

First post here although I've been lurking and reading and struggling with making the "walk away" decision for some time now. Taking the first step and getting over my conscience about doing this is proving very difficult! Not to mention the fear of the unknown and the worry about what in the world will become of me and my finances down the road when everything is over. My situation is nowhere near as bad as some of yours, and my heart goes out to all of you who are dealing with the unfairness and heartaches of this whole mess. Justifying walking away is hard for me because I CAN afford my mortgage. Things are tight, I have to scrimp and save and have a low quality of life, but it is doable.

I did an 80/20 back in August of 2007, and my townhome was $162,500. My first mortgage was for 130,000 or so at 6.875% with Flagstar Bank, and my second (not a HELOC) was for the remainder of that, (approx $32,500) at 10.2%, with Guaranty Bank. I did not have any money for a downpayment and this is what my mortgage broker suggested. I was very clear that I did not want anything adjustable or anything that would balloon as I had already heard some horror stories by this time. I have not refinanced and never made a late payment. Walking away was not something I had considered at all up until recently when I heard of someone that my Mom works with doing this. Then, the wheels slowly started turning and I decided I would research the process and the consequences and the pros and cons etc. I've read multiple posts and stories on this forum and am heavily leaning towards stopping payments on both mortgages for a few reasons. First off, I'm underwater by approximately $50,000. I know this is a drop in the bucket compared to some of you out there but for me, its a fairly big deal. I'm young, single, and loved the idea of owning my own home and so I made the (wrong) decision to pursue homeownership. I rushed (and was strongly encouraged/pushed by my realtor and mortgage broker) into purchasing my townhome and I signed the papers and here I am. To be honest, I don't know how in the world I qualified for my loans, and my mortgage broker said he was barely able to make it work and at the same time, stressed how great my interest rates were for my situation. Anyway... I called both Flagstar and Guaranty last week. Flagstar offered me a reduction in my monthly payment of approximately $75. Not enough to change my mind about walking. Guaranty said their goal was to combine my first and second mortgages (to protect themselves in case I can no longer pay?) and that they would do some research, and call me back. Have not yet heard back from them. Second, I don't like where I live. I did not buy in a good neighborhood and I do not like dealing with the HOA. HOA dues are high, nothing ever gets done, and the homes are slowly deteriorating. Third, I have a problem with making my mortgage payments and seeing my money go into nothing that benefits me whatsoever. I work hard at a job I don't like very much to make the payments and I can't save a penny for my future or live like I want to (I have no intention of living a life of excess, I just want to be able to afford some comforts and peace of mind) because all of my money goes into paying Flagstar and Guaranty. God forbid that I have a serious medical problem or if my car breaks or if my dogs get sick or blah blah blah. You name it--one thing goes South, and I'm in trouble. As many of you know, its stressful living this way.

So, has anyone in Utah had any experience with walking away? I know Utah is a no recourse state but I have heard that they may have one opportunity to file a lawsuit against me. I have some knowledge of what sort of timeline to expect due to the information I've found on the forums here, but aside from that, I'm pretty much in the dark about what will happen to me as far as Utah laws go, and as far as what my first and second mortgage companies can and will do.

I have a very strong desire to be proactive in protecting my money and saving as much as possible due to the inevitable credit problems after a foreclosure, and would appreciate any tips on that. So far, cashing out any checks or withdrawing money as soon as possible after it is deposited, and then hiding it in a shoebox under the bed is sounding like a good plan.

If/when I stop paying my mortgages, I plan on living rent-free for 2-3 months at least, and then moving back in with my parents. I don't want my house anymore, despite all the blood, sweat, and tears my family and I have poured into it, and I'm very close to just doing away with it and throwing in the towel. The druggies down the street and the incompetency of the HOA and the general depression I have due to feeling so taken advantage of by greedy people just squashes any desire I have to stay.

I have also thought about filing for bankruptcy if it comes to that. I don't want either of the mortgage companies to take any of my money, and so bankruptcy seems like my only option. How do I find out if I meet the requirements for bankruptcy in Utah? Any suggestions or help or anything at all on the above would be much appreciated. I'm sure all of you can ride through this and come out the other side stronger and more knowledgeable than before. One thing I know for sure is that I won't be taken for a fool again and if they think I will sit back and take this, they are sadly mistaken. I just need to get all of my ducks in a row before taking the final plunge because I'm scared to death and I need some idea of what to expect.

Thanks from the bottom of my heart for any advice.

[La Biondina]

Just in case anyone else is in Utah and is in my situation, it appears that Utah is a "one action" state and as far as I can understand from the things I've read, this basically means that the lender can do one of two things. They can either foreclose on your house to try and recoup their losses (more common of the two), or BEFORE foreclosing on your house, they can file a judgement against you to try and get their money back (apparently this is only done when you are wealthy and they think there may be a chance of getting all that they owe). In my situation with two mortgages, I'm assuming that if/when I walk, the lender for my first mortgage will foreclose (I don't have any assets, certainly not enough for them to get $130,000 out of me), and the lender for the second will sue me, write off the money that I owe them, or sell the debt to a collections company so THEY can try to get the money back.

Am I thinking about this correctly? Thanks in advance for any insight, just trying to figure out what to expect.

[Moe Bedard]

Hello and welcome to the community La Biondina!! I love your story. Not the way you have to struggle or your plight, but your style and the way you present your problem/solution in such an intelligent manner. I commend you for coming to the realization that the reality that is "sold" to us is not always the reality we want.

Life is nothing more than learning lessons that make us wiser and strong or make us weak little complainers. You have chosen to be wise and strong. To live the life you want as opposed to the life that is sold to us from childhood through little or should I now say "wide" boxes in our living rooms called TV's.

As far as the lenders recourse, most all of you who are going through this are pioneers or some would say, test subjects. No one knows what they will do. Yes, they can pursue you. It is happening right now to people, but it is not the norm as of yet. It is more rare to hear lenders going after people than not.

With that said, there are no guarantees. Utah isn't really friendly to consumers when it comes to these types of issues. They are corporate friendly and allow wage garnishments which would be something to be a bit concerned about. However, if you qualify, bankruptcy may be an option to protect yourself and future income.

Start researching these laws and bankruptcy. I hope this help you

Utah's high bankruptcy rate stems from wage garnishment laws, BYU expert says

A new study by two BYU economists, Lars Lefgren and Frank McIntyre, published this month in the current edition of the Journal of Law and Economics, found that Utah's high bankruptcy rate stems from its wage garnishment laws, the number of Utahns who end up filing for bankruptcy multiple times and the relatively high percentage of young, middle class residents with moderate incomes.

"Our high bankruptcy rates prior to 2005 were due more to some people in Utah filing for bankruptcy multiple times, rather than growing numbers of people filing bankruptcy," Lefgren said.

And the state's wage garnishment laws, which offer very little protection for debtors, also motivated more people to file for bankruptcy to stop creditors from dipping into their paychecks.

• After Congress passed the bankruptcy reform bill, known as the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, bankruptcies plummeted from a record-shattering 2 million cases nationally -- which reflected a rush to file before the new law took effect -- to 600,000 in 2006. But now bankruptcies are booming again. Why are bankruptcies in Utah -- in particular Chapter 7 filings, which typically involve a liquidation of property and assets -- rising again despite the recent federal law changes that supposedly make it harder for someone to qualify?

[kpm425]

I'm in the same situation as you are as far as walking away in UT is concerned. We can afford our house, but we hate it, values continue to fall and we have a sweet interest only loan. On top of that we have a baby on the way and won't be able to fit in our small home. I have tried for countless hours to get BoA to refinance or modify my loan and they keep telling me there is nothing that they can do as long as I make the payments.

I have met with several real estate lawyers in preparation for our walk. They have both said that lenders seeking deficiency judgments in UT are rare, but are starting to happen more and in my situation they would probably seek one. There are some foreclosure laws and statutes that make it more favorable for the "walkers" than in other recourse states, but they definitely can sue you for the difference. It's not a get out of jail free state like AZ.

My advice is to call around to real estate lawyers and get a consultation. Many will offer a free 30 minute consult and you can at least get an idea of what will happen in your situation. I'm crossing my fingers that when we walk that the bank will just write off the difference or possibly do a deed in lieu, but more than likely there will be some form of legal action and end up costing me $$$ in lawyer fees and settling the difference.

I've thought about it for months now and I'd rather take the chance than continue to give $1500 a month to a black hole that only keeps getting bigger. Worst case scenario we have to start over and can't buy another house for 7 yrs. IMO, much better than continuing to make my payments and maybe break even in 15 yrs.

Keep us updated with your progress and I'll do the same.

Good luck

[La Biondina]

Thanks so much for the helpful info and words of support! Very much appreciated. Such a scary thing to be contemplating, especially when you don't know what will happen.

Moe, I hadn't yet heard much about the wage garnishment, ugh! At a whopping 25%! That give me pause for thought... I will look at ways to possibly prevent/circumvent this and pass along anything I find out in the hope that it can help someone else out there in this situation. I have a fairly well paying job and so I suspect that will make filing for bankruptcy a little complex but we'll see what happens. I don't know yet what the requirements/limits for bankruptcy are in this state. Will do more research on that also. I think my next step will be to consult an attorney and see what my options are for all of this. I'm just so sick of such a low quality of life and of having no chance any time soon of saving any money, of being able to make any necessary repairs to my house, of feeling like my finances are secure etc etc, that it just seems like it would be worth it to face the stress and the unknown over the next few years just to get away from my current situation!

kpm425, I definitely think you are making the right decision, especially with an interest only loan and a new member of the family to provide for on the way! My next step will be consulting with an attorney or two to discuss my options and the possible fallout from this. I will be sure to keep you posted. I don't relish the thought of having to hand over my financial information to the banks if I try to pursue a DIL or short-sale or loan modification of some sort, so I think I'm just done. I just want out and I'm not too interested in trying too hard to get anything about my mortgage terms changed. A clean slate and getting away from my asinine financial situation is what is best for me and my future. Why I ever thought this was a good idea in the first place is beyond me. Just from running the numbers and calculating what I'll be able to save from not paying my mortgage just makes me squirm! I'm almost 30 and cutting my losses now makes the most sense. It has been a costly and time consuming exercise in money management and smart thinking but it has been a lesson VERY well learned. Good luck in your walk, and please post any insights or developments as you have them. I'm relieved to find a fellow Utahn in the same boat!

Positive thoughts and well wished to all of you walkers out there. Stay strong and take it one step at a time!

[kpm425]

The one real estate lawyer I talked to came across as a real shark, someone you want on your side when push comes to shove. He said that worst case senario the bank could garnish your wages, but it's a pain in butt for them to do so. They have to fill our paperwork quite often, and usually it for only a coulpe hundred dollars a month (obviously depending on your income). Not worth it for them in the grand scheme of things. They would much rather settle rather than pay someone to keep track of you. He also told me about a recent client who got sued for $90K and they negotiated it down to around $8K. This is something I'm definitely going to research out futher, so if you come across any helpful info please share.

We don't have one postive asset. I still have $50K in student loans I need to repay, both our cars were bought last year, so we'd probably break even, and I'm close to $90K upside down in our lovely home. So I'm hoping and praying that if/when we get sued, we can negotiate a settlement. I'm planning on trying to save up for lawyer fees and a settlement which may be unaviodable.

[Moe Bedard]

This is great to see to Utah homeowners helping one another with their plights. I hope you both update and help one another until the end. Many others will read your words and learn.

Yes, be leery of lawyers. There are sharks out there who will burn you and good attorneys as well. You just have to perform your due diligence on anyone you want to work with before you sign a contract. This is also a new area of law and many lawyers are inexperienced. Try and find a seasoned real estate and bankruptcy lawyer in your state that is 10 years practicing. But remember, there are no gurantees in anything.

I wish you both the best!

[La Biondina]

kpm425, my strategy is the same. Stop paying mortgage, save every penny in a safe or shoebox under my bed to pay the legal fees and for the attorney consultations etc, and go from there. I don't really have any assets either, and knowing my luck, my wages WOULD get garnished. I own a scooter, and my old VW van which I love and REALLY don't want to lose and would go to some effort to protect/hide. Anyone have any insights on transferring things into other peoples names to protect them in the event of a lawsuit/bankruptcy? I have to say, this sort of "sneaky" behaviour is not in my character AT ALL. I really feel like I'm turning into some sort of criminal who is trying to get away with escaping unscathed from something I feel obligated to uphold at the same time... very conflicting. I'm not a thief and have always played by the rules, made every payment on time, and I'm a good person! Arrghh. I have some credit card debt and haven't yet paid off my scooter, for a total of about $6500. I was planning on getting most of this paid off by saving what I would have been paying on my mortgage but if bankruptcy is in my future, maybe I should rethink this... so much to take into consideration and so hard to know if you're doing the right thing! Anyway, I'm keeping my fingers crossed for you. Will let you know when I have consulted an attorney about my situation. Best of luck!

[kpm425]

I don't think it would be wise to start transferring things into another persons name. I am by no means an expert in this, but I have read serveral bankruptcy sites that advise against it. Here's a brief overview on wikipedia:

Fraudulent conveyance - Wikipedia, the free encyclopedia

For me, a car or a 4-wheeler isn't worth it. It definitely wouldn't look good if that came up in court. Hopefully it never goes there, but that's playing with fire IMO.

This whole process in one big calculated risk!

[kpm425]

Met with a bankruptcy lawyer today and he was basically zero help. Had no idea about deficiency judgements or the laws pertaining to them Said that it bankruptcy the deficiency gets erased so he had no advice/knowledge on how to fight one if I do get sued. His final advice was to try and work with the bank, LOL! I told him I'd been doing that for the past year to no avail, thanked him for his time and went on my way.

Of the 4 I've met with, 2 seem to have a good idea of what to expect and how to handle it, but 2 of them were no help at all.

Any updates on your end??

[La Biondina]

I have not yet met with any lawyers or attorneys. I'm reluctant to shell out for legal advice at the moment due to lack of $$$ and I'm also feeling slightly intimidated about the prospect of meeting with an attorney (never done it before) and not to mention the fear of finding someone unsympathetic to my situation, and me being judged etc. Instead I have spent more time researching and reading as much as I can find about strategic default/foreclosures and consequences in Utah. There isn't that much out there surprisingly, or maybe I'm just not looking in the right place. I have specific questions about wage garnishment and about Utah being a "one-action" state and I can't seem to find any solid, easy to understand information anywhere. I've read things that said banks are overwhelmed and going through the hassle of suing/garnishing wages isn't worth it in most cases and at the other end of the spectrum I've read that wage garnishment is an easy and common practice and will almost surely happen, and I've also read things that say it costs a company upwards of $10,000 to implement wage garnishment and that they more than likely won't bother, and all sorts of things inbetween. It is SO confusing and SO awful not knowing what in the world to expect. It would be nice to find someone who has been through this in Utah and has experience of the proceedings and sequence of events. I will start looking for an attorney this week after I've thought long and hard about the questions I need answering. I will be sure to pass on any info.

I hope all of you are not too stressed with your situations and best of luck to you guys with everything. Thanks so much for all the support and please continue to post up about your experiences. It really is such a huge help and a huge relief to know I'm not alone! If anyone has anything to add or any advice or experiences to share about anything (Utah in particular) it would be very much appreciated.

[rninforeclousre]

To you both -

I am sorry that you are both facing these tough issues. You will find much comfort here from others going through similiar situations.

FYI - Something that has helped my husband and I come to terms with our decision is this:
We would rather have the banks sue us for the deficiency, then continue to throw 2500/month towards NOTHING (we have an interest only loan). Our house is in Las Vegas (a recourse state) and we are 200k upside down. We know that there is a potential that the banks could sue us for the deficiency; however, we would rather put money towards a debt then continue to throw money down a black hole. Just my 2 cents.

Good luck with your decision and I wish you the best on whatever path you take.

[La Biondina]

rninforeclosure, thanks for adding some much needed logic to my emotionally tainted decisions! Of course you're exactly right. It does not make any financial sense whatsoever to keep pouring money into my house, yet for some reason I'm having the hardest time with this. It is my own house! It felt SO GREAT to be a homeowner! How responsible and privileged I felt and how excited I was to be able to make my house my own and plant a garden and blah blah blah. What a waste of time and money! What a huge farce! Its all so overwhelming. I feel so paranoid and worried about what is down the road for me. I don't know if I'll ever be able to trust a lender or a bank or a realtor again but at the same time I have this strange innate desire to be a homeowner! I want something I can call my own. I want to have stability and I want a haven and I want a safe place for my family and plant some flowers and I want to be able to paint the walls pink with yellow polka dots or whatever. Its such a shame that this is just an elusive dream now. I don't feel like I can trust anyone enough to go through this headache and hassle and financial mess ever again. I suppose I should stop lamenting what could have been and stop with the woe is me and just deal with the current situation! Thanks for all the advice everyone, good luck to you all!

[kpm425]

While in UT they can seek deficiency judgements, they are limited by the difference of the "fair market value" of the home and what it actually sold for.

Antideficiency Statutes

Some states (including Alaska, Arizona, California, Connecticut, Florida, Idaho, Minnesota, North Carolina, North Dakota, Texas, Utah, and Washington) have enacted antideficiency statutes. These statutes generally prohibit a lender's deficiency judgment against a borrower (often in connection with a nonjudicial foreclosure action) or limit a deficiency judgment to the difference between the debt and the greater of the fair market value of the secured property (as determined to the satisfaction of the court) or the price paid at the foreclosure sale.

So worst case senario, you walk and get a deficiency judgement against you, your lender can only sue you for the difference of the fair market value of your home and what someone bought it for at the auction. You'd probably have to hire an attorney to agure this in court, but it's really not too hard to prove what the fair market value of the home is.

I highly doubt the bank would come after you. They know the laws are in favor of the borrowers in UT and UT is a "one action state" as well. So if I understand that right it means they can either sue you for the difference (and go through the whole fair market value issue in court) or write of the difference and forgive the debt.

As for the whole moral issue with walking away, I think it's laughable. If you google "strategic default", "buy and bail", "walk away" etc, you'll get many articles or comments talking about the ethical dilemma of it all, saying you signed a contract and you should live up to it and blah, blah, blah. I am so past that. I pose this question/analogy to all you people who think it's unethical to walk from you home:

Say you put everything you had into starting a new business, all you savings, worked extra hours to get all the supplies you needed and had many people around you saying how smart it was and that you'll never regret doing this. You did all your reseach and seemed like you were making a very smart investment in you future, so you went a head with it.

Fast forward 3-5 years down the road and your business/investment is struggling. Even though you have poured countless hours into making it work, marketing to the best of your ability, and trying everything in your power, it's not working out. Your area of business is no longer needed and by crunching numbers you realize that more that likely you will not be able to break even and start to make a profit for 10 years from now. If you pooled all your resources, worked overtime and saved your pennies you could pay the bills, but it would still be 10+ years before you are maybe back to your starting point. Sound like a smart business move? Or you could realize you made a mistake, your business didn't pan out, and move on to the next part of your life. Sure there will be some consequences of ending your business and starting over, but the pros far out weigh the cons.

How many of you would actually "stand firm" by a dying business with the hope that you might make some money 10 - 15 years down the road?? Absolutely no one would. For some reasons this society holds your mortgage in sacred regards, and makes you feel like your cheating on your spouse by even thinking about walking away.

Plain and simple it's a business move. If you break your mortgage contract, there are going to be some consequences (just like cancelling your magazine subscriptions before it's up) but if you've done your research, ran the numbers and it makes financial sense for you and your family (including the risks) then do it.

[SDUtah]

Originally Posted by CC Brown

La Biodina,

We are a law firm here in Salt Lake City. The law offices of CC Brown. The head of the firm has been practicing law for over 30 years. His background was litigating against the banks in the late 80's when the last real estate market crashed. As a Law Firm we have completed more loan modifications, Deed in Lieus, Bankruptcies, etc than any other law firm in the state. We are glad to do a free consultation for you to help so that you know all your options, as utah is a deficiency state. Charles Craig Brown also served as bankruptcy trustee for 5 years, his knowledge in defending against for creditors is bar-none. Call us and Ask for Chad, The Law Offices of CC Brown, 801-265-8500

Do you have any offices in Southern Utah or recommendations down here?