Still a little in shock that it is come to this but my wife and I have decided after some much needed counseling from my dad that it's time to walk away from our Home in Puyallup. I thought I would share a little bit about my situation and our thinking to see if anyone can offer any guidance.
I've been like a sponge the last three days on this site and think I have a basic understanding of the process and what to expect. I can't say that it makes it any easier and my wife and I are having to get past the feelings of being a failure and make it into simply a financial decision that has to be made without emotions. We have accepted there will be some consequences of our actions but feel like we have no other options.
Here's our situation:
Bought a home in Puyallup in 2008 for $350,000 and ended up financing $327,000. We have a single mortgage through CitiMortgage that we just found out is carried by Fannie Mae. The home is currently estimated at $226,000 according to Zillow and we still owe just over $321,000. We moved to California in May of 2011 for a job relocation and decided that we needed to try and rent the home since it was too far under to sell and Citi offered nothing unless we were behind. We ended up renting to our niece and nephew but they couldn't pay enough to cover our mortgage payment so we make up $600 a month between their rent and our monthly mortgage payment.
We realized last night that it will take many, many years to make up the $105,000 we are under assuming it stops declining in value (wishful thinking) and all we would gain is lots of years making a payment to just break even (if we are lucky)
So as far as the walking away part, we are scared. I've seen the many posts by TomEason (Thanks Tom!) about the unlikely case that a mortgage company will pursue a judgement for the difference in Washington state but we are frightened that we will somehow become the first to say we were the exception to the normal process. Izzle's posts of the process has been very helpful too (thanks Izzle!).
Here is our plan.
We just found out last week that our landlord (we are renting in CA) is coming home from a military assignment and we will need to be out of the house by the end of June. Our thinking is that we will stop making payments on the mortgage on June 1st. Our rationale is that our credit report hopefully won't reflect any issues with our credit while we are applying for a new rental and won't show up on our credit until we are in a two year lease. Based on the timeline I've seen for WA, we are hoping the process will be over in June/July of 2013 so our niece and nephew can move out after the kids get out of school. We are planning on only charging them enough to cover homeowner's insurance since we want them to be able to save money too (and they are close family who are struggling too).
A couple of questions I have.
1) Does us being in California have any affect on this process? We don't want our niece and nephew to get dragged into anything or have to deal with collectors or law enforcement banging on the door wanting payment.
2) Does the house need to be occupied during the whole process? I'm pretty sure my niece and nephew will try to stay as long as they can so they can build up a savings but if they happened to move out early, would I need to make sure it stayed occupied (versus having some friends keep the property looking nice)?
3) My wife and I are going to have a large income reported for last years taxes (probably around $190K) but the sad reality is we don't see hardly any of that money after child support and debt for legal expenses. Is this going to be incentive for the mortgage company to try and get a judgement? I've heard that they can garnish up to 25% of your salary. In our case we would have no other option but a complete bankruptcy.
We did a refi in 2010 (We really let Citi ****er us in to this one but that's a tale for another blog...) so they have our 2009 tax information (quite a bit lower income) and they have our paycheck stubs from that year. We are planning on stopping all communication with them and actually found it ironic that they just sent out a form asking us to verify our contact information and give them email addresses and alternate phone numbers.
Sorry this is so long but hopefully some of you have insights to help us through this traumatic time for us.