Just want to give you all some information that we would've found useful prior to taking the plunge:
Purchased our home for $525K in 2006. Citibank owns 1st mortgage, $425K. Bank of NY owns 2nd, but they only deal with us through loan servicer SLC. Today, our home won't sell for a penny over $260K. We are in the Inland Empire, the 2nd highest rate of foreclosures in the country. All home values have plummeted as a result.
So, we can afford our home. But being new parents, in our 30's & 40's, we have to look out for our financial future. We can rent our exact same model, in our neighborhood, for $1900 a month. Currently, with taxes, our home cost $3400 a month - and that is interest only. Citibank gave us the modification run around. Rejected us once. Then the Federal settlement came along. Citibank rejected us again. Said our income was 2% higher than it needed to be to qualify. 'We've concluded that this financial situation just isn't tenable.
We tried to get info about the impact this would have on our credit but what we found was limited. So here's our experience so far:
Started with 793 score on Experian. We have 2 credit cards. Only use AMEX and pay it off in full every month. Took out a vehicle loan in May (might as well get the vehicle we'll need next year now, while we still have good credit!). In June, got our first 30 day late hit. My credit is now 713. An 80 point drop. That's a bit more than I expected. It may be due to taking out the vehicle loan, installment credit.
I will update monthly to show what the impact to our credit has been.