Buy and Bail Chronicle

**bs6440** · 07-04-2012, 03:37 AM

ss After reading the posts on this forum for the last several months, my wife and I have decided to buy and bail. We thought we would chronicle our experience for those interested.

About us:
My wife and I have credit score north of 700. We are both from New England and have wanted to move back. We currently live in California.

The CA house
We bought the house (1962 ranch house, 1800sqft) for $530K in 2005, with and first mortgage of $423K (GMAC) and a purchase money second of $107K (ResCap (Also GMAC)). Total payment per month of $3300, not including tax escrow or insurance, which are both paid separately. As such, the total per month is just under $4k.We have never missed a payment or been late and actually make one extra payment per year. Our interest rates are 6.25% on 1^st mortgage, and 7.5% on 2^nd mortgage. We have replaced the HVAC system, windows, and landscaping. We intended on staying.

GMAC
We called several times seeking to reduce the interest rate but the call center worker instead chose to lecture us on our obligations to pay our as prescribed. The irony of getting this lecture from GMAC, a company that required a gov’t bailout, isn’t lost on me. As such, no interest rate adjustment is possible.

The Decision
Luckily, my job affords me the opportunity to pretty much work from anywhere. There is a moral issue we each wrestled with. In the end, it is a business decision, pure and simple. Our quality of life would greatly improve by moving back to New England and dumping this house. We decided to live in Southern NH. We have identified a number of houses we will be looking at when we go back to NH at the end of July. We are looking in the $300K to $400K range. Houses in this range are a considerable improvement over the CA house. Most are at most 10 years old and need little is any work as opposed to our CA house.

The Loan
We have good credit and make good money. I was concerned that the question of our intentions with regard to the CA house would come up. One mortgage banker from Discover immediately asked us about the CA house. At that point we changed our approach. We went directly to a mortgage broker. Our thinking is that he could care less provided we put down a good amount of money. We are putting down 20%. Once he heard that he never asked about the CA house. Yesterday I got our pre-approval for a $325K at 3.875%, fixed for 30 years. With our down payment that means we can buy a $400K house at 3.875% fixed. Our payments on a $375K house, with high NH real estate tax and insurance included, will be about $2200 per month. We are saving at least $1800/month for a house needing little to no work!

The Plan
Once we close on the house in NH, we will cease all payments to GMAC and ResCap. I am going to contact them and let them know I have walked. I may engage a CA lawyer to officially notify them that we surrendered under DIL. We were going to short sell the property but why? If a short sale is treated exactly the same as a foreclosure and reported as such to the credit bureaus then why should I waste my time and effort to help out GMAC.

Sorry for the long post, but they will b shorter now that the background has been established. Please feel free to ask any questions. Also, any advise or suggestions are appreciated.

**Movin' On Up** · 07-05-2012, 11:57 AM

Congratulations on making the decision to buy and bail! It sounds like a solid plan except that I see no need for a CA lawyer. Just let the the process play out and look into renting out your CA house. If your loan is owned by Fannie Mae, it will move quickly. My house sold at the trustee auction just last week, after 8 months of non-payment. Hope everything goes smoothly. My story is here: Doing the "Buy and Bail" in Northern CA

**vantuckian** · 07-05-2012, 01:47 PM

That interest rate sounds/seems high, unless that is the APR number instead of "interest rate". In any case, an easy way to get a ball park quote, that doesn't require any personal info is to get a quote from www.amerisave.com in Seconds and check that against what you're getting.

**bs6440** · 07-11-2012, 09:47 AM

My wife and I bought in 2005 for $530K. House now wouldn't sell for $250K. We are buying another house in NH and moving there. We will try to rent SoCal house but will likely walk. If this happens I am thinking about contacting the mortgage holder on SoCal house and try to work to get a DIL as we will be 3000 miles away. As such, no one will be in the SoCal house. Am I nuts? I don't want the place to go to hell. Nor do I want the pool to become an environmental hazard. I don't want to be a landlord either. I may have some leverage with the bank as the house will be wasting away. Am I dreaming?

**TomEason** · 07-15-2012, 09:55 PM

Originally Posted by bs6440

My wife and I bought in 2005 for $530K. House now wouldn't sell for $250K. We are buying another house in NH and moving there. We will try to rent SoCal house but will likely walk. If this happens I am thinking about contacting the mortgage holder on SoCal house and try to work to get a DIL as we will be 3000 miles away. As such, no one will be in the SoCal house. Am I nuts? I don't want the place to go to hell. Nor do I want the pool to become an environmental hazard. I don't want to be a landlord either. I may have some leverage with the bank as the house will be wasting away. Am I dreaming?

I might recommend you get a property manager to handle renting it out. Unless you're really in a position to turn your nose up at easy positive cash flow rental income.

**bs6440** · 08-28-2012, 01:31 AM

Quick Update. We found a great house in Dover, NH. Made offer and accepted. Received notice today that our loan has been approved and will be closing in early October. Never once asked about our plans for SoCal house. Our plan is to talk to GMAC and give them 2 options: (1) rework mortgage on SoCal house so we can retain ownership and rent out the house (no credit slam); or (2) we walk. I will not even entertain the idea of short selling. If my credit is going to be slammed by a short sale the same as a foreclosure, why would I waste my time helping GMAC? Will keep you updated.

**TomEason** · 08-28-2012, 09:28 AM

bs6440

Congratulations for having found your soon to be new home, and for being approved on your new purchase loan! Interesting that your new lender didn't ask about your SoCal house.

FWIW, I commend your proposed strategy of dealing with GMAC. I hope the closing on your new home goes as planned.

**bs6440** · 08-30-2012, 12:00 AM

We are not saying a word to GMAC until we have the keys for the new house in hand and the deal in done. Our current payment on the SoCal house is about $3400/month without escrow for taxes and insurance (another $600/month). The new house in NH is $2200 with everything. The amazing thing is that right now, the NH house appraises for more then the SoCal house.

**bs6440** · 09-21-2012, 01:07 AM

Spoke to mortgage broker on new property. The underwriting should be done within a week. Scheduled to close in early October. I had planned to stop all payments on first house immediatelt thereafter. Interestingly, I received several calls ( out of the blue) from mortgage brokers telling me harp 3.0 is on the way and I would most likely qualify to have my 1st (GMAC) modified, but not the 2nd (GMAC also). If that is true I may continue making payments for a few months to see if harp 3.0 is for real. If so, I rework the 1st and stop paying the second to drive them to settle. If nothing happens by February I stop all payments on first house. Thoughts? Is anyone else getting these calls?

**TomEason** · 09-21-2012, 08:15 AM

Hi bs6440

Thanks for your update.

FWIW your plan sounds OK to me. But, as you know, it will likely take many months to get a favorable settlement on your GMAC 2nd. So, the February timeline may be a little optimistic. Were it me, I'd rent your place out right after you vacate. Then you can decide what to do about Harp 3.0 etc.

**bs6440** · 09-21-2012, 09:45 AM

I agree. The February date is the cut off point to determine is harp 3.0 is real. If it is, we continue to pay the 1st, stop paying the second, and rent the place out. I agree it will take months maybe years to settle the second. If there is no progress towards harp 3.0 by February, we stopping paying both the 1st and 2nd and continue rent it out until GMAC either reworks the loan or forecloses.

**TomEason** · 09-21-2012, 06:01 PM

Hi bs6440

I think that's an excellent plan!

**bs6440** · 10-04-2012, 07:22 PM

Update - The loan on the new property has been cleared to close. Just wired down payment to lawyer for closing which is next week. The hardest part of this whole ordeal may be over. Now a new question. As you know, both our 1st and 2nd are purchase money loans, and as such, no recourse in California. We had planned on seeing if GMAC would work with us once we bail and retain the California house as a rental. Now I am thinking that I do not want to refinance the California house regardless of the offer. Refinancing the loans would make them recourse I believe. As such, GMAC has zero leverage over me because the loans are no recourse. I think I will probably walk on the California house. Am I looking at this accurately?

**TomEason** · 10-04-2012, 10:06 PM

Originally Posted by bs6440

Update - The loan on the new property has been cleared to close. Just wired down payment to lawyer for closing which is next week. The hardest part of this whole ordeal may be over. Now a new question. As you know, both our 1st and 2nd are purchase money loans, and as such, no recourse in California. We had planned on seeing if GMAC would work with us once we bail and retain the California house as a rental. Now I am thinking that I do not want to refinance the California house regardless of the offer. Refinancing the loans would make them recourse I believe. As such, GMAC has zero leverage over me because the loans are no recourse. I think I will probably walk on the California house. Am I looking at this accurately?

Hi bs6440

Thanks for your post.

I'm happy to hear your replacement property deal is set to close! You will have soon completed the most challenging leg of your buy 'n bail.

Yes, your assessment of the refi of your existing property is accurate. While loan mods don't change a non-recourse to a recourse loan, needless to say, refis do because it's a brand new loan.

Even though the refi loan would be recourse, the only downside is this. If the new 1st lender FCs, you might have tax liability due to CODI. I recommend you consult with your tax person about that potential IRS liability. There are no other downsides of which I can think.

Whatever you do, I recommend (and I know you agree) you rent your existing out as soon as you vacate.

**bs6440** · 10-04-2012, 10:26 PM

Tom, thanks for the info! I mis-spoke. I hope to push GMAC into a loan mod once I stop paying. I want to settle the 2nd (95K) for no more than 4K then try to get GMAC (ResCap) to modify the first by resetting the interest rate to 3.5% or so. I didn't know that loan mods do not reset the loan to recourse. I assumed a loan would reset the loan to recourse. If they do for it and mod the loan I will keep the California house also as I can rent it out. In any event I plan on keeping someone in here until the bitter end.

**bs6440** · 10-14-2012, 11:54 PM

update - We closed on the new house last week. Not once was I asked what I intend to do with the CA house. We are moving to the new house in November and have a friend staying here for low rent. We will see if GMAC wants to work on a deal for s to keep the CA house. If not, here are your keys GMAC. When will they realize they have NO LEVERAGE!

**driftwood** · 10-15-2012, 09:17 AM

Congrats bs6440, I am just starting my process just hope it goes as smooth as yours seems to have gone. Look forward to hearing what happens with GMAC. Good luck.

**bs6440** · 10-28-2012, 10:30 PM

closed on new home. packing all our stuff. We will be moving in the next few weeks. I checked my credit score on credit karma today - 720. we will not be paying the november payment on the old house. Should be interesting to see the effects. I will chronicle the results. I expect to tell the bank we will not be paying the property tax either when they call.

**TomEason** · 10-29-2012, 09:57 AM

Congratulations on completing the most challenging leg or you buy 'n bail. If it were me, I wouldn't communicate with your old lender at all - ever again. I wouldn't answer the phone or call them. Instead, I recommend that, once you vacate, you rent that property out. Since you won't be making payments on mortgage, property tax, utilities, etc, you'll realize immediate positive cash flow. You'll enjoy that recurring revenue stream for many months while your lender takes it's sweet time to eventually FC. Have fun!

**bs6440** · 11-28-2012, 02:05 PM

November Update - The wife and I are in the new house. Made the first mortgage payment on the new place - less than half the amount of the money pit in SoCal! Amazing. Truly amazing. I am officially late on the old SoCal money pit. I didn't make the November payment nor will I pay the taxes on the old place. That was real smart of GMAC not to work with me to achieve a mutually beneficial outcome. Soon the will be the proud owners of another house in SoCal. GMAC has been calling me at work. I have to send out the cease and desist letter. My credit is still over 700 but waiting for the explosion on Credit Karma. I kinda want to talk to GMAC just to hear their offer and sales pitch. Am I being petty?

**TomEason** · 11-28-2012, 03:57 PM

Originally Posted by bs6440

November Update - The wife and I are in the new house. Made the first mortgage payment on the new place - less than half the amount of the money pit in SoCal! Amazing. Truly amazing. I am officially late on the old SoCal money pit. I didn't make the November payment nor will I pay the taxes on the old place. That was real smart of GMAC not to work with me to achieve a mutually beneficial outcome. Soon the will be the proud owners of another house in SoCal. GMAC has been calling me at work. I have to send out the cease and desist letter. My credit is still over 700 but waiting for the explosion on Credit Karma. I kinda want to talk to GMAC just to hear their offer and sales pitch. Am I being petty?

Thanks for your post. Again, I recommend you never again speak with GMAC. If it were me, I'd get busy and rent it out. It's likely you'll enjoy the resultant recurring revenue stream for many many months. Good luck.

**bs6440** · 12-13-2012, 04:44 AM

December update - the first missed payment on old house was November's payment. Before I began this my credit score was 720. Suntrust reported payment 30 days overdue. According to credit karma my score is now 680. GMAC calls several times per day. Recently sent off cease and desist letters. Also received the we are here to help packages from suntrust and GMAC.i intend to offer GMAC $3k to settle sold out junior.we owe $90k.