We made our last payment yesterday...

[KT in CA]

So we made our last mortgage payment yesterday. I am excited for the future but sooooo worried about the taxes!!! We have recourse loans due to refinancing, and our second is $55k that they probably will come after us for (though the attorney I talked with didn't think so). I figure we'll work out something on the $55k, and I'm hoping insolvency will help us out with the deficiency so I'm going to keep us pretty insolvent until after the foreclosure.

I am a planner. I have a nice little box I live in and everything fits perfectly. The next few months are going to be like nothing I've experienced ever in my life, and most of it will be out of my control.

I could care less about my credit right now. Both my husband and I have 730 or so FICO scores, but those can be rebuilt. I'm looking forward actually to not HAVING to use credit cards to get buy. And I'm anxious that we will find somewhere nice to move to for our 2 girls and our dogs. But I can't stand not knowing my tax liability now! This is something we won't have to deal with until April of 2010, but I hate not knowing. It is on my mind and eats at me constantly. And especially when I read something about the exemptions might not be available to you if you ever had a business in your home. I did books for my uncle in my office at home about 4 hours a month, and claimed no home office deductions and wrote off none of my house for business, but I have a fear that that is going to come back and bite me in the butt for some reason. I have tried to read up on the IRS site but don't see much of anything about that in relation to the mortgage debt relief and/or insolvency.

I know I just need to take a deep breath, be grateful our numbers aren't worse than they are, be thankful that we have jobs when so many here don't, and just let whatever happens happen. But it so hard for me to do that.

Just wanted to vent.

KT

[DAVetran]

If it was never claimed, it never happened. I would not lose sleep over this, nobody knows what the long term effects of this will be, plus a new sheriff is coming to town and just maybe there will be some releif in the future.

I am sure the professor will be by to help ease your mind if possible.

[The Professor]

My suggestion relative to the potentials (specifically forgiveness of debt tax liability and the owner of the second loan seeking a judgment) is relax and wait to see what happens. What happens in large part rests on your post-foreclosure financial health. If you are insolvent, then you can seek relief from the tax liability and the lender is less likely to chase you because the chances of ever successfully collecting are remote and it doesn't make good business sense to incur litigation costs for something that isn't likely to be successfully collected.

Take care,

Daniel

[Lisa in MN]

KT
Breathe in. Breathe out. Try to stay in the present.

It was a big step, one we did back in April- never looked back but it is hard at first. I felt guilty, almost like a criminal. I am sure you understand.

Happy Holidays
Lisa

[KT in CA]

Thank you Professor. You have given great advice before and again here. It is my understanding that insolvency is looked at up to the day before the foreclosure. Do you have any advice/information on that? I have done some online research, and CPA's seem to say the IRS determines insolvency in relation to foreclosure as how you stood the day before the foreclosure date.

Lisa - you and I sound a lot alike. I think a lot of my anxiety is that I do feel guilty, but we just can't make it anymore. I will remember what you said. "Breathe in. Breathe out." Thank you for your kind words.

KT

[Lisa in MN]

KT-
Your comment:

I am a planner. I have a nice little box I live in and everything fits perfectly. The next few months are going to be like nothing I've experienced ever in my life, and most of it will be out of my control.
Yea, we are pretty much clones I am exactly like this. I actually have 2 physical day planners, one is financial and one is "regular" stuff! I plan, plan, and plan almost compulsively. Then when one plan falls through or changes I have to rework the whole thing- ok so maybe you aren't that bad.
Anyway, this conscious decision you made is still a "plan". Now, you plan what you will do with the money not going towards your house- stay in the present and take control over that which is IN your ability to control.

Next comment you made:

I could care less about my credit right now. Both my husband and I have 730 or so FICO scores, but those can be rebuilt.

Again, we are on the same page. When we started this crap 8 yrs ago, my FICO was 765, hubbys a little higher. I am done playing all thier games.

Chin up doll, breathe easy, hug your kids ( and dogs) and know in your heart you are doing whats best for all of you. I know we are.

Lisa ( in MN and temp is 10 degrees and we think it is "warm")

[KT in CA]

Lisa -
Thanks so much! Wow! Someone who is worse that me when it comes to planning...it's a sickness really, don't you agree? You have made me feel better in that I know we are not alone in this mess. And we do know we are doing what's best for our family. I just don't do "variables" very well at all.

Thanks so much again -
Karen
(in a very cold CA and who CANNOT imagine what 10 degrees feels like when I'm complaining about our 40's!)

[The Professor]

This sort of recognition that you don't have to go down this path alone makes it much easier. Lisa and KT, you are both doing a wonderful job of dealing with adversity. Today our Governor announced that all State employees will be basically facing a 10% reduction. My sense is this reduction will filter over to the public colleges and universities and it won't be long before I'm facing a similar reduction in pay. I'd much rather be facing an across the board reduction than see others lower down on the seniority list lose their jobs.

These are going to be challenging times for all of us. I'm appreciative of the opportunity to provide input in hopes that it helps all of you.

Take care,

Daniel

[Mountain Mike]

Prof. Shays,

I have filed bk, it was discharged....no re-afferm on 1st 254k or 2nd 120k I hve just been paying till I just could not afford. Now heading towards foreclosure, just recieved demand from 1st and have heard othing from 2nd. Do you think the 2nd will try to come fter me? I am in central Cal. I don't know much about the laws.

thanks,

Mike

[The Professor]

Assuming there was no reaffirmation (you would have been required to sign something to reaffirm and no doubt your attorney suggested you not reaffirm), and your discharge has been entered, you would not be personally liable under either the first or second loans. So I seriously doubt the holder of the second would come after you. If they attempt to do so, simply let them know of your previous Chapter 7 filing, that they were listed as a creditor, and your discharge has been entered.

Daniel

[Mountain Mike]

Prof. Shays,

Thanks for your info. I am probably in the wrong forum but I have been reading your posts and appreciate your experience and knowledge. So, I had a few other questions maybe you could help me answer...

1. Do you think after the forclosure my 1st mortage will negotiate? We like the house and could afford a pmt of around 1500.00-2000.00 just not 3500.00 like it is now with the 2nd.

2. Should I try to negotiate before foreclosure? or does the 2nd still hang on?

Just looking for different ideas and suggestions to ponder. Either way the Bankruptcy has still got my credit sideways...so I am basically just trying to get out of the 2nd and re-negotiate the 1st...I am sure the whole world wants that!

Thanks,

Michael

[The Professor]

The first will not negotiate with you after the foreclosure, nor would you probably want them to because of the potential that the second could "reattach" once you entered back into title to the property. The fact that you went through bankruptcy might eliminate this potential "reattach" but I seriously doubt a title company would ignore this possibility which effectively would serve as an inability to close escrow on any repurchase.

Daniel

[KT in CA]

Since we are missing our first payment in January, what would be the estimated time frame that the house would foreclose? I know that before the professor has quoted 3 months and 21 days, but is that from the first missed house payment, or is that from a different point? We are trying to decide when to start looking for rentals. My husband says June, but I say we should start looking in March for a May rental. I don't want to get caught short. I'm just not sure when the 3 months and 21 days starts? Is it from the date of your first missed mortgage payment?

[The Professor]

The 3 months, 21 days clock starts the day the Notice of Default is recorded. In California due to recent legislation they have to jump through some additional hoops more than 30 days before they file the notice of default.

My guess is you are looking at sometime that would, at the earliest be mid-summer before the foreclosure would be complete. Lenders react slowly and we've seen instances of time lapse between the missed payment and filing the notice of default of five months or more.

Take care,

Daniel

[ultimate4799]

Hi KT, I will be looking forward on your updates when the time comes and you moved out... We are in the same shoe and I understand all you feel. I just made my last payment this month and planned to walk out and skip payments on Jan 2009.... Please do keep us posted during the time you try to find rental/apt if they will scrutinize credit(if lenders reported delinquency) before they approve application... Not sure as of the moment when to start finding apt since I have a son who will be in elementary soon and I wanted to move to an area with good schools...

[KT in CA]

Thanks Professor. So there is no set amount of time before they file the notice of default? I guess that's what I'm asking since you say the clock starts ticking after that. You say you've seen 5 months before the notice of default was filed, and then it's 3+ months on top of that? Goodness gravy. Sounds like its up to how fast our lender files that notice. But it seems we can count on 3 months or so after that before the foreclosure.

Ultimate - We too have kids in school. I have one going into first grade next school year, who I'm not worried about moving to a different elementary school. But I have a 7th grader who I want to keep in the same school. I'm hoping to find a rental in our same area. I can tell you that I have been in touch with one property manager in our town. She said they understand the situation a lot of homeowners are in because of foreclosures, and if credit is good aside from that, that no other conditions will need to be met. She said at the most they would ask for would be maybe another month's rent in advance or a co-signer on the lease. My hope is other property management companies in town have the same attitude. I definitely will keep the forum posted on our progress. Am anxious on missing that first payment and don't want to deal with the phone calls that will start. But oh well...Keep posted with your story too please.

[The Professor]

KT, I think that you will find most property managers have a similar view and will use the sort of approach the one you talked suggested. Just too many good people who pay their bills on time and have a good credit history are caught up in this mess. Incidentally there are things you can do to lengthen the time it takes for your lender to file a notice of default. The are a bit like "stringing them on." Things like your attempting to get your "rich Uncle Harry" to come through with a loan that will allow you to bring the loan current, to you are trying to go the short sale route and it looks promising.

Heck they really don't want your home and are not in a hurry to get one more REO (real estate owned) on their books.

Take care,

Daniel

[AZChick]

A friend of mine is about a month away from her auction date. She did have an issue getting a rental, she finally got one where she had to put down a double deposit, that was fine by her. She did also get a 2 year lease. If she had gotten a rental before her credit was effected she would have only put down 1 deposit. I wonder if it would be sensible to get a rental before your credit is hit and start making payments on it before you leave your home. Wouldn't that also help your credit recover faster........that's what one lawyer recently advised me..

[The Professor]

If you stay until the very last minute (sometime after the foreclosure), the money saved in not paying rent probably easily makes up the extra deposit you might have to give a landlord because of a decline in your credit score.

I guess my point in this is if you are going to end up going through the foreclosure process, you might as well maximize the benefits by staying as long as possible without making payments.

Daniel

[AZChick]

Good idea, it's just so hard to get my mind wrapped around this....I'm used to always paying my bills on time, this whole foreclosure issue gives me anxiety, I'm stepping into the unknown..I'm still dealing with issues of shame and guilt and have only discussed this issue here on the forum. I don't have the courage to tell friends and family yet.

[cactus77727]

No one should be ashamed. You are doing what is best for your future. And there is nothing illegal or immoral about it. The media wants you to think that it is immoral and wretched that you dare not pay your mortgage. While Wall Street is forgiven their mistakes by the billions and trillions with our tax dollars. We are only fullfilling the terms of our loan agreements. They put all that jibber jabber small print in there for a reason. Might as well use it and the laws in your state if they are favorable for your situation. Don't feel guilty for making a smart business decision for your life.

[KT in CA]

I'm coming from the same place as you AZChick. Never missed a payment on anything in my life, so this is going to be very weird. Unknown territory. We drained our 2 retirement accounts and racked up $40k of cc debt to stay in this damn house. After spending time on these forums, we really did begin to realize it is a business decision, plain and simple. Donald Trump wouldn't hesitate to dump a crappy piece of real estate, and we shouldn't either. But I understand you not being able to tell anyone. My parents know, a few of my husband's friends (2 of which are also walking from their mortgages) and 2 of my girlfriends know. We haven't told our neighbors and are just going to wait on that. It's really nobody's business except ours. I just don't want their pity or them feeling sorry for us. We are able to breathe again having our extra money, and once we get through the actual process and the tax ramifications are all figured out (which for us won't be until we file our taxes in 2010) we get a clean slate to start all over. Sure the credit has to be rebuilt, but that can be done. I don't feel ashamed, but I also don't wany anyone's pity. Yeah, it's terrible to have to walk away from your home, but worse things could happen. So I hope most will save the pity for someone who really needs it.

[Lisa in MN]

Karen,
I am sorry I havent responded. Sometimes I have a hard time finding posts and I dont always get the email responses. I wish this forum wasnt anonymous- but I understand Moe and Cats reasons for it. It would be nice to share email, IM, etc....
Anyway, I wanted to let you know I know exactly how you feel. Once we made the decision we were not going to pay anymore, and making that "last" payment, I was terrified. I too do not do variables very well, and I am also somewhat of a control freak- but in a good way I spent 4 months waiting for a local bank who was willing to do a short refi for us to work with WAMU, couldnt take the inaction on MY part and would up cancelling the deal. They never called me, WAMU said they had no record of contact by them, then someone else told me yes they did, they had multiple records of contact..I couldnt take it and decided I needed to work on my own behalf. We have wound up with an excellent loan mod and have accepted it. For the first time in 8 YEARS I feel renewed joy in my house. Even when the 5% rate sets in at year 4, we can still afford it, even on one income- for the past 8 years we have both been working 2 jobs just to pay the damn mortgage and meet the needs of a growing child. I am also ashamed to say- we were not able to get her the needed orthodontic work for the past 3 years when it was recommended- until this fall when I paid for it all upfront. Never did I think I would be someone to not pay a bill,, let alone a mortgage.
I have released a breath I didnt know I was holding all these years, able to have joy, and you and your family will also. Maybe not in that house, but you will make a warm and loving home somewhere, all knowing you can provide that without killing yourselves.
Only recently did we tell my parents- they are children of the 50's and would have been MORTIFIED we werent making our mortgage payment. It just isn't done.
I am keeping you in my thoughts Karen, and wishing for your peaceof mind in all this. The outcome WILL be positive, just for a different reason.

Warm Regards,
Lisa the controller in MN

[Moe Bedard]

Lisa,

I am glad you understand, and I understand where your coming from..............what we were dealing with was a ton of spam emails laced with virus infected links that looked like it came from the forum, that were crashing computer and also infected sections of the forum.............we didn't want to expose member's computers to that.........for this reason alone it just isn't worth enabling those features.............as spammers make it a point to look specifically for those features.