Do we stick it out or walk - no hardship (CA) - Loan Modification Forum

J2911 · 12-23-2008, 08:41 AM

What a great forum. I need some advice as to whether we should stick it out or cut our losses and start over. First I need to state that we are currently NOT experiencing a hardship. Like many homeowners we are totally upside down in our mortgage. We purchased this home with the hopes of selling it in 5-10 years…at a profit, and purchasing a smaller home for our retirement years (We are in our mid-forties). We live in the Sacramento area and purchased a new home in 2006. We put down 10% and paid a lump sum payment of $25K to the second lender once our previous house sold. So without even discussing our current mortgage, we have lost $84,000. So here is our situation:
Purchase price 2006 $589,500
Current Value $345,000
Loss in Value ($244,500)

Current Mortgage – both purchase money:
Negative Equity:
1^st WFB $402,000 (57,000) 30 Yr fixed 6.125%
2^nd National City $87,100 (87,100) Int only yr 1-10 (4.99%- varies), repay 11-30
Total $489,100 (144,100)

I just received an email from a realtor who evaluated our home. Based on recent sells around our home, our same model has sold for $316K, $333K and $336K. She put the current value as Low $314K – High $340K. Wonderful. I feel like crying. My husband and I both have decent paying jobs, though he is a unioned electrician = no work, no pay (vacation, sick, rainy days) and 50% of his work is contracted with CalTrans. Our great governor wants to stop CalTrans projects. Winter brings smaller paychecks and we have to dip into savings to pay. I am facing a possible 10% cut in pay come February (thanks governator). Right now we spend 46% of our take-home pay on our mortgage. I love this house and would actually be OK if we just had the 1^st. So, now for my questions: In our situation, should we cut our losses, rent for 7 years (we would save $2K/month in rent vs the mortgage or $168Kin the 7yrs). And if we do this, do we have to fall behind in payments to qualify for a short sale? I keep reading about hardship requirements, doesn’t being insolvent count for anything? I personally would have a hard time living in the home during a short sale. Is it better to accept foreclosure and stay in the home for the 8 months it would take to foreclose (saving $33.6K). What about Ch13 Bkcy? Would we even qualify since technically, we can pay 1^st & 2^nd ? We have no other debt. FICO scores were 799 and 800 when we bought in 2006. Never late on payments. My acceptable situation would be to settle with the 2^nd to get rid of it, but again, we can’t prove hardship. Sticking it out would mean hoping and praying that we would be able to sell this house for a profit within 7 years, if not we are basically renting for $4200/m where we could be renting for $2200 easy. Also, once retired, we would not be able to afford to live here. ANY advice would be greatly appreciated.

The Professor · 12-23-2008, 09:06 AM

Welcome neighbor to this site. As I'm sure you noticed I spend a lot of time here attempting to provide helpful advice. Since we both live in what has been characterized as the 5th worst real estate market in the Country by CNN earlier this week, I feel your pain. Fortunately I'm mortgageless, and capable of ignoring the paper loss. Nevertheless it will have an impact on my retirement if I decide at that point to sell and move. Good news with selling is I'll likely buy and pay a lower price down the road for a purchase.

As to your situation, my guess is that if you read my postings you will discover that what I recommend is a business like approach. My sense is that we won't see a bottom to this market until 2011 (I've been saying that since 2005 to my students). Additionally bottoms in real estate markets tend to be flat for an extended period of time (probably 4 to 5 years). That tells me that values won't tend to rise until something like 2015-16. Given that time frame is something like 7 years out, and foreclosures show on your credit report for 7 years, I suggest that your answer may rest in the obvious. If you continue to make house payments that exceed the fair rental value of the property by $2K as you've done in your posting, that becomes rather a sizable amount that could be characterized as throwing good money after bad.

Your loans appear to be non-recourse under CCP Section 580b (something I'd confirm by spending some time with an attorney skilled in real property law and debt collection practices). I still have some available seats in my Spring foreclosure class and maybe you might want to join it (check your local community college a ways up Highway 80 on your way to Auburn for course information). Yes that is a shameless plug, but what the heck.....

Take care,

Daniel

J2911 · 12-23-2008, 09:50 AM

Daniel, thank you for your quick reply. So if I treat this as a business decision and know that I will ultimately walk away, do I then stop paying both loans at the same time? Is it better to try to do a short sale and if so, am I making payments during this time? In a short sale, won't the bank demand financial information from us and see that we can afford the mortgage? If we're going to destroy our credit, I would like to be able to save as much money as possible. I'm starting to think that once a decision has been made to walk away and ruin your credit, the plan is to stay in the house as long as possible without making payments, and saving all we can. My only fear in doing this is will we be able to get a rental with lousy credit. Also, with tarnished credit, will our credit card accounts be closed? We don't have balances, but it's nice to know they're there for emergencies.

Thanks again

civilguy · 12-23-2008, 11:04 AM

irvine housing blog has this cool calculator that gives a good estimate on true housing cost. Plug in your numbers and it gives you a good idea how much you are paying each month to stay in your house vs renting. In my case w/ a purchase price of 779k my monthly expense is $4700, i could probably rent it out for $2800, therefore i'm negative $1900 each month. Right now i'm renting out a nicer place for 3k, in effect saving me almost 2k a month. Yes I treated it like a business decision but that 2k a month could go into my retirement fund instead of down the black hole that was my mortgage payment.

The Professor · 12-23-2008, 11:13 AM

J2911:

I agree this is that sort of go/no-go decision. Your point in maximizing the benefit if you choose to do a "delayed walk away" certainly makes sense. As to credit cards, some credit card vendors do have a universal default provision in their agreement and the loss of the card, or reduction in the maximum balance is a real possibility. But there is in a true sense a real benefit to maintaining no credit card balances, particularly since all of us are currently at their mercy relative to the rate they can charge.

I doubt given the number of vacant single family dwellings here in our area that you are going to face much difficulty if your only credit ding is a foreclosure. Given your current situation, taking such action might be viewed as an appropriate course of action to benefit your overall financial situation. That "being a victim of the housing crash of 2007-11" is a reasonable excuse for the negative impact on your credit report IMHO.

Daniel

J2911 · 12-23-2008, 01:13 PM

Civilguy, thanks for the rent vs own calculator recommendation...no surprise, it said I should rent.
Daniel, I agree that with so many foreclosures going on - and I don't think it's going to stop anytime soon (77% of our subdivision is upside down in morgages)- the ding on the CBRs may not be as bad..or may be more likely to be overlooked in the future. One thing I need to think about is the $30K in interest I will no longer be able to declare on our tax returns...I may need to take the standard deduction, which will make our tax payment jump. I plan on running both scenarios (itemize, standard) through turbo-tax and see what the damage will be.

The Professor · 12-23-2008, 02:17 PM

When calculating the cost differential keep in mind (as I'm sure you will) the tax benefits associated with the deductable nature of real property taxes too. To do a complete analysis of the associated benefits and burdens of home ownership vs. renting, you need to include:

Benefits Burdens

Appreciation in value Depreciation in value
Interest Deduction Interest Payment
Property Tax Deduction Property Tax Payment
Fire Insurance Premium
Homeowners Association Dues
Reserves for maintenance (just
like condo associations do)

Good luck,

Daniel

Scott · 12-23-2008, 10:13 PM

J2911-
I'm in same situation, no hardship but decided to walk. You can view my posts and see my situation, basically same as yours.

Stopped paying December 1st, already got phone call today from our 2nd loan holder (Chase). I answered it by mistake but then the call got cut b/c it was on my cell and bad reception.

Prof Shays, here's my question: should I just not answer the phone, or what should I tell them? Obviously I'm trying to delay as long as possible.

The Professor · 12-23-2008, 11:44 PM

Scott:

Based upon an earlier post your situation as I understand it is as follows:

-CA primary residence
-80/20 loan - all purchase money, never touched the equity line
-Owe 505k on first to Aurora company (5.875 rate fixed for 30 yrs)
-Owe 105k on second to Chase (rate is prime rate)
-Purchased house for 630k in 2005 with zero down and stated "no doc" income
-House worth about 400k
-I'm married but my wife is not on any of the mortgage papers, but she is on the title

Chase is in a rather precarious situation. My sense is you should let them know that the loan is:

1. From a practical standpoint unsecured given the current balance on the first is about $505K and the home's current value is about $400K.

2. That the loan proceeds were utilized to purchase your residence and under California Code of Civil Procedure Section 580b you are not personally liable.

3. You are willing to do all you can for them, so that they get something but that is going to require a short sale and they will need to participate in making your short sale efforts a success by negotiating in good faith with the holder of the first loan if you successfully find a buyer.

After hearing this news, Chase will undoubtedly stop collection efforts if they know what they are doing. They are not the real issue in keeping you in the home as long as possible. It is Aurora that will be the one you need to worry about and I do not hear very good things about their having a cooperative attitude. My suggestion is that when the opportunity presents itself that you first proceed down a potential modification path. It would be worth it for you to search the forums for posts from those trying to get Aurora to modify their loan to get a feel of the process. Once you've used up as much delay time attempting to negotiate a modification, then switch gears and start talking up a short sale to them. Make it appear you are actually going to work effectively at finding a purchaser. Find a lazy real estate agent with no concept on how to negotiate a short sale and list the property with them (if you are willing to have a "for sale" sign in the front yard. Point is you may be able to buy some time this way before Aurora files the notice of default. Once that notice has been filed, wait for 80 days and then try to see if you can get them into a negotiations effort for another loan modification. This may delay their action of filing a notice of sale (something they can do after 90 days has elapsed from the filing of the notice of default.

Well that's about all I have tonight.

Take care,

Daniel

J2911 · 12-24-2008, 12:19 PM

Scott, I read your thread and agree our situations are similar. I'm stressing right now about when to stop paying. Actually, if I could get rid of the second, I would be happy to stay even being $50K+ underwater on the 1st. I am wondering if anyone has had any success not paying the 2nd and settling with them, without involving the 1st. My husband doesn't think it would work and really wants to not make our January payments. Even with all the work we've done to the house, he's already accepted the fact that it's just a material possession and can be replaced. The 2nd is not due till the 20th of each month. I work as a Budget Analyst, so for me it's hard to jump into decisions without first fully researching...
So anyone having a 2nd with National City Bank have any luck negotiating a settlement?? Funny thing, I used the Banks Home value calculator, listing my address, balance on the 1st...and I got an error telling me the value is less than my balance and please enter a smaller figure. Their value of my home was $275K - $305K. The lowest I've seen to date.
So, I'm just trying to work things out in my head, considering all my options. Those being:
(1) Stop paying 1st and 2nd
results: Save at least $25K in 6 months
Rent for $2200, saving $165K + in 7years
Tarnish Credit for a while

(2) Stop paying 2nd only
results: Temp - Save $800/m
Possibly negotiate settlement and keep house
risk: no proof of hardship, they may just chargeoff and wait for value of house to exceed balance on 1st, then proceed with foreclosure. Would stay longer on CBRs than foreclosure. Sense it would take years for value of house to go up.

(2a) If 2nd won't negotiate, filing Ch 13 Bkcy to remove debt
risk: no proof of hardship, would we even qualify?

Ok..that's all for now. Hope everyone has a wonderful Christmas.

Scott · 12-26-2008, 07:55 PM

I think once you weigh out all the options, you will probably choose #1, just as I did.

Let us know how it goes and I'll keep posting on my status as well.

Thanks again to Prof Shays for all the help and advice.

-Scott

J2911 · 12-26-2008, 10:35 PM

Scott, I think I selected option 1 today. I spent a couple of hours checking out all the Sacramento area house rentals out there and am amazed at what's available for $2K or less! That being said, about an hour ago a took the big step of canceling our January payment via online banking. I won't even set up the 2nd (due the 19th or so). So I guess, today we joined the many Anatolia Walkers. Another neighbor down the street is loading up the moving van today! Still no for sale sign on the lawn.. I'm a little nervous, yet excited about what is in store for us for 2009. We will be on a 2-week cruise (paid for last summer) starting the 15th...so if/when WFB calls, we will be unavailable. I'm hoping to be able to stay here through June.

I'm wondering if we should apply via rental management companies now that our credit is good and state we're looking for a June/July move-in date. Has anyone done that? And if so, would they re-run our CBRs when it's closer to move-in date? They charge for that right?

Thanks everyone for all your advice. I will definitely keep everyone posted. I certainly have learned a lot reading everyone's experiences...love those updates! So I'll do the same.

J2911 · 12-26-2008, 11:22 PM

So, I just sent a lengthy email to my parents and older brother...along with my spreadsheet analysis, letting them know of our decision to walk away from our house. I should be getting a phone call any minute. I don't know why telling them was harder for me than the decision to walk. My mother will worry of course. I tried to be quite detailed and gave the data I received from the "Walk Away from your Mortgage Calculator" I stated I could wait it out for six years, so given the current value of the house, how much I owe, what a rental would cost etc., it said I should walk UNLESS I thought the value of my house would increase 9.07% PER YEAR, for the next SIX years...um, I don't think so...At that time even with those increases, it would be worth $572,620....still less than the $589,500 we paid.
So I'm confident that we are making the right decision....the phone is ringing

J2911 · 12-28-2008, 11:31 AM

Well, family and friends are now aware of our decision to walk away from our house. Surprisingly, my parents are in agreement - they don't want us losing any more money. It helps having everyone's support. So now comes the waiting period and the inevitable calls from the lenders.
I'm a little unsure of what I'm going to tell them, should I say that we plan to vacate? If so, would they speed up the foreclosure process? Do I avoid their calls? I'm afraid that if I tell them we can't pay, they will ask for proof of hardship and I really don't want to send them anything...but will if it buys more time....yet if I send them financial info and they see we are able to pay, then would that itself speed things up, since they would see that we have no intention/desire to negotiate any type of modification...

oregonheaven · 12-28-2008, 04:14 PM

I'm in your same situation. I don't want a modification because it's useless for my situation. I just want a DIL so my credit score doesn't drop as much. My attorney sent a letter stating all this, and that a DIL was in the bank's interest because prices are only going down, and at least they could get the house now and have a prayer of selling it this summer. Plus, banks generally don't want an empty house over the 6-12 months it takes to actually get it back through foreclosure. But, as I'm discovering, banks can be less than rational. My letter just reminded them that fair debt collection act prohibits them from calling, and all contact should be in writing through my attorney. Like I said, hiring the attorney was the best money I spent. It's convenient, keeps the wolves away from the door, and generally good therapy (ie, when you are paying someone to hear you complain, they have to listen!). Good luck. Peace to you this year.

J2911 · 12-28-2008, 04:31 PM

Oregon,
Are you still making your payments, or have you stopped. I'm not sure how many additional points your credit score goes down doing a DIL vs. foreclosure. And from what I've read on this forum, banks are being less than cooperative. They could care less how their actions affect their customers. If they were smart, they would just lower our principle balances and avoid all the costs that they are paying in the foreclosure process...but that would benefit us, and would like us to suffer and gain nothing.
Let us know how your attorney's efforts come out. I would be curious to see if you ever get a phone call....of course they could always say, they haven't seen the letter, etc. They lose a lot of things.

J2911 · 12-28-2008, 04:53 PM

Also, my chances of getting WFB to do a DIL are slim to none, since I have a second with National City Bank. I doubt the National will just release the lien without a fight and let WFB have the deed.

oregonheaven · 12-28-2008, 05:18 PM

I fully expect Wells will do nothing. But at least I can say I tried, right? My sources say DIL hits you up to 100 points, and foreclosure about 200 points. After a few years, the pain starts to fade from what I've been told. But what I have learned from this whole mess is that corporations have no memory at all. When this is all over, they will pour credit out upon all of us again. No, I am not paying. I am enjoying buying my kid a happy meal again. And I just might be able to buy socks at Wal-Mart or Kohl's now. It's nice when your mortgage is no longer 80% of your take home pay.

cactus77727 · 12-28-2008, 06:01 PM

Hello J2911

I can relate to the issue of convincing family of the serious nature of the situation. They were all telling me "don't be crazy, you HAVE to pay your mortage." I refused to accept money from my mom to pay the mortage. I tried to explain it was money down the drain, but they just didn't know. After the October financial collapse happened, they changed their minds and now realize my plan to walk away is the best in the long run.

As for telling the mortgage companies, I didn't say anything to them when I stopped paying. They catch on real quick when the payments stop. I avoid most of the phone calls, but I like to talk to them every week or two. I'm stringing mine out as long as possible to live rent free. I'm unemployed, so I keep telling them as soon as I find a job, we can work something out. The 2nd wanted to send me hardship forms. I just told them OK, and then never returned them. So if you don't want to send them anything, don't. Just play their own game right back at them. I am very polite when I do talk to them. My strategy is to keep them hoping I find a job soon, in an effort to delay the foreclosure as long as possible. I have been consistent in my tone and determination with them, asking them to please delay, I'll find a job soon. They probably won't, but it can't hurt.

Everytime they call, the person will try to act like they don't know what has happened in previous phone calls. They are debt collectors, so they always start with: "Where's the money Lebowski?!!!" I always stop them, and tell them: read the account notes, you know what's going on, it's all on the computer screen right in front of you. It makes the calls much shorter. Sometimes though, I actually try to keep them on the line, just for fun. Telling them my latest adventures in job hunting. I even asked one of them if they were hiring!

Regarding your credit score, I'm doing the same, paying everything else except the mortgage. I've stopped worrying about the credit score. It'll be bad. I'm already down over 100 points at 3 months late. It's out of my control. Waiting for the credit cards to go to 55%. Oh well, like oregonheaven said: "When this is all over, they will pour credit out upon all of us again." They have to, because money IS debt.

Keep us all updated. Good luck to you!!!

J2911 · 12-30-2008, 10:01 PM

Ok, I have a question about monitoring our FICO scores. The last time I saw our credit bureau reports, it was when we bought this house 3/06. I know you can request one a year free of charge from each of the agencies. I noticed some people on this forum have been monitoring their scores monthly, after each missed payment. So is it worth it to join these services? From what I've found from a quick search, most run about $9-15/month.
Does anyone have any recommendations, or one's to stay away from. Should I just get my free one every 4 months?
Thanks in advance

cactus77727 · 12-31-2008, 01:52 AM

The score I get is free monthly FICO score through an online bank account. It's part of the account features. I can't remember if the free annual report includes the FICO score. For me, once I'm below 650 I don't care anymore. It'll be years before I use credit again anyway. So why give myself more grief. You know?

J2911 · 12-31-2008, 01:29 PM

Cactus, thanks for the info. I'm not sure if my credit union offers that. My plan is to run a report, with my FICO score next week,(right after we miss our first payment). This way I can show any future landlord or rental management co, that prior to this mess, we never missed any payments etc...and the only negative information is specific to the foreclosure.
The bad thing about wanting to walk away, is we are forced into default by our lenders; they won't talk to us if we're current in our payments. So, like Daniel says, we would like to maximize our savings during this time.

I am curious to see what our score is today. Our secondary lender froze our credit line (we didn't use it anyway - purchase HELOC) when our home value started to go down. We paid a lump sum of $25K a few months after buying the house, after selling our previous home. Anyway, I remember someone saying that they noticed that their credit score was affected by the 2nd lender doing this....which is so unfair. I would like to see if ours went down.

cactus77727 · 12-31-2008, 03:00 PM

That's a great point J2911. I haven't seen it mentioned too often.

Get a paper hardcopy of your pristine credit report before you start the late payments.

Quote:

This way I can show any future landlord or rental management co, that prior to this mess, we never missed any payments etc...and the only negative information is specific to the foreclosure.

And one copy for my scrapbook of memories too.

J2911 · 01-01-2009, 04:28 PM

Absolutely!

Copy for scrapbook? Funny, may just do that too!

J2911 · 01-03-2009, 01:33 AM

OK, well we missed our first payment today. I ran my husband's and my equifax and as of today, my FICO score is 794 and my husband's is 805. Not sure why mine went down and his went up. Any, I'm printing the lengthy reports now, so we have hard copies to show how we have never paid late and we really are creditworthy...dang it. Anyway, now comes the sad part of having to watch our scores deteriorate. The FICO simulator says just one late payment can bring down the score as much as 100 points.

12-23-2008, 08:41 AM	#1 (permalink)
J2911 Senior Member Join Date: Dec 2008 Location: Rancho Cordova, CA Posts: 80 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Do we stick it out or walk - no hardship (CA) What a great forum. I need some advice as to whether we should stick it out or cut our losses and start over. First I need to state that we are currently NOT experiencing a hardship. Like many homeowners we are totally upside down in our mortgage. We purchased this home with the hopes of selling it in 5-10 years…at a profit, and purchasing a smaller home for our retirement years (We are in our mid-forties). We live in the Sacramento area and purchased a new home in 2006. We put down 10% and paid a lump sum payment of $25K to the second lender once our previous house sold. So without even discussing our current mortgage, we have lost $84,000. So here is our situation: Purchase price 2006 $589,500 Current Value $345,000 Loss in Value ($244,500) Current Mortgage – both purchase money: Negative Equity: 1^st WFB $402,000 (57,000) 30 Yr fixed 6.125% 2^nd National City $87,100 (87,100) Int only yr 1-10 (4.99%- varies), repay 11-30 Total $489,100 (144,100) I just received an email from a realtor who evaluated our home. Based on recent sells around our home, our same model has sold for $316K, $333K and $336K. She put the current value as Low $314K – High $340K. Wonderful. I feel like crying. My husband and I both have decent paying jobs, though he is a unioned electrician = no work, no pay (vacation, sick, rainy days) and 50% of his work is contracted with CalTrans. Our great governor wants to stop CalTrans projects. Winter brings smaller paychecks and we have to dip into savings to pay. I am facing a possible 10% cut in pay come February (thanks governator). Right now we spend 46% of our take-home pay on our mortgage. I love this house and would actually be OK if we just had the 1^st. So, now for my questions: In our situation, should we cut our losses, rent for 7 years (we would save $2K/month in rent vs the mortgage or $168Kin the 7yrs). And if we do this, do we have to fall behind in payments to qualify for a short sale? I keep reading about hardship requirements, doesn’t being insolvent count for anything? I personally would have a hard time living in the home during a short sale. Is it better to accept foreclosure and stay in the home for the 8 months it would take to foreclose (saving $33.6K). What about Ch13 Bkcy? Would we even qualify since technically, we can pay 1^st & 2^nd ? We have no other debt. FICO scores were 799 and 800 when we bought in 2006. Never late on payments. My acceptable situation would be to settle with the 2^nd to get rid of it, but again, we can’t prove hardship. Sticking it out would mean hoping and praying that we would be able to sell this house for a profit within 7 years, if not we are basically renting for $4200/m where we could be renting for $2200 easy. Also, once retired, we would not be able to afford to live here. ANY advice would be greatly appreciated.

12-23-2008, 09:06 AM	#2 (permalink)
The Professor Senior Member Join Date: Jul 2008 Location: 49er Gold Country Posts: 1,543 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) Welcome neighbor to this site. As I'm sure you noticed I spend a lot of time here attempting to provide helpful advice. Since we both live in what has been characterized as the 5th worst real estate market in the Country by CNN earlier this week, I feel your pain. Fortunately I'm mortgageless, and capable of ignoring the paper loss. Nevertheless it will have an impact on my retirement if I decide at that point to sell and move. Good news with selling is I'll likely buy and pay a lower price down the road for a purchase. As to your situation, my guess is that if you read my postings you will discover that what I recommend is a business like approach. My sense is that we won't see a bottom to this market until 2011 (I've been saying that since 2005 to my students). Additionally bottoms in real estate markets tend to be flat for an extended period of time (probably 4 to 5 years). That tells me that values won't tend to rise until something like 2015-16. Given that time frame is something like 7 years out, and foreclosures show on your credit report for 7 years, I suggest that your answer may rest in the obvious. If you continue to make house payments that exceed the fair rental value of the property by $2K as you've done in your posting, that becomes rather a sizable amount that could be characterized as throwing good money after bad. Your loans appear to be non-recourse under CCP Section 580b (something I'd confirm by spending some time with an attorney skilled in real property law and debt collection practices). I still have some available seats in my Spring foreclosure class and maybe you might want to join it (check your local community college a ways up Highway 80 on your way to Auburn for course information). Yes that is a shameless plug, but what the heck..... Take care, Daniel

12-23-2008, 09:50 AM	#3 (permalink)
J2911 Senior Member Join Date: Dec 2008 Location: Rancho Cordova, CA Posts: 80 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) Daniel, thank you for your quick reply. So if I treat this as a business decision and know that I will ultimately walk away, do I then stop paying both loans at the same time? Is it better to try to do a short sale and if so, am I making payments during this time? In a short sale, won't the bank demand financial information from us and see that we can afford the mortgage? If we're going to destroy our credit, I would like to be able to save as much money as possible. I'm starting to think that once a decision has been made to walk away and ruin your credit, the plan is to stay in the house as long as possible without making payments, and saving all we can. My only fear in doing this is will we be able to get a rental with lousy credit. Also, with tarnished credit, will our credit card accounts be closed? We don't have balances, but it's nice to know they're there for emergencies. Thanks again

12-23-2008, 11:04 AM	#4 (permalink)
civilguy Senior Member Join Date: May 2008 Location: Orange County California Posts: 65 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) irvine housing blog has this cool calculator that gives a good estimate on true housing cost. Plug in your numbers and it gives you a good idea how much you are paying each month to stay in your house vs renting. In my case w/ a purchase price of 779k my monthly expense is $4700, i could probably rent it out for $2800, therefore i'm negative $1900 each month. Right now i'm renting out a nicer place for 3k, in effect saving me almost 2k a month. Yes I treated it like a business decision but that 2k a month could go into my retirement fund instead of down the black hole that was my mortgage payment.

12-23-2008, 11:13 AM	#5 (permalink)
The Professor Senior Member Join Date: Jul 2008 Location: 49er Gold Country Posts: 1,543 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) J2911: I agree this is that sort of go/no-go decision. Your point in maximizing the benefit if you choose to do a "delayed walk away" certainly makes sense. As to credit cards, some credit card vendors do have a universal default provision in their agreement and the loss of the card, or reduction in the maximum balance is a real possibility. But there is in a true sense a real benefit to maintaining no credit card balances, particularly since all of us are currently at their mercy relative to the rate they can charge. I doubt given the number of vacant single family dwellings here in our area that you are going to face much difficulty if your only credit ding is a foreclosure. Given your current situation, taking such action might be viewed as an appropriate course of action to benefit your overall financial situation. That "being a victim of the housing crash of 2007-11" is a reasonable excuse for the negative impact on your credit report IMHO. Daniel

12-23-2008, 01:13 PM	#6 (permalink)
J2911 Senior Member Join Date: Dec 2008 Location: Rancho Cordova, CA Posts: 80 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) Civilguy, thanks for the rent vs own calculator recommendation...no surprise, it said I should rent. Daniel, I agree that with so many foreclosures going on - and I don't think it's going to stop anytime soon (77% of our subdivision is upside down in morgages)- the ding on the CBRs may not be as bad..or may be more likely to be overlooked in the future. One thing I need to think about is the $30K in interest I will no longer be able to declare on our tax returns...I may need to take the standard deduction, which will make our tax payment jump. I plan on running both scenarios (itemize, standard) through turbo-tax and see what the damage will be.

12-23-2008, 02:17 PM	#7 (permalink)
The Professor Senior Member Join Date: Jul 2008 Location: 49er Gold Country Posts: 1,543 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) When calculating the cost differential keep in mind (as I'm sure you will) the tax benefits associated with the deductable nature of real property taxes too. To do a complete analysis of the associated benefits and burdens of home ownership vs. renting, you need to include: Benefits Burdens Appreciation in value Depreciation in value Interest Deduction Interest Payment Property Tax Deduction Property Tax Payment Fire Insurance Premium Homeowners Association Dues Reserves for maintenance (just like condo associations do) Good luck, Daniel

12-23-2008, 10:13 PM	#8 (permalink)
Scott Member Join Date: Nov 2008 Posts: 17 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) J2911- I'm in same situation, no hardship but decided to walk. You can view my posts and see my situation, basically same as yours. Stopped paying December 1st, already got phone call today from our 2nd loan holder (Chase). I answered it by mistake but then the call got cut b/c it was on my cell and bad reception. Prof Shays, here's my question: should I just not answer the phone, or what should I tell them? Obviously I'm trying to delay as long as possible.

12-23-2008, 11:44 PM	#9 (permalink)
The Professor Senior Member Join Date: Jul 2008 Location: 49er Gold Country Posts: 1,543 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) Scott: Based upon an earlier post your situation as I understand it is as follows: -CA primary residence -80/20 loan - all purchase money, never touched the equity line -Owe 505k on first to Aurora company (5.875 rate fixed for 30 yrs) -Owe 105k on second to Chase (rate is prime rate) -Purchased house for 630k in 2005 with zero down and stated "no doc" income -House worth about 400k -I'm married but my wife is not on any of the mortgage papers, but she is on the title Chase is in a rather precarious situation. My sense is you should let them know that the loan is: 1. From a practical standpoint unsecured given the current balance on the first is about $505K and the home's current value is about $400K. 2. That the loan proceeds were utilized to purchase your residence and under California Code of Civil Procedure Section 580b you are not personally liable. 3. You are willing to do all you can for them, so that they get something but that is going to require a short sale and they will need to participate in making your short sale efforts a success by negotiating in good faith with the holder of the first loan if you successfully find a buyer. After hearing this news, Chase will undoubtedly stop collection efforts if they know what they are doing. They are not the real issue in keeping you in the home as long as possible. It is Aurora that will be the one you need to worry about and I do not hear very good things about their having a cooperative attitude. My suggestion is that when the opportunity presents itself that you first proceed down a potential modification path. It would be worth it for you to search the forums for posts from those trying to get Aurora to modify their loan to get a feel of the process. Once you've used up as much delay time attempting to negotiate a modification, then switch gears and start talking up a short sale to them. Make it appear you are actually going to work effectively at finding a purchaser. Find a lazy real estate agent with no concept on how to negotiate a short sale and list the property with them (if you are willing to have a "for sale" sign in the front yard. Point is you may be able to buy some time this way before Aurora files the notice of default. Once that notice has been filed, wait for 80 days and then try to see if you can get them into a negotiations effort for another loan modification. This may delay their action of filing a notice of sale (something they can do after 90 days has elapsed from the filing of the notice of default. Well that's about all I have tonight. Take care, Daniel

12-24-2008, 12:19 PM	#10 (permalink)
J2911 Senior Member Join Date: Dec 2008 Location: Rancho Cordova, CA Posts: 80 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) Scott, I read your thread and agree our situations are similar. I'm stressing right now about when to stop paying. Actually, if I could get rid of the second, I would be happy to stay even being $50K+ underwater on the 1st. I am wondering if anyone has had any success not paying the 2nd and settling with them, without involving the 1st. My husband doesn't think it would work and really wants to not make our January payments. Even with all the work we've done to the house, he's already accepted the fact that it's just a material possession and can be replaced. The 2nd is not due till the 20th of each month. I work as a Budget Analyst, so for me it's hard to jump into decisions without first fully researching... So anyone having a 2nd with National City Bank have any luck negotiating a settlement?? Funny thing, I used the Banks Home value calculator, listing my address, balance on the 1st...and I got an error telling me the value is less than my balance and please enter a smaller figure. Their value of my home was $275K - $305K. The lowest I've seen to date. So, I'm just trying to work things out in my head, considering all my options. Those being: (1) Stop paying 1st and 2nd results: Save at least $25K in 6 months Rent for $2200, saving $165K + in 7years Tarnish Credit for a while (2) Stop paying 2nd only results: Temp - Save $800/m Possibly negotiate settlement and keep house risk: no proof of hardship, they may just chargeoff and wait for value of house to exceed balance on 1st, then proceed with foreclosure. Would stay longer on CBRs than foreclosure. Sense it would take years for value of house to go up. (2a) If 2nd won't negotiate, filing Ch 13 Bkcy to remove debt risk: no proof of hardship, would we even qualify? Ok..that's all for now. Hope everyone has a wonderful Christmas.

12-26-2008, 07:55 PM	#11 (permalink)
Scott Member Join Date: Nov 2008 Posts: 17 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) I think once you weigh out all the options, you will probably choose #1, just as I did. Let us know how it goes and I'll keep posting on my status as well. Thanks again to Prof Shays for all the help and advice. -Scott

12-26-2008, 10:35 PM	#12 (permalink)
J2911 Senior Member Join Date: Dec 2008 Location: Rancho Cordova, CA Posts: 80 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) Scott, I think I selected option 1 today. I spent a couple of hours checking out all the Sacramento area house rentals out there and am amazed at what's available for $2K or less! That being said, about an hour ago a took the big step of canceling our January payment via online banking. I won't even set up the 2nd (due the 19th or so). So I guess, today we joined the many Anatolia Walkers. Another neighbor down the street is loading up the moving van today! Still no for sale sign on the lawn.. I'm a little nervous, yet excited about what is in store for us for 2009. We will be on a 2-week cruise (paid for last summer) starting the 15th...so if/when WFB calls, we will be unavailable. I'm hoping to be able to stay here through June. I'm wondering if we should apply via rental management companies now that our credit is good and state we're looking for a June/July move-in date. Has anyone done that? And if so, would they re-run our CBRs when it's closer to move-in date? They charge for that right? Thanks everyone for all your advice. I will definitely keep everyone posted. I certainly have learned a lot reading everyone's experiences...love those updates! So I'll do the same.

12-26-2008, 11:22 PM	#13 (permalink)
J2911 Senior Member Join Date: Dec 2008 Location: Rancho Cordova, CA Posts: 80 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) So, I just sent a lengthy email to my parents and older brother...along with my spreadsheet analysis, letting them know of our decision to walk away from our house. I should be getting a phone call any minute. I don't know why telling them was harder for me than the decision to walk. My mother will worry of course. I tried to be quite detailed and gave the data I received from the "Walk Away from your Mortgage Calculator" I stated I could wait it out for six years, so given the current value of the house, how much I owe, what a rental would cost etc., it said I should walk UNLESS I thought the value of my house would increase 9.07% PER YEAR, for the next SIX years...um, I don't think so...At that time even with those increases, it would be worth $572,620....still less than the $589,500 we paid. So I'm confident that we are making the right decision....the phone is ringing

12-28-2008, 11:31 AM	#14 (permalink)
J2911 Senior Member Join Date: Dec 2008 Location: Rancho Cordova, CA Posts: 80 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) Well, family and friends are now aware of our decision to walk away from our house. Surprisingly, my parents are in agreement - they don't want us losing any more money. It helps having everyone's support. So now comes the waiting period and the inevitable calls from the lenders. I'm a little unsure of what I'm going to tell them, should I say that we plan to vacate? If so, would they speed up the foreclosure process? Do I avoid their calls? I'm afraid that if I tell them we can't pay, they will ask for proof of hardship and I really don't want to send them anything...but will if it buys more time....yet if I send them financial info and they see we are able to pay, then would that itself speed things up, since they would see that we have no intention/desire to negotiate any type of modification...

12-28-2008, 04:14 PM	#15 (permalink)
oregonheaven Senior Member Join Date: Dec 2008 Posts: 101 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) I'm in your same situation. I don't want a modification because it's useless for my situation. I just want a DIL so my credit score doesn't drop as much. My attorney sent a letter stating all this, and that a DIL was in the bank's interest because prices are only going down, and at least they could get the house now and have a prayer of selling it this summer. Plus, banks generally don't want an empty house over the 6-12 months it takes to actually get it back through foreclosure. But, as I'm discovering, banks can be less than rational. My letter just reminded them that fair debt collection act prohibits them from calling, and all contact should be in writing through my attorney. Like I said, hiring the attorney was the best money I spent. It's convenient, keeps the wolves away from the door, and generally good therapy (ie, when you are paying someone to hear you complain, they have to listen!). Good luck. Peace to you this year.

12-28-2008, 04:31 PM	#16 (permalink)
J2911 Senior Member Join Date: Dec 2008 Location: Rancho Cordova, CA Posts: 80 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) Oregon, Are you still making your payments, or have you stopped. I'm not sure how many additional points your credit score goes down doing a DIL vs. foreclosure. And from what I've read on this forum, banks are being less than cooperative. They could care less how their actions affect their customers. If they were smart, they would just lower our principle balances and avoid all the costs that they are paying in the foreclosure process...but that would benefit us, and would like us to suffer and gain nothing. Let us know how your attorney's efforts come out. I would be curious to see if you ever get a phone call....of course they could always say, they haven't seen the letter, etc. They lose a lot of things.

12-28-2008, 04:53 PM	#17 (permalink)
J2911 Senior Member Join Date: Dec 2008 Location: Rancho Cordova, CA Posts: 80 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) Also, my chances of getting WFB to do a DIL are slim to none, since I have a second with National City Bank. I doubt the National will just release the lien without a fight and let WFB have the deed.

12-28-2008, 05:18 PM	#18 (permalink)
oregonheaven Senior Member Join Date: Dec 2008 Posts: 101 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) I fully expect Wells will do nothing. But at least I can say I tried, right? My sources say DIL hits you up to 100 points, and foreclosure about 200 points. After a few years, the pain starts to fade from what I've been told. But what I have learned from this whole mess is that corporations have no memory at all. When this is all over, they will pour credit out upon all of us again. No, I am not paying. I am enjoying buying my kid a happy meal again. And I just might be able to buy socks at Wal-Mart or Kohl's now. It's nice when your mortgage is no longer 80% of your take home pay.

12-28-2008, 06:01 PM	#19 (permalink)
cactus77727 Senior Member Join Date: Sep 2008 Location: Arizona Posts: 542 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) Hello J2911 I can relate to the issue of convincing family of the serious nature of the situation. They were all telling me "don't be crazy, you HAVE to pay your mortage." I refused to accept money from my mom to pay the mortage. I tried to explain it was money down the drain, but they just didn't know. After the October financial collapse happened, they changed their minds and now realize my plan to walk away is the best in the long run. As for telling the mortgage companies, I didn't say anything to them when I stopped paying. They catch on real quick when the payments stop. I avoid most of the phone calls, but I like to talk to them every week or two. I'm stringing mine out as long as possible to live rent free. I'm unemployed, so I keep telling them as soon as I find a job, we can work something out. The 2nd wanted to send me hardship forms. I just told them OK, and then never returned them. So if you don't want to send them anything, don't. Just play their own game right back at them. I am very polite when I do talk to them. My strategy is to keep them hoping I find a job soon, in an effort to delay the foreclosure as long as possible. I have been consistent in my tone and determination with them, asking them to please delay, I'll find a job soon. They probably won't, but it can't hurt. Everytime they call, the person will try to act like they don't know what has happened in previous phone calls. They are debt collectors, so they always start with: "Where's the money Lebowski?!!!" I always stop them, and tell them: read the account notes, you know what's going on, it's all on the computer screen right in front of you. It makes the calls much shorter. Sometimes though, I actually try to keep them on the line, just for fun. Telling them my latest adventures in job hunting. I even asked one of them if they were hiring! Regarding your credit score, I'm doing the same, paying everything else except the mortgage. I've stopped worrying about the credit score. It'll be bad. I'm already down over 100 points at 3 months late. It's out of my control. Waiting for the credit cards to go to 55%. Oh well, like oregonheaven said: "When this is all over, they will pour credit out upon all of us again." They have to, because money IS debt. Keep us all updated. Good luck to you!!!

12-30-2008, 10:01 PM	#20 (permalink)
J2911 Senior Member Join Date: Dec 2008 Location: Rancho Cordova, CA Posts: 80 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) Ok, I have a question about monitoring our FICO scores. The last time I saw our credit bureau reports, it was when we bought this house 3/06. I know you can request one a year free of charge from each of the agencies. I noticed some people on this forum have been monitoring their scores monthly, after each missed payment. So is it worth it to join these services? From what I've found from a quick search, most run about $9-15/month. Does anyone have any recommendations, or one's to stay away from. Should I just get my free one every 4 months? Thanks in advance

12-31-2008, 01:52 AM	#21 (permalink)
cactus77727 Senior Member Join Date: Sep 2008 Location: Arizona Posts: 542 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) The score I get is free monthly FICO score through an online bank account. It's part of the account features. I can't remember if the free annual report includes the FICO score. For me, once I'm below 650 I don't care anymore. It'll be years before I use credit again anyway. So why give myself more grief. You know?

12-31-2008, 01:29 PM	#22 (permalink)
J2911 Senior Member Join Date: Dec 2008 Location: Rancho Cordova, CA Posts: 80 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) Cactus, thanks for the info. I'm not sure if my credit union offers that. My plan is to run a report, with my FICO score next week,(right after we miss our first payment). This way I can show any future landlord or rental management co, that prior to this mess, we never missed any payments etc...and the only negative information is specific to the foreclosure. The bad thing about wanting to walk away, is we are forced into default by our lenders; they won't talk to us if we're current in our payments. So, like Daniel says, we would like to maximize our savings during this time. I am curious to see what our score is today. Our secondary lender froze our credit line (we didn't use it anyway - purchase HELOC) when our home value started to go down. We paid a lump sum of $25K a few months after buying the house, after selling our previous home. Anyway, I remember someone saying that they noticed that their credit score was affected by the 2nd lender doing this....which is so unfair. I would like to see if ours went down.

01-01-2009, 04:28 PM	#24 (permalink)
J2911 Senior Member Join Date: Dec 2008 Location: Rancho Cordova, CA Posts: 80 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) Absolutely! Copy for scrapbook? Funny, may just do that too!

01-03-2009, 01:33 AM	#25 (permalink)
J2911 Senior Member Join Date: Dec 2008 Location: Rancho Cordova, CA Posts: 80 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Do we stick it out or walk - no hardship (CA) OK, well we missed our first payment today. I ran my husband's and my equifax and as of today, my FICO score is 794 and my husband's is 805. Not sure why mine went down and his went up. Any, I'm printing the lengthy reports now, so we have hard copies to show how we have never paid late and we really are creditworthy...dang it. Anyway, now comes the sad part of having to watch our scores deteriorate. The FICO simulator says just one late payment can bring down the score as much as 100 points.

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