Cross post from Chase Board

[DHMagicMan]

*** suggested I post this here since I may end up walking from my property...

So here's the short version of my story...

I bought a SoCal condo in '05 for $360K with 20% down. The loan of $280K ish had a payment of $1800/month (about one paycheck) leaving me one paycheck /month for homeowners dues, property taxes, car payment, car insurance, utilities, etc...

Not a long term viable situation but I was there. I took out a Home Equity Line of Credit, also with Chase and kept up with all my bills for about two years...

This January things were getting tight... Chase locked down my Line of Credit as there was no longer any equity and I missed my property tax payments. I kept up with my house payments as well as all my other bills through August but without the HLOC I couldn't keep it up.

In September, Chase paid my late property taxes for '08 and set up an escrow account for this years taxes and next years ($800 something) in addition to my normal payment $1800 and it's been downhill from there.

When Chase started expecting $2600/month I couldn't keep up. I haven't paid my first mortgage since September, but I've kept up with my second. In December, I took out a 401K loan enough to cover the amount of all my back payments (including January) and I've been talking to Chase. I've been telling them I can pay them the $10K I owe them now or the $12,600 I will owe them on January 1, but I'll only do it if we can set up a new payment going forward that I'll be able to maintain, otherwise I'll miss February, March and April and be right back where I am now and be out another $12K on a condo already over $100K underwater.

Either I'm not talking to the right people, not saying the right things, or they're not interested in working with me. They keep telling me to pay the entire amount to be "caught up" and then talk to their refinance department and see what they can do for me. This I won't do.

At this point I'm just waiting to see if anything changes with regard to congress/Obama legislating better cooperation in January or for Chase to become more cooperative. I'm saving as much as I can toward what I would be paying on my mortgage and waiting for the other shoe to fall.

If I lose the condo, so be it, I'm just really frustrated.

Can anyone suggest something I haven't thought of yet?

Thanks.

Since the Home Equity Line of Credit was opened after I owned the property, I understand that I would still be responsible for that $32K after losing the house, but the original mortgage (which was opened by another broker but sold to Chase) they couldn't come after me for a deficit. Is that correct?

[The Professor]

I need a clearer understanding of the facts. Let me see if from what you've provided I can reconstruct them.

You purchased the condo in 2005 for $360K, composed of a first loan in the amount of $288K, with a downpayment of $72K. Thereafter you obtained a HELOC (secured in second position), which has a current balance of $32K. There is a little bit of confusion here because Chase appears to be the holder of your first loan and also is your HELOC lender.

In any event you failed to pay the property taxes and Chase, as the holder of the first loan, paid those taxes and set up an impound account (escrow). As the result of establishing the impound account you payments have reached a level where you can no longer afford to make the payments on the condo. You appear to indicate that the condo is $100K underwater (in terms of its value as measured against the loans.

My analysis assumes you have not refinanced the first loan and it is entitled to purchase money classification. That being the case, you are likely not personally liable for the first loan under California Code of Civil Procedure Section 580b. However you need to hire an attorney skilled in California real property law and debt collection practice to review your purchase and loan documentation to confirm this.

As to the second loan, you are likely personally liable because it appears to be a true HELOC, created after the purchase and funds drawn on the line of credit were not used to purchase the residence. You appear resigned to that outcome and willing to tackle it as becomes necessary.

Given your situation foreclosure may be the best route. I would continue to pay the HOA dues during the foreclosure period, ceasing payments once the foreclosure sale has been completed. I suggest that it would be a mistake to utilize retirement funds to solve your problem. I would continue to occupy the residence until after the foreclosure sale, thus extracting some benefit associated with your ownership. Additionally you may be able to exchange "keys for cash" once the foreclosure is completed.

Take care,

Daniel