Fed up and ready to get out

[Rdy2WalkGA]

I Bought my place in GA with $0 down back in 2000 for $260,000. At the time I bought I was paying over 8%
but I was making over $100,000 per year so it wasn't really a problem. I took a new job after not working for over
a year in 2005, and that new job paid substantially less -- my mortgage + HoA + property tax amounted to over 2/3 of my take home pay.

I fell behind in my mortgage with Chase Manhattan and was told by them that the way to get 'caught up' was to stop making
payments then workup a loan modification.

After 5 months of torturous back and forth the modification finally happened the week before the place was going to
be auctioned at foreclosure. I was then paying 7 1/2%, still most of my take home pay going to keep the payments ( now with PMI ).

As an added 'bonus' Chase rolled up ~$10,000 on fees + missed payment back into the principal, taking most the equity I had put in since buying the place, so I still owe $250,000 on the property.

About 18 months ago, a close relative who had just gotten divorced offered to move in and takeover (most of ) the payments, so he moved in and I moved out. This worked out more or less OK, but I still have paid about $20,000 in payments since then.

Now he has told me that he intends to move out and find a cheaper place, and I don't blame him. The problem now is that
I have 6 months left on my current lease -- and paying the lease and the mortgage just isn't possible.

At this point I have a $250,000 loan left on a property I paid $260,000 for over 8 years ago. I could maybe get $235,000 for it right now, even then it wouldn't be a very fast sale.

Now I find myself having paid out about $175,000 over the last 8+ years on a property that I have no equity in, and looking
down the barrel of a payment that I can't make on a property I don't live in.

Under GA law, I know Chase can foreclose rather easily, and even go after me for a deficiency judgment,
which as I understand it, is 'rarely done'. I was therefore planning to let Chase know that I only plan to stay with the
property under a fairly aggressive loan modification. E.g. no payments until my lease expires in June, and then a temporary rate reduction to 4% for the next 5 years.


My questions are:

1) Is Chase in a 'bargaining' mood these days ? Do the terms I would propose have any chance of being accepted by Chase?
2) How likely is it that I will get hit up for a deficiency judgment if I just send the keys back to Chase ?
3) Is Chase's "Loss Mitigation" department the right place to call to start the negotiation process ?
Thanks

[ProfessorShays]

The only question I feel comfortable in tackling is "2) How likely is it that I will get hit up for a deficiency judgment if I just send the keys back to Chase ?"

You mention the existence of PMI (Private Mortgage Insurance). The more likely plaintiff in a lawsuit relating to a deficiency judgment will be the PMI issuer, since there insurance is designed to help make your lender whole. I suspect they will seek monetary recovery from you.

Daniel

[Rdy2WalkGA]

OK on further review of my statement I don't see a PMI item -- the P&I payment matches the amount from my amort. table, and there is a $250 escrow payment for taxes

How does it change things?

[ProfessorShays]

It makes it a little less likely that your lender will chase you for a deficiency. The determining factor is your ability after foreclosure, to pay any judgment they could get. If you have a boatload of assets that provide assurances that if they make the effort to file a lawsuit they can collect, it is certainly more likely than if you are on the verge of filing a Chapter 7 bankruptcy.

Daniel

[Rdy2WalkGA]

EDIT: I had my facts wrong earlier: The rate is 8%, no PMI.

P&I is ~1700
Taxes (Escrow) ~250
HOA ~300

[Rdy2WalkGA]

It makes it a little less likely that your lender will chase you for a deficiency. The determining factor is your ability after foreclosure, to pay any judgment they could get. If you have a boatload of assets that provide assurances that if they make the effort to file a lawsuit they can collect, it is certainly more likely than if you are on the verge of filing a Chapter 7 bankruptcy.

Daniel

Gotcha. Thanks.

I'm not swimming in wealth at the moment. I have some cash (~$10k) sitting around, but not enough assets to cover the $40k+ deficiency I would probably be looking at from a foreclosure sale though.

I have no other debt other than the mortgage, so I can certainly get by as long as I am not also paying $2500 / month on the mortgage.

[Rdy2WalkGA]

I Finally spoke to someone at Chase. I was told that
1) My loan is actually 'owned' by Fannie Mae -- Chase just services the loan
2) Since my mortgage payment + rent where I live now + other is > my take home pay by about $900, they said a loan mod is not an option -- even though my apartment lease goes through July
3) They will not even consider a short sale until they have an offer -- so that may make it difficult to find a listing agent
4) They will not entertain a deed in lieu until the property has been listed for 90 days


My next step is going to be to list the property for sale. So it will be interesting to see what happens 60 days from now when the loan is 90 days past due, and the foreclosure process begins.

[Enough Already]

Hi Rdy2Walk,
Thanks for sharing your info. I'm in a recouse state too, FL. Please keep me updated as go.

Thank you!

[925girl]

Looks like the banks (or what used to be) will be the largest landowners who need someone to pay. They will find a way to shove the bill to the little guy. Watch for multi housing (small units with affordable apartments to be the new/old wave of construction. We can talk about the good ol days of new homes, giant yards, swimming pools, etc. and how it used to be vs. what it is!

[markmc2000]

925 girl,

I agree. I think condos and apartments are where it is at. The world has changed. People will have less save more and probably earn less. Have any thoughts on how far incomes will drop during this downturn?

Mark

[cactus77727]

In Arizona during the housing mania, they converted many apartment complexes to condos, and sold them off like hotcakes. It'll be interesting to see how that plays out if there is a flood back to renting apartments.

[925girl]

Re: How far incomes can drop I don't know if anyone can say. I do think we will be hit with inflation big time. Sorry to be doom and gloom.

[cc123]

925girl, I live in 925 area too. I'm going to start missing the first payment in March. Since you're ahead of us in the process, could you post the time line thing for this area? I really don't know what exactly to expect. I'm bracing myself for a very stressed out year.

[925girl]

I can tell you I am in limbo. Have not heard a word one way or the other. Still in the house, have not paid since May of 08. Kind of waiting to hear from them. Depending on what they propose. If I have to leave fine. If they give me a offer we will see. I will post as things progress. I've read that the Obama foreclousure plan will be an equity share. I don't know but maybe it's worth it to pass and come back later since prices will not go up to the 6-8% a year we had earlier. Of course we have to wait and see if foreclousure, BK, etc will be enforced as strictly as it stands now. Banks are desperate for your money so who knows how they structure payback. Ultimately, they made this mess. Tried my best to be solid but fell under the bus.

[Rdy2WalkGA]

update: now that I am > 90 days past due -- Chase is willing to talk Short Sale. However, they won't guarantee that they will pay the broker fee, so that may come out of my pocket. Not to mention there is no guarantee they would accept any offer I get from a buyer.

If I get stuck paying $14 in broker fees on a short sale that is only about $30k less than the loan amount, just letting them foreclose seems like a better deal.

[dogatemy]

In Arizona during the housing mania, they converted many apartment complexes to condos, and sold them off like hotcakes. It'll be interesting to see how that plays out if there is a flood back to renting apartments.

What is really messed up is that most of these conversations were half baked. I bought my house when I was forced out because of a rental-to-condo conversion. The conversion never succeeded leading to lawsuits against the company doing the conversion. The company filed for bankruptcy leaving a mix of rentals and owners.