Worried in Maryland...3 houses...no income - Loan Modification Forum

maryland7 · 02-06-2009, 02:42 PM

Hi! I have been reading this website frequently to help find answers to our situation. We have 3 homes...our primary in MD, a second home in DE (beach) and a rental (our primary for 7 out of the last 9 years...we couldn't sell it...it is 2 miles from our current house).

My husband's income decreased 80% a year and a half ago and we have been struggling to stay afloat. His had his own company but had to shut down last May...was unemployed until August...and then was laid off again in October. He can't find a job that would offer a high enough salary to support any of the 3 homes. He is currently doing a commission only sales job but we know that it won't support us long run.

We have approximately $50K in cash, an IRA that has decreased from $175K to $95K and cash value life insurance worth $70K. We also have $15K in credit card debt that I took out at 2.9% and put into a CD.

We have never been late on a payment our whole lives but realized that it was more important to save money for food and necessities for our seven children then to keep paying the mortgage payments on 3 homes that have lost approximately $800K in equity over the past 2 years.

Here's the info on the homes:

Primary (bought in 2006):
Purchase Price: $776K and added upgrades of $50K
Loan Amount: $650K First & $80K Second
Monthly Payment: $4000/month
(Chase is our lender for both loans and they are refinances as we put more money down on the house after purchase)
Current Value: $575K
Payments: 90 days down on First (owe add'l $12K) and 30 days on second

Rental Property (bought in 2001):
Purchase Price: $446K and added upgrades of $100K
Loan Amount: $620K First & $130K Second
Monthly Payment: $4,700/month
(Citibank is our lender...We used part of equity in this house to buy our primary and beach property as well as live during the last year)
Current Rent: $2,800/month...the renters have expressed interest in buying the house
Current Value: $580K
Payments: 6 months behind on first (we were given a 3 month forebearance - we owe an add'l $30K) and 30 days down on second

Beach Property (bought in 2005):
Purchase Price: $645K
Loan Amount: $581K
Current Payment: $2,800
(Citibank is the lender...We refinanced this house as we put more money down)
Current Value: ??? - the house next door sold in the upper $400K range...bank owned property...we are the lowest listed house for sale in the neighborhood at $628K...the house has been listed for a year and a half
Payments: 6 months behind (we were given a 3 month forebearance - we owe an add'l $15K)

I believe that there are only 3 viable options but wanted a second opinion.

1) BEST CASE SENARIO - He does have the potential of a job making $100K that he will find out about in the next few weeks. If he gets the job, then I think we can negotiate with Citibank for a modification and move back to our rental home. I think that we can convince Citi to do a deed in lieu of foreclosure at the beach property. It has been on the market for a year and a half. We could eliminate our chance for a deficiency judgement on this property.

I think that the Chase would come after us for the $80K second on our primary. I was hoping to negotiate a settlement to reduce this amount.

We would only have income tax liability on the beach house debt since the mortgage forgiveness act would cover our primary.

2) If he does not get the job, then we will look for somewhere to rent ASAP. Although, I am very concerned about finding someone to rent to us since we have seven kids, 2 dogs and 2 cats.

We will have to let all three homes go...what a waste. We are trying to list our primary but I don't think that we can sell it before it will foreclose. The house is not in great shape due to the kids and a few unfinished home improvement projects. Plus, we turned 1/2 of the garage into a laundry center...great for a large family not so great if you actually want to park a car in the garage!!!

I would imagine that both seconds would come after us...$220K in debt. We could try to negotiate a settlement and then we would be responsible for approximately $100K in tax debt between all three houses. It doesn't look good.

3) This is the same situation as above except that we declare chapter 7 bankruptcy before any of the homes foreclose and before my husband starts making money again. This would eliminate the debt and the tax consequences. Our IRA and our cash value life insurance would be protected.

Please let me know if you have any suggestions as to what makes sense in our situation!

Thanks a lot!

Julie

maryland7 · 06-16-2009, 08:01 PM

Hi! We have 2 underwater properties that we are signing short sale contracts on this week. However, the lender (Citi) says that they will clear the properties to close and then we will be sent to the recovery department to deal with the deficiencies ($400K). They say that they will most likely 1099 the difference...they very rarely do anything else. HMMMMM....not sure that I trust that statment!

We are in a state that allows for deficiency judgements...is it better to do the short sale without any guarantee of them 1099ing the differences or do we let them foreclose. The only other factor is that our primary (we are modifying this property under the Obama plan) is in the same area as one of the properties. I would hate for the property to foreclose because everyone on the neighborhood and our kids schools would hear this news.

What do you guys think???

Thanks!

02-06-2009, 02:42 PM	#1 (permalink)
maryland7 Senior Member Join Date: Feb 2009 Posts: 47 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Worried in Maryland...3 houses...no income Hi! I have been reading this website frequently to help find answers to our situation. We have 3 homes...our primary in MD, a second home in DE (beach) and a rental (our primary for 7 out of the last 9 years...we couldn't sell it...it is 2 miles from our current house). My husband's income decreased 80% a year and a half ago and we have been struggling to stay afloat. His had his own company but had to shut down last May...was unemployed until August...and then was laid off again in October. He can't find a job that would offer a high enough salary to support any of the 3 homes. He is currently doing a commission only sales job but we know that it won't support us long run. We have approximately $50K in cash, an IRA that has decreased from $175K to $95K and cash value life insurance worth $70K. We also have $15K in credit card debt that I took out at 2.9% and put into a CD. We have never been late on a payment our whole lives but realized that it was more important to save money for food and necessities for our seven children then to keep paying the mortgage payments on 3 homes that have lost approximately $800K in equity over the past 2 years. Here's the info on the homes: Primary (bought in 2006): Purchase Price: $776K and added upgrades of $50K Loan Amount: $650K First & $80K Second Monthly Payment: $4000/month (Chase is our lender for both loans and they are refinances as we put more money down on the house after purchase) Current Value: $575K Payments: 90 days down on First (owe add'l $12K) and 30 days on second Rental Property (bought in 2001): Purchase Price: $446K and added upgrades of $100K Loan Amount: $620K First & $130K Second Monthly Payment: $4,700/month (Citibank is our lender...We used part of equity in this house to buy our primary and beach property as well as live during the last year) Current Rent: $2,800/month...the renters have expressed interest in buying the house Current Value: $580K Payments: 6 months behind on first (we were given a 3 month forebearance - we owe an add'l $30K) and 30 days down on second Beach Property (bought in 2005): Purchase Price: $645K Loan Amount: $581K Current Payment: $2,800 (Citibank is the lender...We refinanced this house as we put more money down) Current Value: ??? - the house next door sold in the upper $400K range...bank owned property...we are the lowest listed house for sale in the neighborhood at $628K...the house has been listed for a year and a half Payments: 6 months behind (we were given a 3 month forebearance - we owe an add'l $15K) I believe that there are only 3 viable options but wanted a second opinion. 1) BEST CASE SENARIO - He does have the potential of a job making $100K that he will find out about in the next few weeks. If he gets the job, then I think we can negotiate with Citibank for a modification and move back to our rental home. I think that we can convince Citi to do a deed in lieu of foreclosure at the beach property. It has been on the market for a year and a half. We could eliminate our chance for a deficiency judgement on this property. I think that the Chase would come after us for the $80K second on our primary. I was hoping to negotiate a settlement to reduce this amount. We would only have income tax liability on the beach house debt since the mortgage forgiveness act would cover our primary. 2) If he does not get the job, then we will look for somewhere to rent ASAP. Although, I am very concerned about finding someone to rent to us since we have seven kids, 2 dogs and 2 cats. We will have to let all three homes go...what a waste. We are trying to list our primary but I don't think that we can sell it before it will foreclose. The house is not in great shape due to the kids and a few unfinished home improvement projects. Plus, we turned 1/2 of the garage into a laundry center...great for a large family not so great if you actually want to park a car in the garage!!! I would imagine that both seconds would come after us...$220K in debt. We could try to negotiate a settlement and then we would be responsible for approximately $100K in tax debt between all three houses. It doesn't look good. 3) This is the same situation as above except that we declare chapter 7 bankruptcy before any of the homes foreclose and before my husband starts making money again. This would eliminate the debt and the tax consequences. Our IRA and our cash value life insurance would be protected. Please let me know if you have any suggestions as to what makes sense in our situation! Thanks a lot! Julie

06-16-2009, 08:01 PM	#2 (permalink)
maryland7 Senior Member Join Date: Feb 2009 Posts: 47 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Short Sale or Foreclosure???? Hi! We have 2 underwater properties that we are signing short sale contracts on this week. However, the lender (Citi) says that they will clear the properties to close and then we will be sent to the recovery department to deal with the deficiencies ($400K). They say that they will most likely 1099 the difference...they very rarely do anything else. HMMMMM....not sure that I trust that statment! We are in a state that allows for deficiency judgements...is it better to do the short sale without any guarantee of them 1099ing the differences or do we let them foreclose. The only other factor is that our primary (we are modifying this property under the Obama plan) is in the same area as one of the properties. I would hate for the property to foreclose because everyone on the neighborhood and our kids schools would hear this news. What do you guys think??? Thanks!

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