Having second thoughts?

[spj3210]

Anyone else having second thoughts about walking away or otherwise taking action to get out of your house?

If you've seen my previous posts you know we were in the process of negotiating a settlement on the 20% of our loan and then either do a DIL or walk away from the 80%. Well we never sent in the paperwork, we made this month's payment and are sitting on the paperwork and letter just totally scared to make this kind of move and take the hit to our credit. How will we buy a car, buy another house someday, make our kids feel like they have a permanent home, how much will we have to rely on family for help, or cosigning, and will they oblige.. etc. etc.

So I alternate between being so worried about ruining our credit for (who knows how many?) years, and being worried about the fact that even when the market starts to improve it will take many years (again, how knows how many?) for our house to ever be worth what it used to be - for us ever to be able to move w/o ruining our credit.

Then I start thinking.. well what if the govt steps in to somehow bail us out?? Revamping Hope 4 Homeowners program, etc.. I had some faith that Obama would put forward something that might help, but from what I understand what he discussed today wouldn't help us much.

Not only is our home more than we can afford and we've outgrown it and we're very upside down in it, but we can't/shouldn't wait very long to move due to a neighborhood situation - quite complicated but this is no longer a neighborhood where we could feel safe letting our kids ride bikes, play outside, even right in the front yard. We talk about riding it out but then it always comes back to this. We'll have to get out of here sooner or later. It's just a matter of biting the bullet I guess..

If you've had similar second thoughts, how are you dealing w/it?

[AZChick]

I used to have those thoughts until I've realized all the savings from not paying an expensive mortgage. When you have children as I do too, 3 infact, you do want to give them a sense of security and comfort. I had to realize that security and comfort does not come from a house but comes from our family unit. God forbid one of my kids had cancer or something...we are all in good health and together as a family. At this point I'm making decisions that will benefit me and my children. Having money to actually enjoy my family instead of being house poor makes a huge difference even within my marriage.....it's a personal choice, I'm not concerned about my credit score it will come back....I'll just have to pay cash for awhile...good lesson for my children....good luck no matter what your decision, it's not easy to take this plunge.

[cc123]

spj3210,

Be comforted that you are not alone in this mess. We put down large downpayment for our conforming loan. We are extremely "underwater" with no hope for reasonable refinancing and modification. Because of all the foreclosures around us, our neighborhood is starting to look very trashy. Just earlier this evening, I noticed some grafittis on one of the houses. My kid is not allowed to play outside nor ride her bike in front of our house.

It is indeed very painful to just walk away. It is not just the money we have already lost. We don't know what is the dignified way to cut our loss short. We've exhausted all options and only left with foreclosure. We are stopping mortgage payment for the first time beginning of next month. Yes, our credit will nose dive. Yes, we'll be renting for a while.

Once we have made the decision, we try to just look forward only. We tell our kid that she gets to bike and play outside in her new neighborhood. She'll go to better schools. She'll get to live in different houses ... like an adventure. To worry about it is not going to change anything. Once you make the decision, don't second guess yourself anymore. It is not worth the stress and toll on your health and sanity. We decided and we're sticking with our decision unless something drastic in the law is passed in our favor (Obama's plan is not going to help us or many others at all... we owe 300% on the market value!!! In his plan, the cut off is at 105% only... ridiculous...what a joke!). Ok, back to the point.... hang in there and plan forward. With some planning, you will make it. Family, friends, health and love are more important than money (or the lack of).

[ORNV3]

I thought about it everyday for over 2 years. I finally made my decision at the end of December and have missed 2 payments now. I'm still really worried about what is going to happen (regarding the deficiency) but I know that I am making the right decision for me. I feel good about it because I know it's what I want and need to do.

What's really amazing is that when I told my family and close friends they were so supportive. I had this picture in my mind of them looking at me with horrified faces and I thought that I would die of the shame! Not one person has had one bad thing to say to me. They understand. They still love me. I don't know why I thought they wouldn't.

Anyway... credit score is just a number.

[cc123]

Yes, and only the opinion of people who matters to you matters. You know people who truly love you won't judge you negatively. Do what is right for you and your family.

[Yanqui]

Just consider that if your credit is ruined it will be repaired in time. This is a bump in the road to straighten us out. I have to file BK7. No ands if's or buts and the attorney says I'll most likely lose my home. At this point for me I just want to move on. Credit, like almost everyone is saying is incosequential due to the nature of this crisis that we have not experienced since the depression. people are still renting to people becausethay are trying to say their property also and they don't want it sitting empty.

Good luck in your decision.

[kymburley]

Hi -

I go back and forth every single day - multiple times a day. It's not that I want this house, or ever wanted it. It was a roof over our head while we lived here. But we're obligated to pay this big stupid mortgage and we want to get rid of it the right way. Our house is in a nice neighborhood, in a good school district, and is safe. I think we're the only one in our neighborhood in this position. Makes me feel like a total loser. This makes me want to try to save the house even more. Funny thing, though, is the neighbors have never been very neighborly towards me.

Because of this house my credit has gone down to a 490, and it's not even in foreclosure yet. We didn't have a real high score when we purchased, a 680 or so, but now we can't get anything (not that I care - we just pay with cash), but I do want to buy a house in Florida and retire and never move again. I'm 42 and have moved geographical locations every 3 years, and every year in each location. Make sense? I'm sick and tired of moving and that might have something to do with wanting to save the house. Even if we transfer (military family here) we want to save the house and maybe rent it out and when the market rebounds then sell it the right way.

But right now we can barely afford food or gas. We haven't bought any clothes in 3 years. My daughter needs some orthodontic treatment before she turns 14 (palette expander thing) and she'll be 14 in July. We haven't had any vacations in 15 years. Life just sucks, but we're obligated.

However, I can only take so much and I look at how much more comfortable we'd be if that $3,350 wasn't going to a mtg payment. My husband is bringing home $3,600 month. It's just so frustrating... especially when you call the mtg company for a loan mod and they say you have a surplus.

Long story short - I sympathize and you're not alone in your feeling.

[chefette]

Its a tough decision. The thing is you must weigh the pros and cons for yourself. I can tell you that after being house poor for 3 years now, that once the ARM adjusted I knew what I had to do. This decision has literally saved my marriage, because the stress of being broke for so many years was unbearable. My husband turned into a monster. Now, he is a totally different person. It feels good not think twice about needing something as little as a bloody pair of socks.

[SlammyR]

i paid the mortgage last month, mainly so i could get other credit issues taken care of well BEFORE i was in default, but also because i chickened out at the last minute, i admit. however, the final decision to walk has been made, and my laces are tied.

for ALL of us, our credit will come back one day! time passes so quickly, you'll be creditworthy before you know it. you just have to have patience, and that new house may just have to wait a few years. as a society, we've forgotten the concept of delayed gratification!

there are so many people with crappy credit (and that club is getting bigger every day!), that those left standing still offering credit will have a very small pool of customers to choose from. so, i believe, very soon, they will have no choice but to lower their standards!!!! in the meantime, you don't need the phone that plays music, or 500 channels on your tv. there's always some fat to shave off somewhere! and when you can say you've shaved it all, you can be proud of yourself.

while you're mulling the walking option over, MAKE A PLAN. that's been my whole search these past 3 months.. what do i need to do NOW before that first payment is missed...??? tell others what you think, and listen to their ideas. we can all benefit from sharing, which is another concept we've forgotten as well (well, site members excluded!)

take your "missed" mort payment and multiply by 12. add property taxes, insurance, and maint. expenses to that figure. tell me what you will have in your pocket in one year. i know it's not as cut and dry, but from a business viewpoint, i'd rather sock that away than go in debt further trying to make that payment. it truly is a black hole from which your money will never return. houses are no longer "your biggest asset". as far as i can tell, cash is truly king, so start saving it.

i can only say for myself, i have peace of mind from research (which is why we are all on here!), from making a plan and from starting a savings. i have peace of mind from talking to a lawyer (albeit briefly), a cpa and some real estate friends. i have peace of mind involving my family in the decision and it not being some deep dark secret.

i have alsoresolved myself to the fact there may be some accountability down the road from my decision, but i am prepared to deal with it at that time, and not waste my present time dwelling on it!!!

being prepared has made me feel confident in my final decision, and i'm not looking back..... i also put personal feelings aside and looked at it as a business decision, and when you TRULY do that, it's a no-brainer. and i loved cc123's advice above.

[Enough Already]

I have second thoughts about this almost everyday. I love our home and our neighborhood.
My family has been very supportive, but I really haven't told anyone else yet. I just don't want to be judged, or misunderstood.
The funny thing is I’m sure many people we know are in this same boat, but they aren't discussing it openly. It's embarrassing. It's definitely not the situation anyone dreamed about ending up in.
In the past few years our income has dropped by about 50%. When we bought the house (at the top of the market) we could easily afford it, but 3 months later we took a big hit on our income. Since then we've exhausted ourselves working from 8:00 AM - to 11:00 PM, 7 days a week to keep up.

Now here we are, 4 years and 2 babies later we just can't do it anymore. Being house poor takes such a toll on your life. It's just not worth it. We pay $3000 a month to the mortgage. That money can be used for many other things, including building our savings. Imagine that, actually being able to save some money, or even spend some money! Our 3 year old needs some new socks (like cheffette said) and we've been holding off. How silly is that? Not anymore.

It does make me feel like we failed, and then I start to think maybe we can keep on trying. Luckily when I start to have second thoughts my husband will remind me: We can't afford it. And, that's really all there is to it. That's the bottom line. It really comes down to this being the best decision we can make for our family. Our kids don’t need their parents to be stressed out all the time. We need to slow down and enjoy life. Getting out of here will allow us to do that again.

[KT in CA]

We have been in our house for 8 years. Great neighborhood. But our payment is $3400 a month and it adjusts in August. It's just so not worth it. It got to the point where we emptied 2 retirement accounts to the tune of $50k, racked up about $25k in cc debt, and I would stand in the aisle at Walmart wondering if I should buy the brand toilet paper or the off brand. Let me tell you, that off brand TP is TERRIBLE. And that sounds petty, but we make good money (luckily we both still have our jobs) and I shouldn't have to worry about the price of TOILET PAPER.

December was our last payment. Not too worried about the credit issue. First of all, it will train us to not use CC's and live within our means. Besides, there are millions of people in this country who now have spotless credit other than a foreclosure on their report. It's a whole new niche market of people to lend money to. Believe me, eventually companies will be scammering for our business. Remember, your credit will recover. This isn't a finite situation.

I don't know what state you are in. I'm in CA and in my city the property managers are working with people like us to get them into rentals. I look at ads on craigslist and a lot of them say foreclosure is okay. Don't worry about finding a rental.

Our life is so much better now. We are saving some money and paying off a few small bills. We are leaving the larger ones to use towards our insolvency claim for our 2009 taxes. We, unlike a lot of people here, don't have non-recourse loans, and if we can't claim insolvency we will have to pay taxes on our 1099-c amount. We also have a second for $55k that may come after us. We will deal with that when the time comes. But neither of those things have swayed us in making our decision to walk. The tax issue can be dealt with and paid for over time. The second should be able to be negotiated. But the long term benefits to walking definitely outweight these things.

And after all of this, we aren't sure if we ever want to own a home again.

Just trust your gut.

[kymburley]

It's a little different for me. We are military, husband with security clearance and deployed. I'm basically having to make all the decisions without him. I know him very well and know that foreclosure and the impending bankruptcy is NOT an option. It very well could be the end of our marriage. On top of that Washington is a community property state so I can't go bankrupt on my own. Well, I could, but what's the point?

[gravymark]

I'll let you know how I moved on the decision to foreclose or not. If you think of it from a business decision standpoint you'll see what I did.

What does a bank, corporation or any buyer for a retail market do when they get into an asset that does not move? They cut their losses. I myself am way upside down on my house. I am in the military and I know I will be moving in a few years. So, I could still struggle to make the payments on a house for the next 3-4 years paying down a mortgage on a house that will never see a positive return on it in at least 10-15 years, or I could ruin my credit.

Credit to me is an american thing anyways. Do you NEED credit? Sure you need it to some degree. I won't get into the credit thing because money management comes into play here and cash is king. Many many top investors have terrible credit, and they live ok.

Or....I could walk now, and start to repair it now, or walk later anyways, and have to rebuild it anyways. The new mortgage plan that just passed doesn't do squat for me, or most people because it still is simply up to the banks to agree to take a loss. Principal reduction is the key here, not tacking on another 10 years to my crappy 30 year mortgage payment, or taking my 6% loan to a 5.16% loan saving me 80 bucks a month. Principal reduction to 90% LTV and i'd talk. Current value of my house is estimated at $68k now from a peak of $271k 3 years ago. I owe $230k still. Do the math and see if the market bottomed out, and averaged a return of 5% a year, see if i'd break even in 3-4 years when the military makes me leave. For the record I don't want to be a landlord anyways.

Business decision, cut my losses, rebuild now. When an actual business does it, they write down assets and take the hit on their spread sheets. My spread sheet is my credit report. It'll go back up. You can buy a house with a foreclosure in 4 years anyways.

That was my thinking on how I came up with my decision.

[cdmosaic]

This is a tough decision and I question it all the time, even though I know the right thing to do for my family. I stopped paying everything in Sept but my car payment and a personal loan and while I have not received an NOD yet, I have this irrational fear that the sheriff will show up one day and say “out – didn’t you get the notice?”. My house is now worth less than what the people I purchased it from paid 7 years ago. It will not regain that value any time soon and after the murder across the street last spring the neighborhood has lost all its appeal (and, no it is not a bad area, just a bad episode which we unfortunately witnessed).

I totally agree that saving as much cash as possible now is vital. It took a year for the powers that be to start saying the word “recession” and now they talk non-stop about the “deepening recession”. Will it take another year before we start hearing the word “depression”? Things are bad out there and getting worse. I have a good job, for which I am thankful, but that could change at any time so save, save, save. As of today I have $23k saved up (not all in my bank account). That is enough to move and rent a decent house; even pay a few months of rent in advance if needed to convince a perspective landlord that my trashed credit is not a factor.

I’m hoping to stretch out this process through summer and then I will make offers to settle my credit card and medical debt, as I will have lump sums to use to pay off those debts. That is my way to avoid BK as I am an over median debtor and to file I will have all my finances reviewed with a fine toothcomb and who wants to go through that!

Just a note – I choose to walk not simply because my house value has tanked and my loans are interest only or have high interest rates, although those are good reasons by themselves. I have $30k of medical debt for my son last year and about $18k this year, not covered by insurance. I had to find a way to lower my expenses so I could afford his care and so I started to research my options. Obviously the house payment is the big nut so how could I reduce that? I was happy to rent if needed, but I can’t sell my house, can’t rent it out and move somewhere cheaper to save money, letting it go seemed like the only option. Really not much of a choice.

There are hundreds of stories about why or how we find ourselves in this situation, and it is a very difficult and unsettling choice, but if you are truly considering it then probably it is the best decision for you. Don’t run up credit cards and exhaust savings and retirement funds – I personally don’t think being house poor is worth future financial troubles. We will get through this, your credit will recover and as everyone has mentioned, hide your cash somewhere safe, perhaps invest in precious metals to have a hedge against the inflation that will come as a result of all this government spending and stop being in debt. Sounds like a relief truly.

[Ambling]

When a person considers whether or not to walk consider this:

* what good is a credit score if you have no disposable income to spend?
* who would possibly want to buy a home in the next 4 years?
* can you stay in your home for 15 years or more while the price recovers?
* are rents in your neighborhood comparable to your mortgage, or cheaper?

Unfortunately Obama's new plan does not address underwater homeowners so the only way to rid yourself of your own 'toxic asset' is Jingle Mail.

[chefette]

Ambling,

All valid points. I will say this about cash. After our bk we were a cash only family. Debit card is the only card we use. (we keep one credit card each in case of emergency) It can be done. If everyone would switch gears and use cash it would give those banks a wake up call.

[kymburley]

I am following the Dave Ramsey plan and he teaches to save cash for emergencies. When you have enough cash saved you'll notice you have fewer emergencies. If you need to fly out of town unexpectedly I have found that if I can produce the return plane ticket and agree to a large deposit I can still rent a car on my debit card. No credit cards for me, EVER.

[Enough Already]

This is a good thread. I started to get cold feet again today, after missing two calls from Chase. Which got me thinking of all ramifications, and possible problems associated with walking away.

Reading all the posts here helps me to remember all the different reasons why we're doing this. This is a scary road to go down. There are so many unknowns, and it goes so against the grain for me, but it's the right thing for us.

We'll be moving into our old house, the one we lived in before we bought our current underwater home. We kept the old house as an investment. Little did we know we'd be moving back in! Our old house is half the square footage, no pool, and neighborhood isn't as nice, but it's affordable, and it's not underwater.

No matter how many second thoughts I have it always comes back to this being the right decision for us. It's time to cut our losses, and move on.

[trajay]

Originally Posted by kymburley

I am following the Dave Ramsey plan and he teaches to save cash for emergencies. When you have enough cash saved you'll notice you have fewer emergencies. If you need to fly out of town unexpectedly I have found that if I can produce the return plane ticket and agree to a large deposit I can still rent a car on my debit card. No credit cards for me, EVER.

Yep, so do we. Cash only!!

[sharona]

I am in the beginning of this process so I get cold feet everyday. I was raised to pay my bills on time and be responsible. It's funny, my Aunt emailed me the other day saying "do everything you can to save your home". She means well but grew up in a different era. I have tried like everyone else and have come to realization that I need to think about my financial future.
I currently have a 788 score and dread losing it but need to think about the future and my emotional and well being.

[Irish Gal]

Hey Sharona,

If you're new to this, I would suggest you read Prof Shays' posts and ask him any questions re your specific situation. He teaches a (CA) foreclosure class and was in the business before that for years. He has a unique way with words that really gets folks to think and rethink about this process in a very helpful manner. Basically, to be realistic, logical and not emotional in your decisionmaking process about your home. Ultimately, it's a painful process we all seem to go through. You will eventually know what is best for you. Read. Read. Read. Do your homework. Ask questions. Talk to a real estate lawyer to confirm any liabilties or long-term, legal ramifications. You know the drill ...

Irish Gal

[sharona]

Hey Irish Gal,

I have been reading this site for three days and I have read many if not all of Professor Shays posts. I have a lot of respect for him and have learned a lot because of his posts.
My situation seems to be similar to a few posts I have read ; Ca homeowner 2005, 80/20 all towards purchase. No refi, underwater 100,000. As far as I can tell, foreclosure seems to be the best solution for me.
My brother agrees and I will probably move back east and live with him until I finish my degree. Thank God for family but I will miss San Diego! I have lived here for 20 years and love it! I am going to talk with a real estate attorney to be sure though.

Thanks again Irish Gal, I appreciate your advice!

Sharona

[The Professor]

Thanks for the kind comments IrishGal and Sherona. Sherona, having read my comments, I suspect you have gained some comfort relative to the decisions you can make. Fortunately with California's anti-deficiency laws, at least you have a choice of paths you can take.

I miss San Diego (born and raised there as was my father). I remember when Interstate 8 (then Highway 80) was a two lane road going through Mission Valley with cattle grazing where there are now hotels, commercial buildings, and shopping centers. Plans are to acquire a place West of I-5 in 2011 (my estimate of when we reach the market bottom), and eventually move down there when I retire (anticipated retirement in 2016).

Sharona, keep working towards that degree and I hope that an education serves you as well as it has served me.

Take care,

Daniel

[sharona]

Thanks for responding Professor Shay! I will miss San Diego! It has truly become my home. I live in Rancho Bernardo where all the fires were a year and a half ago. I moved here in 1989 from Philadelphia. I will be moving to Long Island and in with my brother and his wife. Quite humbling after all these years. I plan to move back to San Diego after I get my BSN.

I am so sorry to hear about your wife. I wish I could offer you some help. I am in the medical field and care for patients post-operatively. From everything I have read on this site, and how you have helped so many people,you are a wonderful person and she is fortunate to have you in her corner.

Take care of yourself and thanks again for all your help,

Sharona

[tryingtostay]

Originally Posted by cdmosaic

This is a tough decision and I question it all the time, even though I know the right thing to do for my family. I stopped paying everything in Sept but my car payment and a personal loan and while I have not received an NOD yet, I have this irrational fear that the sheriff will show up one day and say “out – didn’t you get the notice?”.

This is EXACTLY how I feel. March is only month 4 of nonpayment. I know no NOD is filed yet. I have doubts all the time. I know we are very, very underwater and the house is next door just sold for half of what we owe. (that house is bigger, too). But I keep thinking maybe I should be calling NACA and ask for a principal reduction.

Everytime I have people drive past my house I'm afraid it is going to be someone from the mortgage company or a Sheriff.

Walking away isn't an easy thing to do. We found a rental house and plan on moving during spring break in a few weeks. It's the perfect house for us, great yard. But it's not our house, and once we move I know our credit will be destroyed for years.... so many doubts...