My unsympathetic story

[Solvent]

Hello everyone. I don't expect a lot of sympathy from folks who are not in my tax bracket, but here she goes...

Bought house in 2004 for $875k. $750k mortgage. My income was $225k a year, and fully documented.

Comparable homes selling in 2005 for $1.2 to $1.4M...but we knew we needed a major backyard project to get our home up to neighborhood standards. Did a 10 year ARM at 5.6% and a HELOC for $200k.

So we owe $950k. The house was $1.4M to $1.6M at high point. Last month the house across the street short-sales for $785k after being purchased for $1.4M at the height of the market. They are the most direct comp in our neighborhood of custom homes. So we are likely under water by at least $150k based upon the banks numbers. That short sale took us from $1.05M to $850k IN A DAY according to Chase.

Loan doesn't adjust for 5 years, and now my income is closer to $300k a year.

Both loans with Chase.

We can afford to pay a 30 fixed mortgage on $950k at today's interest rates, but no one will do the loan based upon loan to value. In 5 years I expect interest rates to be double or triple what they are now based upon government spending coming home to roost. The people in my tax bracket have giant tax targets on their backs, so there in now way home values will rebound in my price range as the folks who could afford them in the past...like me...are facing additional taxes approaching 50 percent of the monthly mortgage we have right now. In other words, I am staring down the barrel of $3,000 a month in new taxes, fees, utility increases and the like that all target high earners since there are not enough of us to buy our votes. That knocks me out if interest rates are 10 percent in 5 years. I can't cover both.

Once Chase told me they would not refinance my loan into a fixed rate, I stopped paying principal. I was paying based upon a 20 year schedule. More money than the loan I want would cost me each month. Now I am banking the money and waiting until the loan adjusts in 5 years.

The whole thing is ridiculous. I can afford the mortgage. The bank will make money. We are a great credit risk.

I never thought I would EVER consider something like a "strategic default", but if I am going to be taxed out of my ability to pay my mortgage, I guess I don't feel bad.

I think I have done everything I can to TRY to work with Chase in a responsible way. My last call with them ended with me saying politely, "Well, I guess we are partners in this now."

Summary:

Fixed rate loan for $950k at today's rates...no problem for us financially. But L2V means no one will finance. So the time bomb is ticking. Although I pay for every program available from the government, I am disqualified based upon being too financially successful.

I appreciate your thoughts. Thanks.

[BabyGirl]

Hello everyone. I don't expect a lot of sympathy from folks who are not in my tax bracket, but here she goes...

Bought house in 2004 for $875k. $750k mortgage. My income was $225k a year, and fully documented.

Comparable homes selling in 2005 for $1.2 to $1.4M...but we knew we needed a major backyard project to get our home up to neighborhood standards. Did a 10 year ARM at 5.6% and a HELOC for $200k.

So we owe $950k. The house was $1.4M to $1.6M at high point. Last month the house across the street short-sales for $785k after being purchased for $1.4M at the height of the market. They are the most direct comp in our neighborhood of custom homes. So we are likely under water by at least $150k based upon the banks numbers. That short sale took us from $1.05M to $850k IN A DAY according to Chase.

Loan doesn't adjust for 5 years, and now my income is closer to $300k a year.

Both loans with Chase.

We can afford to pay a 30 fixed mortgage on $950k at today's interest rates, but no one will do the loan based upon loan to value. In 5 years I expect interest rates to be double or triple what they are now based upon government spending coming home to roost. The people in my tax bracket have giant tax targets on their backs, so there in now way home values will rebound in my price range as the folks who could afford them in the past...like me...are facing additional taxes approaching 50 percent of the monthly mortgage we have right now. In other words, I am staring down the barrel of $3,000 a month in new taxes, fees, utility increases and the like that all target high earners since there are not enough of us to buy our votes. That knocks me out if interest rates are 10 percent in 5 years. I can't cover both.

Once Chase told me they would not refinance my loan into a fixed rate, I stopped paying principal. I was paying based upon a 20 year schedule. More money than the loan I want would cost me each month. Now I am banking the money and waiting until the loan adjusts in 5 years.

The whole thing is ridiculous. I can afford the mortgage. The bank will make money. We are a great credit risk.

I never thought I would EVER consider something like a "strategic default", but if I am going to be taxed out of my ability to pay my mortgage, I guess I don't feel bad.

I think I have done everything I can to TRY to work with Chase in a responsible way. My last call with them ended with me saying politely, "Well, I guess we are partners in this now."

Summary:

Fixed rate loan for $950k at today's rates...no problem for us financially. But L2V means no one will finance. So the time bomb is ticking. Although I pay for every program available from the government, I am disqualified based upon being too financially successful.

I appreciate your thoughts. Thanks.

I would like to say that I am sorry for the pain this is causing you and your family. A home is a home no matter how much you make. I have never had that much but what I have had, others have tried to take.

We need a sense of community again. We are not rats trying to eat each other alive! I wish you did not feel that your problems are unimportant to your neighbors and fellow Americans. You deserve help too! You pay your taxes and probably worked harder and smarter than many.

Need is need and a tax paying citizen is a tax paying citizen, that is what I am hearing from you? -B.

[Maurice Bedard]

Hello and welcome to LoanSafe.org.

Your situation is becoming more and more common. You can expect home values to plummet even further in the coming few years. Every month and year goes by now with it looking worse and worse. There's just no jobs for many people out there and even your income bracket has been hit very hard.

I assume you're in the state of California? I figure with the value of your property that it must be here.

If it is then you need to get familiar with the state laws here in regards to foreclosure, recourse loans and deficiency judgments. When you have a purchase money loan in the state a California it is a nonrecourse mortgage but when you refinance it in the manner that you did, that loan now becomes recourse and your lender can pursue you for a deficiency judgment. With this judgment they could possibly go after any of your assets and or go after your income with a wage garnishment.

These are not automatic. They would have to go through the court systems to obtain one. This would cost banks a tremendous amount of money to prove their cases to go after thousands and thousands of borrowers.

Who knows if they will but it seems like some lenders are going after borrowers who walk away. I'm sure if they have knowledge that you have income and know where you work, it makes it that much easier to pursue you.

Either way it is going to be a gamble. You should spend some money and consult with a real estate and tax lawyer. Maybe they can give you ideas on how to do this properly to shelter your income and any other assets you might have.

You have to do the Ben Franklin here and weigh the pros and cons. It is not going to be easy.

Please feel free to join the other discussions here on the forum and keep us updated on your situation. I wish you luck!

[SurfwhenUcan]

Summary:

Fixed rate loan for $950k at today's rates...no problem for us financially. But L2V means no one will finance. So the time bomb is ticking. Although I pay for every program available from the government, I am disqualified based upon being too financially successful.

I appreciate your thoughts. Thanks.

Unfortunately in your case, success has become the albatross.

I assume you've already gone to the county tax assessor for a reassessment of the property?

The problem for refinancing is the lending guidelines on Jumbo loans now call for lots of equity, upwards of 20% in order to get the good rates (along with perfect credit and lots of income). Divide your total liens by 80% and that's what you will need for value in order to get an affordable rate on a jumb. Then ask yourself how long it will take to achieve that value.

Are you self employed or a wage earner?

[BabyGirl]

Unfortunately in your case, success has become the albatross.

I assume you've already gone to the county tax assessor for a reassessment of the property?

The problem for refinancing is the lending guidelines on Jumbo loans now call for lots of equity, upwards of 20% in order to get the good rates (along with perfect credit and lots of income). Divide your total liens by 80% and that's what you will need for value in order to get an affordable rate on a jumb. Then ask yourself how long it will take to achieve that value.

Are you self employed or a wage earner?

I have had your quote pasted on my mirror for a year now- And I am becoming a better dancer! B.

[Spectrum]

Solvent, as other have said your not alone. I also have 1st and second that I CAN afford at the moment with variable rates. However the property is underwater (apprx 180k) with 196K for 1st and 112k for second. I am in California. First is Aurora (FHA unfortunatly) and second is Chase. I have quit paying on both as I cannot refinance for the same reasons, no equity, and know full well rates will rise to at least triple what I am paying now (sorry, inflation has to happen before recovery). There is no way that makes sense. I finally decided to look at what makes sense for my family first, and spending all this money for the next 2 - 4 years chasing a losing position just was not it. Once you get past the emotional stuff simple math makes it clear you are making the right choice. I am only a couple of months in and am already having plenty of phone calls and such. I know the second (Chase) is recourse for me and expect it to get ugly. But what I finally came to realize is worst case I pay over time the balance owed, no interest. That still leaves me soooo far ahead of any other path I can find. Best of luck.

[scarylarry]

I have had your quote pasted on my mirror for a year now- And I am becoming a better dancer! B.

BabyGirl,

Was there a reason for the friend request? I haven't seen anything from you lately. Maybe I missed it?

Larry

[Maurice Bedard]

I have a suggestion that would make you eligible for a modification- put all your liquid assets into paying the loan down to under the maximum. Your loan needs to be less than $729k(?)Just for the first. Then you will be under the limit for HAMP. This will also have the effect of lowering your payments. But you still need a hardship and I don't think an interest hike five years off qualifies. For a hamp, you also must not have any savings toapply to the mortgage available, or be delinquent already. I don't think you want to ruin your credit just to get a mod.

You might consider using whatever savings you do have, even retirement accounts to pay down the loans to an amount you can refi under FHA. I understand there are also some tax benefits available if you sell stocks this year- basically 0% capital gains.

One thing you don't need to worry about is interest rates hitting 10% because if they do, it will be because of inflation, and if inflation is high, the value of your home will increase, and then you could sell. But I think the economy is in the tank for at least 4-5 more years, unless something big happens, and it is likely that if something big happens, it will be bad, and hurt the economy, keeping interest rates low.

You are only 15% underwater, so it will only take a few years of home price increases to catch up. And if you get in real deep financial difficulty, a ch13 could wipeout the second.

And if you are not earning enough on your investments, I will pay you 4.75% on a 15 yr mtg if you loan me $130k.

PS- there are too many broke people for inflation to occur, if nobody is buying, and producers aren't increasing pay, there is not much inflationary pressure. Supply and demand.

[BabyGirl]

BabyGirl,

Was there a reason for the friend request? I haven't seen anything from you lately. Maybe I missed it?

Larry

Hi ScarryLarry,

I have been off line for a while. I needed to re-group. My request was based on a previous conversation. Disregard if you like. -B.

[scarylarry]

Hi ScarryLarry,

I have been off line for a while. I needed to re-group. My request was based on a previous conversation. Disregard if you like. -B.

babygirl,

I have been semi-offline myself. I "befriended" you last night. If you needed something just let me know.

Larry

[Daisy Cutter]

You won't be able to get HAMP, don't even try. You should try for an in house solution, those look at DTI ratios of everything not just mortgage.

I would start with the first mortgage. Stop paying on the second.

If you have a sick family member, someone with high medical bills, example an elderly parent in a nursing home, etc, claim those expenses on your financial worksheet and show a tiny surplus every month of $200 or something. To do this you need to claim 0 deductions on your W2 (if you are an employee), maybe leave off any commissions revenue from the financial worksheet if possible, and then max out on the medical deductions. This will allow an in house mod on the first mortgage to either a 4.75% fixed or some sort of step rate. The key to get this is to get your expenses up.

After you get something on your first you can deal with the second. Don't mod it, settle it. It is underwater. Some people here have gotten great settlements for 5% or so but in your case if you can get the other mod I would not be too greedy and offer 15-20%.

[Daisy Cutter]

yeah- ****** I am with you on interest rates. I have been hearing about the frightening prospect of higher rates for years - either because Bernake was airlifting in too much money, or the fed was stopping buying mortgages, every bogeyman out there was supposed to cause higher rates.

Well, last week 30 year mortgages fell to 4.5% and 15 year 3.95%.

Unless the USA starts creating jobs again, which means shutting off free trade and whatever else is causing this, rates aint goin NOWHERE BUT DOWN

[BabyGirl]

babygirl,

I have been semi-offline myself. I "befriended" you last night. If you needed something just let me know.

Larry

Hi Larry- I just remembered that you are the San Diego Veteran. I was interested in keeping in touch with people from my area that are going through a similar situation.

I am in a 5 year modification with Homeq, then it starts again. My property keeps declining in value. I thought about walking as you suggested earlier; however it will be difficult to walk and provide for my Daughter. My modification to the first should be finalized by September.

I am interested to know the outcome of your awesome Attorney's work. I may need additional help soon. I am still dealing with a HELOC and $250,000 negative equity. -B.