Here's the situation.
Bought a home in CA for 272,000 and financed 217,000 brand new in 2005 fixed for five option ARM, lived in as primary residence. Put 20% down on home so no PMI or Second. Goodbye $60,000. Home appreciates to $380,000 in the blink of an eye.
Refinanced to change term of loan only to 10 years Option Arm in 2008 (when market was crashing, no cash pulled out only finance fees, loan goes up to 227,000 but I think I have 10 years so who cares the market isn't that bad yet, house still appraises for $299,000) continued to live in residence as primary. Crash continues, home drops and Countrywide flops and Becomes BOFA. BOFA does nothing to help the situation, refuses all efforts at any type of modification. I see myself living in a home for 10 years and then losing it, so.....
Purchased a new home (#2) in 2010 (from BOFA, same lender that would do nothing on home #1) in CA and rented out first home. Continued to pay mortgages on both. Still hopeful that the now rental home will appreciate and that I can sell it at some point at even.
BUT Renters flaked last month in July 2011, trashed most of the house, homes drop again so much that I can't really get enough to cover the mortgage, and new renter is shaky at best but all I can get, and home is $100,000 upside down and still dropping.
So it looks like foreclosure is on the horizon soon for home #1 that I purchased in 2005.
I do not think that there is any recourse on the loan, and the amount is fairly low, so my guess is that BOFA will foreclose in a non-judicial manner, meaning that they use their one action and that's that.
I have not missed any payments yet, but am planning to miss this month and pocket the rental income for as long as I can. I will at least get something back of my losses. The home will not appreciate to the even level for a decade.
My plan is
1- to stop paying and pocket the rent and put it in an account in case I need it later or decide to pay the bank one lump sum in a few months. My renter is a crook anyway and probably will not pay that long. She has multiple judgments of default but gave me a roll of 20's for rent so I said "shucks, ok". All I can get. I will evict her if she makes me, but so long as she shows rolls of 20's I know nothing.
2- to talk nicely with BOFA when they call but not tell them much of anything, no financial info for sure. Maybe request a modification and then lose the paperwork since I'll never get it because I have two dimes to rub together.
3- to try and not drink too much (these are in no particular order)
4- to not sign anything unless an attorney looks at it
5- to forget the idea of a short sale
6- offer a deed in lieu towards the end of the process
7- sit in my current home with a 30 year fixed and make the payments while my credit gets better
8- hopefully complete the foreclosure prior to the end of 2012 and then claim the home as a primary residence on my taxes to not pay anything if BOFA sends me a 1099.
9- I'm not really considering BK because I don't owe on anything else.
10- My wife is on the current home, but not the rental one. So I will hope that no divorce plans are hatched.
Legally, I think my only issue might be if the bank decides to pursue a Judicial foreclosure which is unlikely. The amount is small and I'm not exactly loaded. Tax issues could come up later with the 1099 but that's what accountants are for.
In reality, I won't be pocketing very much. But I will save it in case I have to pay some taxes or if the foreclosure goes past the end of 2012. This is BOFA we're talking about and the loan is a Countrywide one they acquired. So who knows if they can even find the note.
At this point, keeping the house makes no sense. Trying to maintain it after renters move in and put holes in walls, let grass burn up, break things, flake out etc. The decision is to not continue to pour money into a failed investment.
Hopefully this isn't a forum of "the holy ones" who will rip me for playing by the rules of capitalism.
If you're going to post about how I have an obligation to pay the banks and all that other boy scout crap then save it. I'll ignore and read something from someone that has some brains in their head and a sense of reality.