My CA story...

[tryingtostay]

Hello, I have been lurking for a few months and I've finally decided to take the brave step and start working on our housing situation.

We live in the Inland Empire in California, in a city where housing prices have dropped another 30% in the last year.

Our story: Dh is a teacher, we moved from CO to here because here he could go to work and I could be a SAHM. In CO, teachers don't get paid enough for us to have that option. We bought our first house in 2003, a very low fixed rate. We sold in 2006 when my son was entering kindergarten because our old neighborhood and school were getting worse every day. We moved to a great school district and a nicer neighborhood.

We bought the house in Aug 2006 for $420K, the seller gave us $5K for closing costs. We put down 20% down from our old house sale ($80K) so we wouldn't have to pay PMI insurance.

We have a pick a payment loan. Our plan from the day we signed the papers was to refinance the day the prepayment penalty left on month 12. But, the market had already dropped at that point. We were denied refinancing everywhere we went.

Our loan amount was for $330K. DH has had 3 raises since we bought the house. The interest rate is based on the treasury loan. The rate keeps going down, our income has gone up. But it doesn't matter. Since we can only afford the teaser rate ($1550), our loan keeps going up. It is currently at $365K.

Our loan is with AMHS. We have not started at all trying to negotiate something with them. I have read enough stories on here that say this co doesn't want to negotiate until you are late. We don't want to be late, we can still afford the teaser rate. But the teaser rate is just like us paying rent.

Honestly, we'd just like to sell this house in a short sale, if we could negotiate that with AMHS. Our next door neighbor abandoned his home. It was the next model up from mine and it is selling for $209K. My model down the street is $150K. That means we are upside down $215K !!! Our ARM is suppose to balloon in 2010 to 12%. We want to deal with this before that point. And, I read somewhere that until 2009, the IRS forgives your loan debt and doesn't consider it taxable income. That means we need to leave next year.

We would refinance, if the loan company would refinance for the loan value. I think we qualify for the goverment refi program in Oct, but I think we'd rather take our chances in buying in 2 years if we could short sale this place. The program doesn't sound that great for people horribly horribly upside down.

well, that's our story. It's kept me awake countless nights and kept me sick with anxiety for months. I hate living in this place. We feel we can't do any major repairs to anything because it would be like throwing money down a drain. It makes us sick to our stomach that we lost that $80K that we could have saved for our child's college funds....

My SN says trying to stay...but honestly, I'd do whatever I need to do to protect my family. Hopefully protect my good credit, too, but family is definately first.

[schwefls]

Hi tryingtostay welcome to our forum:

I wanted to stop in and say hello. Shortly someone will be reaching out to you with some sound advice/suggestions. In the interim please hang in there.

[The Professor]

Well, the good news, and if you've read some of the postings on the "walk away" forum you may already know this is that your situation benefits from California Code of Civil Procedure Section 580b which effectively means that you are not personally liable for the loan. That gives you the ability to stop making payments, proceed through the foreclosure process, and all the lender can do is foreclose on the property and you will not be responsible after the foreclosure for any deficiency.

Now that doesn't mean your credit score won't take a hit. It certainly will. But if you were in other states (Florida and Texas for example), the lender could chase you after their foreclosure for the remainder of their loss. So the decision about what to do is much easier for you. Being $215K underwater in the Inland Empire isn't something I'd be interested in facing. Frankly were I in your situation I'd be making a business decision. That decision would be based upon whether it is worth having a few years of bad credit in exchange for not making house payments to keep a home that has that much negative equity? Maybe it does if the $1550/mo payment is at about the fair rental value of the property.

Eventually your lender will wake up to the fact that the principal is going up and exceeds the value of the home. That realization in hand, I suspect they will have the right to raise your monthly payments.

Daniel

[tryingtostay]

I meant to say we'd refi if they would refi for close to the current value of the home. I think the only way they'd do that is we took the gov refi plan, and I don't think it looks that good for us.

The amazing part of my story is that my parents offered to buy a rental home in the neighborhood and we can rent from them for cheaper than our current mortgage. BUT, they'd use my child's inheritance to buy the home. It would be a rent-to-own property for us, but we'd have a place we could call our own again. We could treat it like our own house and not a rental. My parents would even let us choose the house to buy (with their approval, of course).

So now not only did we lose the $80K we could put one or two of our children through college with, if we took my parents up on their offer we'd lose their inheritance, too.

If we could get a short sale on this place we could just rent for a few years, not use the inheritance money, and buy our own place later. The market would be higher though and with the new strict guidelines we may not be able to buy because a teacher's salary isn't much. I don't know if it would qualify for a fixed rate loan ever again in CA.

I am getting more and more open to walking away but I feel horrible doing it. I've told a couple friends and everyone I tell criticizes me for defaulting on my contract.

Is there a best way to try to convince the lender we'd like to short sale it? How do I start that process?

I'd feel better about myself at night if we did something not to take the huge hit to the credit because of the foreclosure.

[pattona]

Tryingtostay,

I think everybody and his uncle knows about IE problems. It's going to take a long time before the market recovers. I think if I were in your shoes I would pursue the short sale option although ultimately you might just have to walk away. Get yourself a good real estate agent who has experience closing short sales.

In the meantime, I would take your folks up on their offer. The sooner you physically get out of the house, the better off mentally you will be. In addition, there's no telling what could happen between now and when your kids are ready to go to college. Every financial expert I've run into always advises you to take care of yourself first, and I think housing is one of the big threes.

You will have the option of saving for your kids' college over time. They can also contribute via working or scholarships. Lots of us went to State Universities with no help from Mom or Dad. They will be fine.

Good luck to you.

[tryingtostay]

brief refreshment: I'm in CA, with a single loan in a pick-a-payment ARM where I can only afford the teaser rate; we can't even afford the interest rate each month.

We are going to leave. What's the best way to start? Do we just stop making payments? We have everything escrowed into our house payment. I'd prefer to keep the insurance up on the place. How can we separate it from the mortgage payment?

We want to put the house up for short sale after we leave. Is it better for us (for our credit) to keep paying the mortgage payment until the house sells, or is it better just to leave it alone? It was pointed out that it takes about 10 months for a short sale to go through. We plan on renting a place that is cheaper than our house payment. So if it's $300 cheaper/month, that's $3000 we saved during that time if we don't pay the mortgage.

I guess I just want to know what difference it would make on our credit scores if stop paying now and the house sells in 300 days or if we keep paying and then accept a short sale which shows up that they took a settlement for our loan balance...

I'm so nervous about doing this. I've never missed a house payment before in my life and can't believe I am choosing to miss one. I hate throwing money down a sinking hole though...

we are with AHMS so we can expect on the 2nd of the month harrassing phone calls, right? And they will continue until the phone number is disconnected?

[The Professor]

I know what you face is not a game, but treating it as one might help you do a better job at tolerating your circumstances. Know that your mental well being is first and foremost. You can help that well being by understanding that your job is do get out of this situation that which will benefit you most.

One way to do that is to practice "acceptance." Accept that the market is headed South. There is nothing you can do to change that. It results directly from decisions those thought to be much smarter made. Accept also that based upon your current ability to pay, your loan balance is headed North (because the payment doesn't cover all the interest). While you don't specifically say it, my guess is the current loan balance is higher than the current fair market value of the home. In other words, you don't own the home. The bank does.

Be elated at the fact that the loan you have appears to be non-recourse because its proceeds were used to buy a residence you occupied and that residence is located here in California. What that means is that your home, AND NOT YOU, is responsible for repayment of the loan. Be thankful every day for California Code of Civil Procedure Section 580b.

Set aside emotion and do what benefits your future the most good. Others will hopefully chime in and let you know whether there are really any creditworthiness differences down the road relative to a foreclosure or short sale. Do know that short sales are hard to put together and most borrowers who intend to follow that path eventually end up facing foreclosure. I've repeatedly suggested on this forum that you continue to occupy the premises until the foreclosure or a short sale happen. I suggest that because it is a way to benefit from your situation. Why should you go out and rent a place when you can live in the home for an extended period of time without paying rent?

In terms of paying, if you are committed to the foreclosure/short sale idea, with the exception of homeowners association dues and maintenance of the equivalent of a renter's insurance content and liability policy. Don't worry about the house payment, taxes, and insurance. Once the insurance lapses, your lender will put fire insurance in place (but it won't cover your contents). The property taxes become their problem. Stay in the home because in point of fact you are safeguarding it for the lender until they own it and are in a position to gain possession. Oh and who knows. In exchange for your agreement to move out and leave the home in good shape, they may offer you some money after the foreclosure is completed so they don't have to evict you (cash for keys).

So take care and relax.

Daniel

[tryingtostay]

yes, I'm very, very upside down, more so every day.

so.. I should continue to pay HOA dues only if I am committed to the short sale idea, right? If I leave, and my water is turned off, the grass will die, and the HOA will start assessing penalty fees. Can the HOA come after me for those or are they tacked onto the house?

Shall I just call the homeowners insurance and say I'd like to change to a renter's policy? Do I call the mortgage company and see if they will take the insurance out of escrow?

Thanks for your invaluable advice!

[The Professor]

You continue to pay the homeowners association dues until the foreclosure is complete because you are personally liable for them and the association will chase you after the foreclosure for the pre-foreclosure sale dues.

Your fire insurance is probably paid annually (assuming it is paid from impounds). No need to do anything except that you may want to see if your agent will reduce the coverage to the lender's minimum requirement (usually fire and extended coverage) and apply the refund as a credit to your obtaining a renters policy. That may not work, in which case I'd not renew the existing policy at its anniversary date, forcing the lender to purchase its own coverage and make sure you have a renter's policy that goes into effect on that termination of coverage date.

Hey don't leave. Enjoy your "rent free" time in the place. Given all you'll be paying is HOA dues, it will be cheap.

Daniel

[OrlandoVal]

Daniel is right. Don't leave. I'm a RE Broker in Florida and I have been doing short sales forever. It could be a year before they can/will foreclose. List your property with someone who really knows HOW to do a short sale and then ride the wave. Save your money while you are there so that you have something to start over with. You are very likely to have 6 months payments saved and get out of the foreclosure due to the house selling. This is not a fantasy, it happens hundreds if not thousands a time a day.

Get your own renters insurance if you are concerned, but wait until your Homeowner's gets cancelled. The only reason that it gets cancelled is because the bank decides not to pay it from escrow, instead they substitute your policy for their own which is twice as expensive and doesn't cover you. They may never do that, depending on the bank or your policy renewal time. In any case, they will end up paying for their policy with the short sale proceeds.

By the way, a short sale is ALWAYS better than a foreclosure if you get the right agent. It is imperative that find someone that knows what they are doing because the process is complicated, but the right person will not only know how to do it, they will also have investor contacts to offer on it etc.

DON'T GIVE UP, Choose the right people to help you and take advantage of the "time" to get yourself ready for your new unburdened life, which IS just around the corner
Live as happily as you can in the house. Mow your lawn and keep it nice so that your realtor can get it sold for you. After your short sale docs (bank statements)are sent in, begin saving your payments so you will have something when you leave.

Believe it or not, this can all work out realtively OK for you, and in the mean time, don't let it take you down.

[The Professor]

The only issue I question in OrlandoVal's posting is:

"By the way, a short sale is ALWAYS better than a foreclosure if you get the right agent. It is imperative that find someone that knows what they are doing because the process is complicated, but the right person will not only know how to do it, they will also have investor contacts to offer on it etc."

I question it because I remain convinced that the difference between a short sale and a foreclosure is to some degree a matter of "luck." Luck in having a lender willing to accept a short sale. Luck in finding a buyer willing to purchase. Luck in finding a real estate agent knowledgeable and willing to go through the extra work involved in a short sale with an expectation that it won't happen because of lender unwillingness. So to say "a short sale is ALWAYS better than a foreclosure" is in a sense to say you can move your credit rating up or down depending upon how lucky you are.

I do believe five years down the road, with the extremely large number of potential borrowers that will have foreclosure on their credit history, and the need for lenders to lend, the impact on your credit rating for being what will be know as the real estate collapse of 2008 won't be that bad. Additionally foreclosures disappear from your reported credit matters in seven (7) years. So to me all of this "scare you into avoiding foreclosure" talk is of questionable validity. That is at least my $0.02.

Daniel

[tryingtostay]

okay, it's late, I'm so anxious about htis process starting... please advise if this makes sense, if I need to modify it, etc etc.
------

We are writing this letter to turn to you for help to modify our loan to a payment we can manage easier, and one that is reducing our principle. We are trying to keep our house but we need you to work with us to modify our loan. Our number one goal is to keep our home and we would really appreciate the opportunity to do that.

Every month it is a struggle to pay our increasing mortgage and our bills. We cannot afford to save for our child's college education nor build an emergency fund in case something happens. We drive thirteen year old cars which we can't afford to replace, and must continually pull out the credit card to repair.

We purchased the home with 20% down to avoid a PMI payment. We would not like to lose the home and lose our large investment in this property. We moved to this house because it was a safer neighborhood for our children and we could get our kids away from the increasing gang activity. We chose a pick a payment loan in 2006 because it was all we could afford. We were hesitant in choosing this type of loan, but were reassured by the broker that we could easily refinance at the one year mark because house values always increase. We knew in the one year time period Nick would receive a raise at his job. He did receive the raise, but, unfortunately, the housing market had crashed at that point and we were not able to refinance.

Since we bought our home, our income has increased every year. Unfortunately, it has not increased to the point where we can afford anything more than the lowest rate on our loan. We cannot even afford to pay the interest on our loan every month. fficeffice" />>>
> >
Our house is valued around $182,000 based on comparable home sales. A similar model of our home is down the street is selling for that price (MLS # Ixxxxx). Two bigger houses on our street are selling for $182,000 and $189,000 (MLS#Txxxxxx, Txxxxxx). We currently owe around $370,000 on our loan and every month owe more. >>
> >
Without a loan modification our ARM payments will keep increasing until they skyrocket. We are struggling to make the payments now and as the loan increases, we will not be able to pay even the minimum payment. We know that a loan modification would benefit us to prevent us from heading to default and foreclosure. We would appreciate if you can work with us to help us get into a fixed rate payment that us paying interest and principal.

We truly hope that you will consider working with us so we can keep our home.
--------------------

too long? what shall be fixed? I'm hoping to send it off tomorrow and maybe get a call from AHMSI Fri or Mon... thanks for any ideas/suggestions!! I really do appreciate them all and look foward to reading them...

[Dan Bailey]

Trying to stay, I don't think it is too long....but I havn't heard of anyone dong principle reductions-although it can't hurt to ask. I'm sure *** or Moe will be able to give you some good direction when they see this.. Good luck! I hope it works out for you!

[Moe Bedard]

Please keep us posted on your progress................

Good Luck!

[tryingtostay]

I heard on the news today that they are desparately trying to get another "let's help homeowners" package together BUT they will not pass it or even talk about too many of the details until after the election.

So, it appears to be a good time for us to start doing this. At least since we missed one payment (in 48 hrs) they should work with us now....

[tryingtostay]

Just an update...

we didn't pay this month.
Nov 17th I start getting calls, every few hours.
I don't pick up the phone because I recognize the 949 area code would "probably" be AHMSI. The last call at 5:45pm they finally leave a pre-recorded message to call them back.
Nov 18th we finally call HOPE. Now we have file with them.

Nov 19th we fax off a hardship letter to Jim Davis and J. Drake.
Nov 19th also in the mail comes the bill for Dec. We have a pick a payment loan with 4 choices. First is the teaser rate, then interest only, then principal + interest, then a 15 year rate. We can only afford the teaser rate ever.
So this bill we get, which I'm assuming is our regular bill anyways for Dec, shows us ONLY the teaser rate option to pay, we don't get to choose the other choices. So the bil is Nov + Dec teaser rates, plus a $60 late fee from Nov bill being late.

I will keep this thread updated, I think it's really nice for others to follow a timeline.

We took so long to call HOPE and fax the letters because I have been riddled with anxiety since we didn't send in our bill. Every time a car stops on our street, I'm afraid it is them. Makes no sense, I know, but it's the truth...

[elpjohnson]

tryingtostay.....

Thanks for the update.....I'm definitely praying for you and your family....good luck!

[charlener1]

im praying for you keep calling and checking in and prepare your mind for the positve outcome

[Monnie]

Everything will work out for you. I also live in California and my home value has really decreased as well. I just signed my approval for my loan modification yesterday and returned the papers. I was offered a rate of 4.75% for the life of the loan. I could not believe it when I was told over the phone, but to see it in black and white did make me and my husband feel good to know that we fought and AHMSI listened and responded. Good news will happen for you as well, just be persistent and contact everyone that has been listed on loansafe, and I'm sure you will get some wonderful news. I couldn't have done any of this without loansafe and everyone sharing their stories and experiences.

[charlener1]

true it was just a few days i was reading ur story and now im signing too i was here when the ups person came i was so excited

[tryingtostay]

Okay, here's an update.

For 2 straight weeks we faxed over our hardship letter to the 2 VPs listed in this forum.

We got no response from them.

We got no response from HOPE.

I forgot to cancel the automatic payment from the bank so one payment went thru 11/28. It counted towards the Nov payment so by Dec 1st we were not late and just had late fees from Nov to deal with. So we stopped the faxes.

We did not pay Dec or Jan. We faxed a few more times in Dec before Christmas break.

We just received a letter from Jan 16th stating we owe the 2 months + 2 months late fees. We have 30 days to respond to them or they will start the foreclosure process.

Now we are scared. I thought we had more time?

We are going to go back to a faxing campaign again. Nothing seems to work.

They call all hours, seven days a week. Usually it starts about 7:45am and goes to 8:30pm. I stopped picking up my phone unless it is a caller ID I recognize. They leave no messages.

I don't know what we should do. If they continue to not respond, should we just go ahead and try to short sell this house? We want to get in a rental by June so when school starts again in Aug my son is settled. Now I'm just scared and nervous again. Should I try their loan retention dept now that we are behind?

This has already begun to destroy my credit. One store dropped my limit by 40%; another card dropped it by 82%!!!! ,sigh. All these years of getting good credit, doing our best to survive... it's all getting thrown away. Thank God my husband still has a job and it looks like his job will be around for a while.

[pattona]

Well the fastest they could respond would be an NOD next week. You still would have 90 days + 3 weeks before the foreclosure sale. Then they will need to serve you with a 60 day notice to vacate pursuant to the new law that was passed last year. That gives you until about the end of July. Usually, though, they wait 90 days before they even file the NOD.

I would try one more attempt to negotiate with them but only if you have the stomach for it. Ask them to reduce the interest rate down to the teaser rate (seriously if new 30 yr fix is around 4.25% they should be able to do this) and waive the accrued back interest. You will still be under water but hopefully preserve your credit. If you still really like the neighborhood and see this being at least a 10 year house, then it's worth doing. But if there's a bunch of foreclosures in the neighborhood then perhaps you don't want to stay.

Also try sending the executive office an e-mail vs the fax and linking it to your story. Make sure you edit anything you don't want them to see. That effort worked for me (my story is at Intermural Wars between Related Lenders) because they really don't want a public forum bashing their lack of responsiveness to reasonable offers.

I wish you good luck.

[Moe Bedard]

Actually with AHMSI, the fax goes directly to the desk of the VP.....so in this section for this servicer that works best.

I have a very stupid question, so please forgive me if it is on there, because I am trying to figure out why everyone else is getting a call back form the VP office but you.
Do you have your loan number on the hardship letter along with a contact number to reach you?

[tryingtostay]

Originally Posted by *** Damiano

Actually with AHMSI, the fax goes directly to the desk of the VP.....so in this section for this servicer that works best.

I have a very stupid question, so please forgive me if it is on there, because I am trying to figure out why everyone else is getting a call back form the VP office but you.
Do you have your loan number on the hardship letter along with a contact number to reach you?

Yes, we have our loan number, contact number, and our HOPE account number listed on the letter. I am ignoring all 888 and 877 numbers. I figured they were all unhelpful people from India. (I was answering the phone in Nov A LOT). Wouldn't the VP office be identified on my caller ID?

We don't like the neighborhood much anymore (every 4 houses are up for rent, or for sale; all my kid's friends have left), but we LOVE the school, love the area. Honestly we'd find a rental within a 5 mile radius of our current house. It's really the best location for us, and obviously we can live in the house perfectly fine if the stress of this was dealt with.

[Moe Bedard]

I am not sure how they show up on the caller ID..........maybe someone who did receive a call can chime in.

I was under the impression that the rep from that office would leave a message, but I could be wrong.............did you also call the number and leave a message as well?