Does short sale even make sense?

[RyanU]

Background:
In 2006 my wife purchased a home. We got married in 2007. Shortly thereafter the AC unit died and we needed cash to replace it. She took out a $20k HELOC to cover that and pay off some other debt accrued in the process of fixing up the house. (it was a fixer-upper)

Life happens, in early 2011 we had 2 kids and one more on the way. The home was getting smaller around us. Owed $172k BOA first, $20k Desert Schools FCU HELOC and the neighbor's larger home sold for $83k. My wife contacted BOA to ask about a loan mod or underwater refi, they looked at our combined income and told us to pound sand. We kept current on the loan and put away money and had our 3rd child. We stopped paying both mortgages in december. I found a lender who didn't care that my wife is walking away from an underwater mortgage and bought a more appropriate home last month as my sole and separate obligation. My wife signed a disclaimer deed on the new home.

Our intention was to list the home as a short sale, get an offer, see what BOA might offer the credit union to push it through, and make our acceptance contingent on DSFCU releasing us from any deficiency. I cleaned up the old place and got it in sellable condition with all our nice upgraded fixtures in place and several hundred dollars worth of home theater cabling in the walls and attic and we contacted a short sale listing agent. Her contract basically says we need to give her access to tax returns dating back to 2006 and full ongoing financial disclosure and she will give out our personal information to anyone who asks for it without any liability and she is our agent on that home forever regardless of her actual ability to sell it. She said DSFCU is a pain in the butt and she will not negotiate with them at all.

The realtor's contract is crazy, there's no way we're signing that. I'm not in love with giving out my financial information, particularly to these two financial institutions for my wife's sole and separate obligations that we have already decided to walk from. We don't have any financial hardship other than an underwater house that's way too small for us. The only potential benefit for us would be to possibly settle the HELOC with the short sale money, but that's not a sure thing and although it is a recourse loan it's not likely to be collectable as a sold out junior.

I'm really leaning toward just having my wife call BOA to tell them the place is vacant and shutting off the utilities to hurry along the FC process. Are there any other possible benefits to short sale that I'm missing?

[Cat Damiano]

HI RyanU,

Welcome to the forum and thank you for joining.........


Most on the forum would agree about not wanting to give the financial information. There is a good discussion thread on the differences here;

SS vs DIL vs FC Comparison

[candacededelta]

Hi RyanU,

I also have a HELOC 32K with DSFCU. This month will be my first missed payment with them and was wondering what I can expect as far as phone calls/letters etc.. Have you ever spoken with them about this debt? I have missed 2 payments with my first mortgage so I get plenty of calls now but may need to switch my number if DSFCU calls alot too. I don't intend to speak with them at all.

Thanks in advance for any answers,
Candace

[RyanU]

They call about once a week. It's not hard to avoid them, I just leave my phone on silent and selectively return calls.

[candacededelta]

Thanks for the info. I'm at 5 calls a day from my first so an extra call from the credit union every day or week won't be any worse.
Candace

[candacededelta]

Hi RyanU, Hope you don't mind if I ask questions once in awhile. You are the only member I have found here having a HELOC through DSFCU. Anyway yesterday received my first "scary letter from them stating I am delinquent (1payment) and need to call to make arrangements to catch up. If i don't call within 3 business days they will refer to legal dept. blah blah blah. It was a form letter with my name and amount owed inserted. Now did you receive a letter like this? It kind of freaked me out I have to admit. Since you haven't paid since December have they ever sent you any settlement letters?
Thanks in advance for any answers you can provide.
candace

[candacededelta]

Hi RyanU,
I don't know if you are still following this thread but in case you are I'm wondering if anything more has happened with your HELOC? I have just received my 2nd NOI letter from them. They call about 2x per week always leave a message asking me to call back.
candace

[RyanU]

I don't know if you're still following the thread, but as I have a chapter 7 discharge in my hand I'm now free to respond.

They came after us pretty aggressively, suing us jointly for her separate loan. We met with a few lawyers and were pretty universally advised:

1. We could respond if we really wanted to and try to but we really had nothing.
2. I could possibly file a motion to dismiss and get my name cleared from the suit, but it would cost several thousand dollars paid up front.
3. DSFCU and their law firm would win in arbitration and get a transcript judgement based on that and seek garnishment, draining all bank accounts to $150 each whenever they felt like it and hitting us up for around $2,000/month in wage garnishment until the amount was paid in full with interest.
4. Chapter 7 bankruptcy would cost about $1300 and we would lose our 2012 tax refund from the deal, but total we'd be out less than even the retainer to get started legitimately responding to the suit.

We chose chapter 7. We didn't want to do it, but we wiped out all of our unsecured debt in one fell swoop and now live quite comfortably paying cash for everything. We were able to keep our retirement accounts and both our newer cars and our (new, not underwater) home, and we only gave up $6k in tax refunds.
Maybe you know all this. Maybe they've sued you by now, maybe you've filed for bankruptcy too. Good luck if you have.
Maybe you work for DSFCU or jaburg-wilk and recognized the details and know who I am and wanted to get information for the case. Good luck, enjoy your $20,000+ loss and eat a ****.

[candacededelta]

Ryan U,
How crazy that you just updated because I was just wondering the other day how your situation with Desert Schools turned out. The reason for that is I was just in one of their branches trying to make a payment, and I am truly persona non grata with them these days, as anytime I do this it requires a phone call to collectons dept. and manager approval. So I can tell you I have no connection to that credit union and cannot wait until the day I am finished with them.

Here is my update: Right after I posted the last message to you Desert Schools started hitting me hard with phone calls which i continued to ignore. Well up until they started calling friends of mine looking for me. So after that i decided to call them. I spoke with a polite but firm sounding gentleman who let me know what would happen if I continued not paying. He said straight out that they would sue and get a judgement against me that they would let hang out there for 10 years and renew for another 10 years. He wasn't threatening me just stating facts. I believed him but ran it past my cousin's fiancee for an opinion. The fiancee is an attorney but not consumer or real estate law so he sought an opinion from another attorney.

The attorney said that Desert Schools is truly the devil with cases like this and they are serious about lawsuits. His advice was to find a way to continue making the payments or file the chap. 7 bankruptcy as you did. So another cousin of mine gave me the money to catch up on my missed payments and has been making the payments for me ever since September.

I am right now in the middle of a foreclosure on my home so after that is finished I need to figure out my next move. Chapter7 is still a possibility as I do have credit card debt. This is not a strategic default on the house for me. My income is about half of what it was 6 years ago. It would be a relief to wipe all my debt.

Just one more comment if I may about Desert Schools. That credit union was as greedy as any of the big banks when it came to loans during the boom. My original HELOC was for about 45K and the rep I was working with kept pushing me to take out more money. She asked me on 3 seperate occasions, right up to the moment I signed the paperwork, if I was sure I didn't want to take out more cash. I was approved for up to 65k. Holy cow thank goodness I always declined. I truly can't wait until I am finished with them. One way or another......

Best wishes to you,
candace