Hi, thanks God for this great forum and all the kindhearted folks. I have been reading the last 3 days continuously and need some advice. Sorry if this maybe a bit long but I just want to make sure I explain details so you all can help us figure things out.
We bought our home in 05/2007 for $525K with no-money down. We have 80/20 loans both with CW. The 1st is 6.5% INTEREST only with payment around $2900 and the 2nd is $750. My wife works as an accountant for the last 7 years, she gross about $60K per year. I have been selfemployed with various field the past 5 years. I was doing well in 2005 and 2006 so we decided to buy a new home in 2007 for our children to grow up in because it is in a much better neighborhood. We owned another home at the time so we took out 100% of the equity to keep as reserve and rent out that home. Our thinking was that with the way the market goes, we can have equity built in in this new home and refi 2 years later to a lower rate or at least combine the 2 payments into something lower. Ofcourse we all know what happen, market tanked and now our home is worth around $425K maybe less (basically what we owed on the 1st mortgage). Not only do market tanks but my income took a dive as well. I made less than $20K last year and only $30K in 2007 compare with $80K+. We dried up all of our reserve with this house and now are at the brink of cannot make payments. We haven't missed a payment yet but we only have max 3 more payments (approx $10,000) to go in the bank. We maxed out our credit cards. Actually, we have an AMEX with $34000 credit line and they cut that down to $15000 which is what we owed. So we maxed that out. We don't have any other credit card.
So we have been pondering about modification but from all that we read on here about how CW works and all, we don't know if that is our best options because we don't know if CW will reduce our payments a whole lot that we could afford just on my wife income alone? Somewhere around $2500. And if we go thru this process and at the end they don't allow for modification or don't reduce payments enough then we would have no more reserves. As for the rental property, WACHOVIA option ARM, we collect enough rent to make minimum payment on that. And I don't know if CW will allow us to keep that home or make us sell that. But we are also upside down about $100k on that home too.
Make long story short, we would like some advice. You see, we like this home so much because of the neighborhood and the elementary school our children are in. We have not have any lates on these 2 CW mortgages so we don't know if CW will even consider modification. We was thinking, since we have a friend who hasn't own a home, and he make good income about $80K per year with no debt. He was just talking to us about investing in real estate the other day because of the low price. So we thought, why not STOP MAKING THE PAYMENTS NOW and reserve $9000 we still have for food and other expenses. (We have the automatic draft on the 6th of every month and I just cancel those payments.) Then let the loan be late for 30 days or 60 days so we can initiate a short sale with CW. Hopefully our friend can buy the home and we would rent it part of the downstair from him. He and his wife will stay upper level. My friend has talk with a loan office and he would only qualify for $360-$400K according to his loan officer...but I think he can stretch if CW would allow short sale around $425K. You see, our thinking is this, we know our credit will be damage but really, we aren't planning on buying anything anyway until at least 3 or 4 more years....so by that time, hopefully we can rebuild our credit again.. We are so attach to this home and this neighborhood we do not want to move. We involved alot at our church just 4 blocks away as well so our kids will be devastated if we have to give up this home.
Please would you let us know if this is the best route to proceed? If not, then which way is best? If this is the best route, then my next step I think is to seek out a good "shortsale real estate agent" right to start listing the home????
God bless all of you and may all find peace and love in your families.