Underwater in California and unsure of our options - Loan Modification Forum

underwawa · 10-28-2009, 08:28 AM

Hi Everybody. I am so glad that I found this site. It has been really great to read everybody’s posts and know that we are not alone. Our situation is a little different from what I have been reading. I am wondering if anybody else has this scenario or thoughts on what our options might be.

We live in California. We bought our property for 375K with an 80/20 5yr fixed ARM back in 2005. Our first loan is for 300K and our second is for 75K. I believe our loans are non-recourse. Our mortgage, property taxes and insurance payment come to about 2,400 per month. Our loan will start to adjust in June 2010

Currently, our house is worth around 200K…(and that is probably being generous!) We have never been behind on a payment and can “afford” to make our payments. Since we are moving closer and closer to June 2010, I want to get the process rolling for whatever our next step is going to be rather than wait until the last minute.

We are facing a couple of issues right now:
Our house has been the victim of several burglaries over the last few years. We do not feel safe here at all. This is definitely not an area that we want to continue living in for the long haul…the problem is, we are sitting on a 375K mortgage and there is no way that this house could sell for that amount! We would have been out of here sooner if we thought that there was any way we could sell. There is no way that we could rent this place and cover our mortgage because comparable houses rent for $1200 and below.

This house is 25-years old and needs some expensive repairs. While we can make our payments, that is where all of our extra money goes. We do not have the money for all of the repair work.
Our lender might agree to refinance our loan at a lower rate, but will only refinance it at 375K. This house is not worth (and I dare say will never be worth) 375K, needs repairs and major upgrades…things that we don’t have the money for.

We would really like to be able to move but don’t know what our options are. We are putting all of our money into house payments and are not able to see a light at the end of the tunnel in terms of being able to move on with our lives someday. Do lenders work with people who can afford their monthly payments but are ridiculously underwater? Will they allow a short sale in this type of a situation? Would it make more sense to just walk away? Would they consider a loan mod/principal reduction…just so that we could eventually try to sell this place in the future?

From a financial standpoint, I feel like we’d recover faster from walking away than staying and continuing to put all of our money into something that is not even close to what is was worth before...not to mention living in fear because of the crime issue. Any thoughts on this kind of a situation would be much appreciated!!!

Evan Bedard · 10-28-2009, 09:09 AM

Hi underwawa welcome and thank you for joining.

Quote:

We would really like to be able to move but don’t know what our options are. We are putting all of our money into house payments and are not able to see a light at the end of the tunnel in terms of being able to move on with our lives someday. Do lenders work with people who can afford their monthly payments but are ridiculously underwater? Will they allow a short sale in this type of a situation? Would it make more sense to just walk away? Would they consider a loan mod/principal reduction…just so that we could eventually try to sell this place in the future?

It is very very rare to acheive a principle reduction. I have maybe seen 5or6 now in the past two years and three of them were recently and from Wachovia. If you can afford the mortgage your lender is not going to approve a loan modification. Your best bet would definitely be a short sale. There may be some consequences with a short sale, but they are not nearly as bad if you choose to walk away and let the property foreclose..

underwawa · 10-28-2009, 09:52 AM

Hi Evan. Thanks so much for your thoughts. Everybody we've talked to has recommended a short sale as well. Here's my next question...will they allow us to do a short sale if they feel that we can make the payments? How should we approach it with them? I'm scared we're going to get a "go pound sand" kind of response. Another question...do you think it would hurt our chances if we told them about wanting to move because of the burglaries?

Evan Bedard · 10-28-2009, 10:27 AM

Quote:

Hi Evan. Thanks so much for your thoughts. Everybody we've talked to has recommended a short sale as well. Here's my next question...will they allow us to do a short sale if they feel that we can make the payments? How should we approach it with them? I'm scared we're going to get a "go pound sand" kind of response. Another question...do you think it would hurt our chances if we told them about wanting to move because of the burglaries?

No, you should definitely tell them about the burglaries. Explain this information in your hardship letter. This is a great reason for them to approve the short sale.

underwawa · 10-31-2009, 05:41 PM

I just had a real estate agent tell me that because we are not late on our payments and not technically a hardship, there is no way that the bank would allow us to do a short sale. Do you think that they are telling me this because they don't want to "waste their time" on a long shot? I figure I'll just keep calling around until I find somebody who is willing to help us out...

Just thought I'd see what others thought...

Happy Halloween!

tricia88 · 11-01-2009, 12:42 AM

Maybe this person was hinting that you should start being "late" to get the bank's attention. If you think you are going to eventually walk away, you should stop sinking more money into the house. My condo is underwater too and I just made the decision to stop paying this month. It's a tough leap to make but I think it is the right business decision for me.

You should try to find another agent or broker that can help you. Definitely do your homework and ask a lot of questions.

underwawa · 11-01-2009, 10:21 AM

Hi tricia88. I agree with you...I think the agent is working the angle that we should stop paying to get the bank's attention. The thing is...we were REALLY hoping that it would not have to come to that...especially since we can make our payments. We're also afraid of how that will look to the bank...when you can make your payments and just stop to get their attention? I'm just worried about what repercussions we could face if we can make our payments and just stop.

It's pretty ridiculous because those are the lengths that you have to go to just to get them to work with you when all you are trying to do is the right thing.

I will definitely try to find another agent!!!

inmyview · 11-01-2009, 10:41 AM

The agent may be correct in that you really need to show some sort of hardship. I would play up the burglery aspec and even include any police reports. Be sure to find an agent who has had success with short sales they are not for the faint of heart.

I have had a good deal of success in Sonoma and Marin counties, but it is definately a long, arduous road.

10-28-2009, 08:28 AM	#1 (permalink)
underwawa Junior Member Join Date: Oct 2009 Posts: 4 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Underwater in California and unsure of our options Hi Everybody. I am so glad that I found this site. It has been really great to read everybody’s posts and know that we are not alone. Our situation is a little different from what I have been reading. I am wondering if anybody else has this scenario or thoughts on what our options might be. We live in California. We bought our property for 375K with an 80/20 5yr fixed ARM back in 2005. Our first loan is for 300K and our second is for 75K. I believe our loans are non-recourse. Our mortgage, property taxes and insurance payment come to about 2,400 per month. Our loan will start to adjust in June 2010 Currently, our house is worth around 200K…(and that is probably being generous!) We have never been behind on a payment and can “afford” to make our payments. Since we are moving closer and closer to June 2010, I want to get the process rolling for whatever our next step is going to be rather than wait until the last minute. We are facing a couple of issues right now: Our house has been the victim of several burglaries over the last few years. We do not feel safe here at all. This is definitely not an area that we want to continue living in for the long haul…the problem is, we are sitting on a 375K mortgage and there is no way that this house could sell for that amount! We would have been out of here sooner if we thought that there was any way we could sell. There is no way that we could rent this place and cover our mortgage because comparable houses rent for $1200 and below. This house is 25-years old and needs some expensive repairs. While we can make our payments, that is where all of our extra money goes. We do not have the money for all of the repair work. Our lender might agree to refinance our loan at a lower rate, but will only refinance it at 375K. This house is not worth (and I dare say will never be worth) 375K, needs repairs and major upgrades…things that we don’t have the money for. We would really like to be able to move but don’t know what our options are. We are putting all of our money into house payments and are not able to see a light at the end of the tunnel in terms of being able to move on with our lives someday. Do lenders work with people who can afford their monthly payments but are ridiculously underwater? Will they allow a short sale in this type of a situation? Would it make more sense to just walk away? Would they consider a loan mod/principal reduction…just so that we could eventually try to sell this place in the future? From a financial standpoint, I feel like we’d recover faster from walking away than staying and continuing to put all of our money into something that is not even close to what is was worth before...not to mention living in fear because of the crime issue. Any thoughts on this kind of a situation would be much appreciated!!!

10-28-2009, 09:52 AM	#3 (permalink)
underwawa Junior Member Join Date: Oct 2009 Posts: 4 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Underwater in California and unsure of our options Hi Evan. Thanks so much for your thoughts. Everybody we've talked to has recommended a short sale as well. Here's my next question...will they allow us to do a short sale if they feel that we can make the payments? How should we approach it with them? I'm scared we're going to get a "go pound sand" kind of response. Another question...do you think it would hurt our chances if we told them about wanting to move because of the burglaries?

10-31-2009, 05:41 PM	#5 (permalink)
underwawa Junior Member Join Date: Oct 2009 Posts: 4 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Underwater in California and unsure of our options I just had a real estate agent tell me that because we are not late on our payments and not technically a hardship, there is no way that the bank would allow us to do a short sale. Do you think that they are telling me this because they don't want to "waste their time" on a long shot? I figure I'll just keep calling around until I find somebody who is willing to help us out... Just thought I'd see what others thought... Happy Halloween!

11-01-2009, 12:42 AM	#6 (permalink)
tricia88 Member Join Date: Oct 2009 Posts: 7 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Underwater in California and unsure of our options Maybe this person was hinting that you should start being "late" to get the bank's attention. If you think you are going to eventually walk away, you should stop sinking more money into the house. My condo is underwater too and I just made the decision to stop paying this month. It's a tough leap to make but I think it is the right business decision for me. You should try to find another agent or broker that can help you. Definitely do your homework and ask a lot of questions.

11-01-2009, 10:21 AM	#7 (permalink)
underwawa Junior Member Join Date: Oct 2009 Posts: 4 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Underwater in California and unsure of our options Hi tricia88. I agree with you...I think the agent is working the angle that we should stop paying to get the bank's attention. The thing is...we were REALLY hoping that it would not have to come to that...especially since we can make our payments. We're also afraid of how that will look to the bank...when you can make your payments and just stop to get their attention? I'm just worried about what repercussions we could face if we can make our payments and just stop. It's pretty ridiculous because those are the lengths that you have to go to just to get them to work with you when all you are trying to do is the right thing. I will definitely try to find another agent!!!

11-01-2009, 10:41 AM	#8 (permalink)
inmyview Senior Member Join Date: Sep 2009 Location: Petaluma, ca Posts: 55 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Underwater in California and unsure of our options The agent may be correct in that you really need to show some sort of hardship. I would play up the burglery aspec and even include any police reports. Be sure to find an agent who has had success with short sales they are not for the faint of heart. I have had a good deal of success in Sonoma and Marin counties, but it is definately a long, arduous road.

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