In CA, House in my name 120K underwater, Wife buying another...

[orlandopalms]

Hi,

I'm a few weeks late to the party on this website, but I felt I need to share my story to hear some advice and opinions.

I purchased a home in the Central Valley back in 2007, my wife had recently been through a BK prior to our relationship. So I bought the home with "stated" income and did not put my wife on the loans, nor on the deed. I never placed her on the deed due to the declining property values. When I bought the home, we received a 80/20 loan, no money down, closing costs covered by the builder - as you can say, it was too good to be true! The first was 6.5% ten year interest only loan fixed rate, the second 8.75% 30 year fixed.

We have since had 3 kids and have a number of issues with the neighborhood we reside in. These homes were the last built, and most of our neighbors are gone. Recently we have gunshots behind our home and we have a number of issues with the change in the type of neighbor in how the kids around the area treat the properties. In addition, our child care provider is limited in how far she can commute and coming to us is not possible. Also, due to circumstances, my wife is going to be taking a part time position with her employment.

So our dilemma is that we know we cannot afford the house we are in once she is goes part time. I attempted to refi the home under HARP2.0 and repeatedly tried to reach out to our lenders on the home to work with them. The refi answer took over 90 days and during that time we found out about the part time status. So we killed the refi and kept the loan as is.

The advice we received, was to attempt to get my wife qualified before the change in employment status takes effect in 6 months and buy another home. She got approved and close escrow 2 weeks. The home we would be moving to, is actually smaller, but in a better neighborhood with better schools for our kids, and closer to our day care provider.

So my questions are this...

1. What do I do with the current residence (short sale or foreclose)?
2. What are the possible liabilities to me on the current residence?
3. The home is Underwater by 120K, not enough to cover the second, can they still pursue me?
4. Any other surprises I might expect?

[mellissayr]

Get a lawyer's advice, as an real estate agent and former credit counselor, from what I understand, Community Property Law will hold her jointly liable for and debt incurred after marriage and that goes for any deficiency judgement they can get against you. Community Property debts also include debts prior to marriage in some cases and therefore they could slap a lien on new house since you are both married. UNLESS they can't trace marriage in public records because it is a Confidential Marriage, but that only keeps the marriage private publicly and it wouldn't take an Einstein to figure out she's married eventually.

Now I could be wrong, I am not an attorney but I am speaking from my own past experience personally and professionally and from what I read years ago in the available law or rules on Debt Collections & Creditor rights in CA

[orlandopalms]

Thank you for your advice, if I haven't refied the house, its still a non-recourse loan, so sending them the keys at worst would relieve me of any possible lein they could place on the amount owing I believe.

Get a lawyer's advice, as an real estate agent and former credit counselor, from what I understand, Community Property Law will hold her jointly liable for and debt incurred after marriage and that goes for any deficiency judgement they can get against you. Community Property debts also include debts prior to marriage in some cases and therefore they could slap a lien on new house since you are both married. UNLESS they can't trace marriage in public records because it is a Confidential Marriage, but that only keeps the marriage private publicly and it wouldn't take an Einstein to figure out she's married eventually.

Now I could be wrong, I am not an attorney but I am speaking from my own past experience personally and professionally and from what I read years ago in the available law or rules on Debt Collections & Creditor rights in CA

[orlandopalms]

My wife has closed on the other house, we are now in the middle of moving in. We are excited, better schools, safer neighborhood, and a better built home. The next step begins with my house, we will be missing our next payments with green tree and citi. I'm leaning towards foreclosure, but going to give our realtor a crack at doing the short sell. Any thoughts?