What to do? Two homes, four mortgages.

[rural juror]

Hi everyone. First off let me say this is a great website. I've learned so much here, you guys are doing a great thing. I haven't noticed many people in my situation and so I thought I'd make a post. If anyone has any ideas, it would be a big help. Here's the deal...

I'm in Florida, purchased a townhome (primary) for $230,000 in Feb, 2005. Purchased a second home in North Carolina in June, 2006.

I refinanced the Florida primary because I had an adjustable MTA and was eating up the equity. So I got a fixed first and second mortgage with Chase in 2007. At the time they said the appraisal was $275,000. I was surprised, thought it would be less because the market was already sliding backwards. The two loans total $250,000. But if I were to find a buyer right now, I'd be lucky to get somewhere btwn $180,000 and $200,000.

I don't really have any hardship other than the fact that I'm upside down, under water. The expenses to hold on to the primary house in Florida have drastically increased since 2005, mainly because the taxes soared up and so did the homeowners insurance. The primary is also a fixer-upper (we were hoping to flip it) and I've done about $30,000 worth of remodeling, but it's not finished and I've run out of cash. It still needs a new roof and air conditioning unit and the water heater is 20 years old. I had to borrow money to finish up some repairs and finally maxed-out my equity line on the NC house in order to pay the real estate taxes on the Florida house. Taxes were $3,300.00. My homeowners insurance is due in May ($3,500) and I don't think I'm going to have enough money to cover it. I'm current on my payments except this month I'm late because I had to pay the taxes last month.

I'm thinking of cutting my losses and walking away from the Florida house. They say the market will take years to recover. To be honest, I don't want to spend another hurricane season in a home that could possibly be destroyed and I have to put more money into something that is under water. We had two hurricanes hit here in 2005, just two months after we moved in. It's very costly. Insurance doesn't cover everything.

I was also thinking of doing a modification, but I don't think I'd qualify because I own a second home and since I have no hardships other than being broke.

Does the second home hurt me with all of the possible options? If I do a modification to get the payment down, I could then maybe sell the property, possibly as a short sale. But I'm reading in this forum that you have to qualify for that and does the second home hurt me? Maybe the best idea is to just go into foreclosure, but I'm afraid of a huge deficiency judgement.

And you might be thinking that I should sell the second home. I thought of that too. But I'd rather go into foreclosure on the Florida house, then leave Florida completely, and move to North Carolina and make the second home my primary home. At least there the estimated value is only $5,000 less than when I purchased it.

I'm at a crossroads and a bit of a mess. What would you suggest?

[Dan Bailey]

Rural juror,
Glad you founfd the forum and posted. There is a section of the forum called DIL/walking away that may answer many of the questions you have pertaining making those decisions. Prof Shays posts in there regularly, and has some very well thought out ideas/answers for those who are considering letting go of their property.
Good luck with your decision!