Home Loans and Support

Upgrade and Bail in WA

Discussion in 'Deed in Lieu of Foreclosure - Do You Need Help to ' started by jhuntsman, Dec 30, 2012.

  1. jhuntsman

    jhuntsman LoanSafe Member

    I have long been reading through this forum like a series of bestselling books. The information here is extremely useful and practical, thanks for providing and creating such a great community.

    I am the father/husband of a young family and would have never imagined pondering defaulting on any financial obligation, let alone intentionally foreclosing on my home. In fact, I was one of those who labeled strategic defaulters as freeloaders by walking away from their bona-fide obligation. As the years passed, our home value continued to decrease, mortgage rates hit rock bottom lows all while I sat on my 10 year interest only loan at a ridiculously high interest rate because I felt “morally†obligated to pay the debt. It was pure personal pride in my mind. Meanwhile both my wife and I have enjoyed successes in our careers and accompanying salaries, managed to save well, have no debt outside of our mortgage, and have high credit scores. We really enjoy everything about our lives except for our home.

    It wasn’t until I learned of the “buy and bail†strategy that I really started to consider some options. For me it’s really about a lifestyle change, I am still living in the first home my wife and I purchased seven years ago, our income has nearly tripled, our family has doubled, and we’re ready to move up and take the next step in life. I have discussed virtually every possible avenue with our current lender and have come out of it with a letter from the office of the CEO of Bank of America that simply states we have no loan modification options for you at this time. If we’re going to do something, then I have to take the bank out of the equation.

    Just about three weeks ago, I got in touch with a mortgage broker about a second home who suggested an FHA mortgage because of its high debt to income threshold (apparently as high as 52% in some cases). Long story short, we are currently pre-approved for another mortgage that would put us in a new home we could really be proud of. Interestingly, the mortgage broker is fully aware of what we are attempting a buy and bail and encouraged us to do this if we’re okay with the ramifications (bad credit and foreclosure/short sale headache) as it makes a lot of financial sense. I’ve come to terms that you have to take your emotions out of this and view this as a business transaction. We’re likely just a few weeks from making an offer on a new home.

    Okay, enough of the novel and on to the questions. We have the following mortgages on the bail home:

    Location: Washington State
    1[SUP]st[/SUP] BOA: 215K
    2[SUP]nd[/SUP] Green Tree: 75K (re-fied, so unfortunately is a recourse loan)
    Home Value: 195K
    Under Water: 95K

    We have met with a real estate attorney who is strongly suggesting we short sale rather than foreclose. The primary reason given was the impact on credit. Additionally, some advice was given to us that as a result of browsing these forums I’m not so sure of.

    1. They showed us a bullet list which appeared to be from FICO that depicted short sales as impacting credit for 2 -3 years whereas foreclosures impact for the full 7.5 years. I believe I read here that there is minimal difference between the two strategies so I was somewhat surprised to see this. I’m curious if there is any truth to this?
    2. They also recommended that we continue to pay our second mortgage through the short sale process because if it goes from their “customer service department†to their “collections department†it suddenly becomes much more difficult to negotiate with them. I’m curious if there is any truth to this?
    3. Lastly, they recommended that after we move into the new house we manipulate our assets as soon as possible to make it appear that we have a financial hardship. For example they suggested gifting a portion of our savings account to our parents during the process, pulling out extra cash during retail transactions, coming up with extra dependent care expenses (fake one’s of course), etc. This was something I was not prepared to do nor had heard of. Is all this necessary?

    All this has me questioning this attorney’s advice. I understand that the real estate agents and potentially the attorneys may profit from a short sale, so that’s why they push it…as a result I’m still not sold on a short sale.

    Thanks in advance for taking the time to respond to any of my questions!
  2. vantuckian

    vantuckian LoanSafe Member

    Glad you've made some steps toward a better financial and living situation. The banks look out for nobody other than themselves, so should you! Foreclosure is part of the "contract" you signed, just because you want it to happen, doesn't make it better or worse. The bank would follow the same path no matter what reason you had to cause you to stop paying.
    With regards to credit impact, there is a post/sticky somewhere that discusses that. However, the 7.5 years thing may come from the fact that a foreclosure is a "derog" on your credit report, which can remain there for 7 years IIRC. A short sale would be reported differently, perhaps without a derog, but I wouldn't count on that honestly. In any case, you can read the accounts of others here that have gone through the whole process, and came back to their pre-foreclosure credit score sooner than you'd think, within 2 years generally. However, home loan lenders are much less willing to lend to someone with a foreclosure after just 2 years. It seems to be 3 or more. Even with a 700+ credit score.

    On paying (or not paying your 2nd), you should check out the loan settlement section and look at the sold out junior loan thread, which your second will become when the first loan forecloses. It becomes basically like unsecured credit card debt, since the "security" of that loan, the property, is no longer there. If you're planning to short sale, then its up to you and/or the 1st lien holder to come to an amount with the 2nd lien holder where they will release the lien and allow the short sale. Also, if you can afford to pay the 2nd, and continue to during the short sale, why would the 2nd agree to letting you stop?

    On "moving towards to financial hardship", seems like its only for a short sale. I suppose that will help in getting the bank to approve the short sale with little or no deficiency, but if it were me, I'd just buy, stop paying the 1st and 2nd on the old house, and then let the old house get foreclosed. Pro-tip: rent it out after you've moved, while waiting for the trustee sale. :)
  3. BustedBrokeBeaten

    BustedBrokeBeaten LoanSafe Member

    Hello fellow Washingtonian! I started a thread some time ago that is basically just a thread with links to many other people from Washington who have decided to walk away from their mortgage. I've posted that link below. You will likely find many answers to your questions in these links. Good luck on your journey! ~ BBB

    http://www.loansafe.org/forum/deed-...ay/50987-you-washington-walker-meet-here.html
  4. Kenupstate

    Kenupstate LoanSafe Member

    If you do decide to walk away put a tenant in the house,collect some cash and keep it in decent shape so you don't have the city after you for unmowed lawn etc
  5. jhuntsman

    jhuntsman LoanSafe Member

    We have just moved into an absolutely beautiful custom built home on several acres, we are so excited. I would have never imagined this was possible given I am the holder of a 100K underwater home with an interest only mortgage! The FHA mortgage approval and underwriting process itself was arguably the easiest part of this process (note that we were well qualified, but did only put the minimum 3.5% down). Regarding the existing home, I simply drafted a letter stating I intend to rent out the home. Funny thing is, through the whole process, the mortgage broker knew exactly my intent and that there is zero chance I am paying on the old mortgage once this went through.

    My decision is to foreclose on the old home, I see absolutely no financial or strategic advantage in the short sale. I am looking out for no one but my family’s finances and future quality of life as part of this decision and foreclosure is the best option. When the dust settles, I will have a sold out junior loan with Green Tree. I will try to keep this thread alive as I go through the process to document the events and results as well as get support and advice from fellow members. Additionally, I hope other folks are inspired to do this as I know there are a lot of you out there with interest only mortgages on underwater homes that are about to have their monthly payments increase. If you have been fortunate enough to progress financially and can afford a better home...you can get it, you are not stuck!

    On April 5th, I will officially be late on my very first mortgage payments to both BOA and Green Tree. This will be the hardest step emotionally to take because it goes against my personal values and commitments, but like I said, I have tried to work with the bank and I have my family’s future quality of life to prioritize. I have already rented out my old home at market price and will stockpile the cash. My plan is to use this stockpile as part of a larger plan to pay down the FHA mortgage on our new home and eliminate the mortgage insurance (which, by the way, is permanent on FHA mortgages opened after April 1st 2013).
    Last edited: Mar 28, 2013
  6. StrategicDefaultInWA

    StrategicDefaultInWA LoanSafe Member

    jhuntsman

    I was about to respond to your initial questions then realized that the posting was back in December. Wow, lots of water under the bridge since then, huh? Anyway, our stories are similar in many ways. BOA 1st, GT 2nd, families and a realization that as a husband and father, my priority is to serve the needs of my family, not a bank. If you haven't, feel free to swing by my thread and ask any questions you like.

    http://www.loansafe.org/forum/deed-...lympia-washington-1st-boa-2nd-green-tree.html

    I also chose foreclosure and I'm coming into the home stretch with the Trustee Sale date scheduled for July. I don't regret my decision for a moment. I also agree with you, that I don't see any value in the other options in your situation and in fact, you have a positive cash flow while renting it out. Nice!

    If current trends are an indicator, folks on this forum with a BOA 1st are getting about 12-16 months from 1st missed payment to trustee sale. Mine will be 16 months. There are several other WA walkers here that have walked in similar timeframes as me that are falling into that range (+ or -). Hopefully yours will drag out even longer!

    Lets stay in touch and please do keep posting here especially on your progress (or hopefully no contact) with GreenTree. I'm taking the zero contact strategy with GreenTree and will only respond if/when they offer a settlement of about 2-3% of my loan with them. Otherwise, I will not respond to any of their correspondence. Of course if I'm sued, that's another chapter.

    Keep reading the stories, take courage, enjoy your new home and take care!
  7. jhuntsman

    jhuntsman LoanSafe Member

    Just a quick update. We missed our first official payment on April 5th, today we received pur first phone call and it was from Green Tree (we ignored it). I haven't heard anything from BOA. Secondly, I have secured tenants for our old home and have signed a 12 month lease with them.

    As an interesting positive to this, we paid our first mortgage payment on the new home. Since the interest rate we secured is so low (3.25%), we have paid more against the principal in ONE mortgage payment than we ever did in seven years on the old home which was a 10 year interest only.

    Regarding the phone calls, I have a business class phone service which contains a feature called "selective call forwarding". This allows me to selectively forward phone calls based off the incoming number. I plan on having a little fun with this. Should I do something like forward their calls back to themselves or maybe forward them to some predatory lending organization, or something just silly like forward them to each other (Green Tree to BOA and BOA to Green Tree) LOL. Give me some creative ideas, this could be slightly entertaining.

    Anyways, I'll keep updating.
  8. BofA ThatDeluxeAptInSkyWA

    BofA ThatDeluxeAptInSkyWA LoanSafe Member

    Haha...this is brilliant !
  9. jhuntsman

    jhuntsman LoanSafe Member

    Thank's. I still have only been receiving calls from Green Tree, no calls from BOA. I have opted to forward Green Tree calls back to their own main phone number. So far they've attempted to call from two different numbers. Once I start getting calls from BOA I will do the same thing. I'm curious how much they will continue to call with it forwarding back to their own number.
  10. jhuntsman

    jhuntsman LoanSafe Member

    I recieved my pre-foreclosure notice today from BOA. This is also the notice that WA state residents can respond to requesting a mediation hearing. I have 30 days to respond to request this meeting which will basically extend the foreclosure process by 60 days. From my undertanding, this is the one item I should take action on. However, the notice says it is applicable only if the property securing the loan is my primary residence. As you may have read in my previous post, I have moved out of this home and it is now a rental property which is currently occipied by tenants.

    My question is, assuming there are no "primary residence" police roaming around, how would they know if I responded anyway? Should I still request the mediation, or is there some legal ramification in doing so if in fact the property is not my primary residence? Obviously, I would like to take advantage of this and extend the foreclosure process if possible, but I don't want to make some silly mistake and cause additional problems.
  11. jhuntsman

    jhuntsman LoanSafe Member

    Phone calls have completely disappeared due to the selective call forwarding I mentioned earlier. I am getting zero phone calls which is nice. I've responded to the notice of pre-foreclosure via certified letter and received confirmation from BOA that they have received it. Since then I've received the following:

    - NOD from Green Tree via certified mail (means nothing)
    - NOI from BOA (received two for some reason)
    - A large envelope from BOA saying "your loan could be eligible for a loan modification...including the federal governments HAMP".

    I'm currently researching the Loan Modification/HAMP response as my wife is the only one on that mortgage and would likely be able to prove a hardship (even though together we likely would not qualify). Feedback on responding to the modification package is appreciated as it is requesting financial details. At this point I still am leaning towards no action/no communication.
  12. BofA ThatDeluxeAptInSkyWA

    BofA ThatDeluxeAptInSkyWA LoanSafe Member

    Send them something. Delay the FC of you can.
  13. vantuckian

    vantuckian LoanSafe Member

    If you want to drag out the process and lengthen the time you can collect rent, then play the HAMPster wheel game, and make sure you send nothing that has any financial info. Otherwise, no contact from you to either BOA or GT. As far as primary residence goes, there is a Federal definition, where you lived there some amount of time over the last 5 years or something. I don't know the details so please google or someone else chime in.
  14. jhuntsman

    jhuntsman LoanSafe Member

    There is minimal update to my situation. I did not respond to the HAMP letter, I simply don't want to waste my time playing the HAMPster wheel game. My time is more important to me than a few extra months of rent. I did get a letter from BOA saying we have a new Customer Relationship Manager (CRM) but that it does not indicate a change in status to our loan.

    I'm curious if my phone screening strategy is too restrictive. The phone calls are still coming but have slowed down considerably to about once a week from both Green Tree and BOA. Using my selective forwarding strategy, they are not even permitted to leave a message because the call is rerouted back to them. There is literally zero communication. The reason I ask, is in the slim chance they are contacting me to modify the loan, I wouldn't know unless they sent me a letter. Should I at least allow them to leave a message or would any major development like that come as a letter?
  15. TomEason

    TomEason LoanSafe Guide Staff Member

    jhuntsman

    Thanks for your posts. It's satisfying to know you're getting value from the forum. If it were me, I'd no longer listen to that lawyer. I would let the bail home go to FC. You're correct in your statement there's little, if any, difference in the impact in a consumer's credit file between a FC and a SS. I recommend you visit one of the many forums dedicated specifically to credit on the net. You can also visit the following thread here. http://www.loansafe.org/forum/short-sale-outpost/43265-ss-vs-dil-vs-fc-comparison-5.html Good luck.
  16. vantuckian

    vantuckian LoanSafe Member

    They never leave anything more than "please call us" in a voicemail. If anything, you can pick up one call from BOA to see if they are offering the no-doc mods that supposedly began this month (July 2013). I'd ignore GT calls, as they are just trying to get you to pay anything on GT phone calls. At some point, they stop leaving voicemails too, as I suspect that the calls started coming from a different outfit that just dials, and waits until someone picks up, and connects the other end to someone reading from a "pay us something now" script.
  17. jhuntsman

    jhuntsman LoanSafe Member

    Still no NOD. I did however get another notice of pre-foreclosure (same as in post #10) which is the only item you're supposed to take action on. They must be disorganized because they already sent it to me and I promptly replied via certified mail. Not sure if it will work, but I'll take advantage of the disorganization and reply again in hopes for another 60 day extension.

    Phone calls have completely stopped.
  18. TomEason

    TomEason LoanSafe Guide Staff Member

  19. cgpjs

    cgpjs LoanSafe Member

    Just for reference/comparison purposes on the time frames, I'm in Seattle and haven't made a payment in 24+ months. I've also received the notice of pre-foreclosure letter from the lender multiple times, I think 6 times since last November. This is on a house, not a condo.
  20. jhuntsman

    jhuntsman LoanSafe Member

    cgpjs,

    Mine is a house as well. Did you respond to the notice of pre-foreclosure letter each time (or did you respond to it at all)?

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