Death Rattles

[BleedingOut]

I have a serious question that I would like to ask the professionals on this forum.

I am in the middle of this crisis and have a mortgage lender that has no desire to help. I've tried to get them to refi, restructure, let me roll a payment on the backside, etc. to no avail. My credit rating has plumetted to the mid 600s (last year it was in the mid/upper 700s). DTI is 65%+

My ARM has doubled in the past year and I am barely able to pay it and my other debts. I have appraised my property recently and it has dropped 38% over last summer's appraisal and the home value is way below what I owe. I am not able to put anything into retirement now do to all of this.

My question. In this market, it is nearly impossible to liquidate a property and cover your notes (in my situation). I've thought about trying to do a short sale or foreclosure....The dreaded F word. I know that it would destroy my credit for a significant amount of time. BUT, if I did that, my thought would be this. I can always rent at a fraction of my PITI. I would be able to put nearly 50K a year into my 401 and investments. (remember I can't do anything at the present). In 10 years (latter 50s) I would have over 500K (hopefully) towards my retirement and I may be able to get back into a home.

I grew up being taught right from wrong....paying your bills, etc. and I'm truly ashamed. But stating that, I am more worried about my future/retirement when I'm on a fixed income than currently "owning" a money pit.

Please provide me honest advice and not lectures of opinion....I've read enough of those.

Thanks ahead of time.

[spinDrAtl]

A couple questions: Is this your primary residence? (it sounds like it is) Do you have any large debt you could get rid of - say a $500-$600 suv payment? Is your ARM capped yet? Is a 2nd job an option? Is your home in a good marketable area where if things did turn around in 2 years or so, you could get out reasonably ok?

With 65 DTI, you have no chance to refi with any other lender.

My first thought would be that if you do not want to walk from it, cut debt to the bone - everything goes that is not necessary (or at least analyze doing that to see if it would help). Then get a 2nd job if you don't have one already.

You could try to sell the property at market price to stop the bleeding and then maybe work out something with your lender to pay back any shortfall and save your credit but someone with more knowledge about that type of thing than I have would need to tell you if that is an option.

If it was me, I would do everything I could to keep from going into foreclosure and to keep my credit where it is.

[BleedingOut]

This is my primary residence. ARM not capped. Next adjustment in May(lower hopefully) Currently we are at 11.5%. A couple of additional pieces. We have basically liquidated all that we can. Both spouses work as professionals and put in 60+ hours weekly. The best we could do is a second job of 10-16hrs a week. (maybe net $500/month) that would do little to the overall. We also have a second property (previous primary) that we haven't been able to sell. It is rented, in a depressed market and we are losing about a $1000/month on it. UGH..

Selling at the current market price would put us about $175K short of our current note on the primary. BTW...this is in SoWal on 30A.

This is all possible, but again.....how does this fix the future retirement?

[Pirate]

Have you told your lender they need to work something out with you or they would get the property back in FC? I would be stunned if they wouldn't work a better rate if they were informed how dire the situation was. 11.5 is just greedy. Also, FYI you will need to claim bankruptcy to dispose of the debt and with 2 houses that most likely will not happen. If you just let it foreclose they will come after the shortfall and fees will be packed on. Your 50k a year will still go to this house, you just won't own it anymore and your credit score will be in the low 5's. A non-profit credit counselor might be the answer. At least the lender might listen to them.

[JUL]

You can deed the house to the bank in lieu of foreclosure and walk away

[wrobert]

You can deed the house to the bank in lieu of foreclosure and walk away

The bank has to approve that though. I have a client that tried it and the bank opted to foreclose instead.

[JUL]

How about an auction...

[Bobby J]

Short sale seems to be the only option. Many folks are doing this.

[Rambunkscious]

I'd try everything I could to make it work, I would not pay 11.5% though,
I think this is one of those times when walking away and your subsequent credit markdowns might be the lesser evils if you cant work it out with that bank.

[Mango]

Here's a link with some information from HUD about alternatives (http://www.hud.gov/offices/adm/hudclips/forms/files/pa426h.pdf).
There's a telephone # in there for certified housing counselors that may be able to offer some advice. Perhaps they can help you negotiate something with the Lender in the form of a modification of the current mortgage. With a 6 figure loss, the lender might be more amiable to do such vs. foreclose and with that sizeable decrease in equity, I can't see them accepting a short sale.

[Paula]

I don't have any advice for you BleedingOut but I'm certainly hoping things work out as best as possible for you. Sounds like you're getting some good advice on this board.

[SHELLY]

Bleeding Out,

I don't know if this will help you or not, but I'll just throw this out...there is a site called "Iamfacingforeclosure.com" that has a forum where folks discuss their problems refinancing/modifying mortgages. The site is hosted by a couple of guys who give the people guidance on how to approach the mortgage companies for refi's or modificiations.

Here is a link to the forum: http://loansafe.org/forum/forumdisplay.php?f=4

I'm not saying that the hosts of this site are on the up & up although they do seem very sincere and certainly take a lot of time counseling and consoling these folks who have found themselves in a jam.

As always, I would caution you to be very careful about how you approach any folks who are willing to "help" you out--but maybe if you read some of the stories, advice and feedback it may help get you going in the right direction. In the very least, you'll find out that you're not alone in dealing with these mortgage problems.

Good luck.


Shel.

[spinDrAtl]

Ah, Iamfacingforeclosure.com - Shelly's old friend Casey's past site. He sold that site to those guys some months ago.

Last night on ABC News, they did a story on someone who had a 9% arm that had adjusted all the way up to 14%. Primary residence, both adults worked, etc. I know they did 100% financing when they purchased. They had written their lender to try to work something out and weren't getting any response. ABC made a call and viola - 7.6% 30 year fixed.

It sounds like having a 3rd party helping, any third party (I know we all can't have ABC News going to bat for us), might get the ball rolling, especially if you communicate to your lender that you want to pay and not walk away.

[q1]

Try this: http://www.housinghelpnow.org/

[Chickpea]

Hi BB,

Well my heart does bleed for you and I hope you can find a suitable way to address your very real concerns.

My simple, simplistic piece of advice would be as follows:

If you and your wife are both working 60 hours a week you obviously are hard working and principled (at least that is my take) - do all you can to lower your % interest (11.5 is absurd and bank should be ashamed!), try stick it out for the next 1-2 years and hopefully by then you may be able to recoup some of your investment and avoid the F word.

I do not have a crystal ball but I fervently believe in this area and its inherent beauty, desirability and long term economic prospects. In the meantime, if you have the heart, try some sweat equity and do all you can to make your property stand out, become more desirable and beautiful!

Good luck.

[Bob]

Consult a BK attorney, and draw up the opposing scenarios. You cannot continue under this pressure unless the alternatives are genuinely worse. Please get the best legal advice available.

[BeachKing]

As a follow up,
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_weil&sid=aPSScH5rRBLM

If you can , ask your loan officer , again, to modify the loan. If your really that far upside down, then they to will not want the property.

[Rambunkscious]

Bleeding Out: Check out this webpage, it has your name written all over it:

http://www.youwalkaway.com

or call 1-877-878-9255

looks very promising for you, good luck.

[dunelover]

Bleeding Out: Check out this webpage, it has your name written all over it:

http://www.youwalkaway.com

or call 1-877-878-9255

looks very promising for you, good luck.
That was the company discussed on nightline last night. The show mentiond that this company was just formed Jan. 1st. The scenario they discussed did sound quite like the one described by bleeding out.

[SHELLY]

That was the company discussed on nightline last night. The show mentiond that this company was just formed Jan. 1st. The scenario they discussed did sound quite like the one described by bleeding out.

The "You Walk Away" plan is getting lots of chatter on the Economic message boards too. Here's an excerpt:
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I spoke with John Maddux a "senior advocate" with You Walk Away (YWA) about the business. As one might expect it is booming. For $995 one receives a half hour of legal counsel where individual strategies are mapped out and all the laws pertaining to recourse vs. non-recourse loans as well as judicial procedures are explained to the customer. YWA also files the necessary legal papers to stop mortgage companies from calling and informs you immediately of how many days you will be able to stay in the house for free. Should the lender take longer to process the documents, YWA will keep you informed of any extra time.

With the amount of money at stake, the fee seems reasonable for the services provided.

Maddux informed me that YWA is currently operating in the state of California only, but Nevada and Florida will soon be coming online. Eventually they expect to be nationwide.
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Not sure how programs like with will impact lenders' ability to package and sell mortgages off to investors going forward....my guess--it won't be pretty.

But hey, with the government flushing the tax liability of a foreclosure...."Now is a great time to Walk Away."

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