Foreclosure, Loan Modification, and Short Sales
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2011 - 2013 Recommendations
Loan Modification avenues
May 2013I have been working on getting a loan modification through the Hamp program with BofA. I work on a semester to semester contract basis so I don't have a set yearly salary. I don't qualify for refinancing since my condo's value in the market is lower than my loan. My interest is 6.5%. Anyway, I have had numerous conversations and have turned in every document they every asked for and they always needed one more and one more. It became pretty obvious that they were going in circles trying not to help me. I never missed a payment but I am getting to the point in which I might have to. The kind of advice I need is if you know or suggest any other avenues I may be able to pursue in order to get this loan modification done. I know that there are people out there who claim to get that for you but it's more often than not, a scam. Any ideas based on your experience? Please, don't advertise your own business; I'm interested in real personal experiences. Thanks for any ideas. anon
Hi. We're in the same boat, only with SunTrust. They've lost papers, said we didn't send, then transferred us to another person. It's been a nightmare and we've sort of given up. House is now worth 200k less than when we bought it, and we pay 6.5%. We've never missed a payment. If you find out anything on how to get your lender to work with you, please post! --wishing us both luck
Hi there, I work for a non-profit organization that deals with lending issues and so I have familiarity with the HAMP program and other issues around loan modifications. You are right not to pay any of these organizations to help with your loan modification. It is unnecessary and they are generally scams.
First, a couple of questions. In order to qualify for the HAMP program, your mortgage payment (first lien, taxes & insurance, NOT any 2nd loans) has to exceed 31% of your gross (before taxes) income. Is this the case for you? Also, is there some type of hardship that changed your situation (reduced income? increased expenses?). Owing more than your home is worth does not make you eligible for this program.
There are other loan modification and refinance programs, though, including the recent attorney general settlement. You may be eligible for either a loan modification or a refinance under the recent attorney general settlement. For a refinance, it depends on who your loan is serviced by. Here is some information on the settlement and what you may be eligible for: http://www.responsiblelending.org/mortgage-lending/tools-resources/mortgage-relief.html
I would recommend contacting Katie Porter's office. She is the California monitor under the settlement. She is extremely responsive and helpful. The email is CAMonitor [at] doj.ca.gov. Good luck. Alternatively (but I would try the monitor first), you can try contacting a HUD- approved housing counselor. They are free and are very familiar with these issues. You can find one in your area here: http://www.hud.gov/offices/hsg/sfh/hcc/fc/index.cfm?=search=CA=dfc
loan mod helper
Underwater Mortgage Decisions
August 2012 Hello,
Like many people out here we bought our house in Oakland in 2005. It has since lost nearly half of it's value...
We stupidly refinanced in 2009 to lower our mortgage payments, which gave us a recourse mortgage. The house is located in a so-so neighborhood, that has seen a raise in crime since. When we bought we didn't have kids and were thinking we would be able to sell later to buy in a neighborhood with better schools. We moved in with my elderly father-in-law last year who lives in Berkeley both to help him out and in order to have our 5 year old attend a good school and try to get back on our feet financially.
We have been renting out our Oakland home for a year for a little more than our mortgage, but loosing on the property tax and repairs, and frankly we are not enjoying being landlords. Plus with another kid on the way, we are going to have more expenses coming.
We have called Wells Fargo and we are not eligible for any government programs or refinance.We also don't have enough of a hardship probably to qualify for a loan modification. We would still owe between a 100 and 80k if the house sold at today's prices and don't want to use all of our savings to fill the gap. We don't want to live in this house anymore and were wondering where to start... Does anybody knows a competent person that provides counseling in this field? Or have you been in this situation and could give any input? Thank you in advance. underwater mama
You may want to consult your tax professional and/or attorney about the tax consequences of a short sale. A short sale is a home sale where your lender agrees to sell the loan ''short'', in essence. They generally forgive the rest of the debt--it's rare that a Seller hands over cash at closing unless they are trying to protect their credit more than they are trying to get out from under the debt.
Short sales are long and trying though, and are not for the feint of heart. There are many Realtors who specialize in short sale transactions, and the process has become more streamlined and less byzantine over the last few years. I am a Licensed Real Estate Broker, but I'd also ask your friends, search on BPN and Yelp if you like...find someone you trust---who will be forthright and tell you the truths about what a hard road it is. It will damage your credit though--so don't believe anyone who says it won't. Short sales are different from foreclosures--but they both will get you out from under. Good Luck. Corey
I think you should sell and take the loss. You don't want the house. You have a recourse loan. You dont want to be a landlord and you want to move out of your father in law's house. Sell, take the loss, and rent something you do want. This is the downside of leveraged assets. An alternative: lower your sights and get focused. Get active in your Oakland neighborhood instead of fleeing its problems. Be the parent who helps the Oakland schools meet your child's needs. There are good schools there and I wonder whether you've really given that option its due. Tough love
Thanks to last year's CA SB458, any lender who approves a short sale must grant full release from the debt, so if you short sell your property it will be non-recourse. It sounds like you'd easily qualify for a short sale, and you can call WF to discuss that option without worrying that they will do anything negative about your account. I'm a short sale specialist and WF and other banks refer Bay Area homeowners to me for details on the process. There is no cost to you to sell the property, and WF will pay all the fees. See www.myshortsalegroup.com for more on this question. Carter
Are you sure that your house is worth so little? I think real estate is coming back a bit. I also think that Oakland is going to be an up and coming city. Can you raise the rent to cover most of your expenses? If so, it sounds like it might be a good deal to keep it, and build up your equity. Make sure you check comps before making any decisions. Make sure you are getting full rent for your place. Good Luck
2 homes underwater need to review options
August 2012How hard is it to qualify to rent a house after a short sale or foreclosure? We are going through a strategic default (please no responses with judgements on this) on our previous primary residence. We have become accidental landlords because we are underwater on our mortgage by about $100k. We moved far away for our jobs. We rent for a huge loss every month. We were not in default and tried to short sale but were denied because we were ontime with pymts. We just missed our last payment and will reapply to shortsale in sept. if we are declined, we will go into foreclosure or try for a deed in leui. We are ontime with every other financial obligation. We make a very nice living and are responsible tenants. Am I going to find it impossible to qualify to rent if I need to move? How about credit cards? Are they going to take them away or deny new applications? Nervous defaulter
Most rental agencies and landlords check credit records, and each missed payment will appear as a ding on your credit. In the Bay Area there's a shortage of rental units, and I'd assume they go to the best available tenants. I'm a short sale specialist, and usually advise my clients who are thinking of renting that they do it sooner than later, even before a short sale is completed, to reduce problems from the credit dings - if you're already moved into the rental unit the landlord won't make you move out when the dings hit your record. I've even helped short sale clients purchase a new place before we start the short sale on their underwater property, so they aren't even affected by the two- to three-year waiting period most need after a short sale. From your description of your situation, you should be able to qualify for a short sale as long as you work with a realtor who really knows how they work - ask to see multiple approval letters from each agent you interview. Carter
We short sold our house 2 years ago. We started with excellent credit and have found that our credit hasn't affected us as much as we anticipated. We were able to rent a home without a problem. Everyone we spoke with said short sales and foreclosures aren't viewed as a dealbreaker anymore as long as that is the only issue on your credit. We had one credit card close our account and one lower it's limit, but two years later we're pre- approved for all kinds of cards and bought a car qualifying for their highest credit rating. Glad we are no longer home owners
Effect on renting after short sale or foreclosure
July 2012We're about to do a short sale of our home. We're trying to decide whether to rent while we still have our stellar credit or wait and bank the mortgage we would've been paying, and rent after the short sale (when our credit won't be so good). One of our top priorities is to rent in a neighborhood with good elementary schools. My question is, does anyone here have any experience with renting in a neighborhood with good schools after a short sale or foreclosure? Any wisdom you can share with us? I know there was a similar question back in 2009. I'd like to gauge what the current rental market is like. Thank you! Susie
Hi, there -- I have done some research on this question, and here are my thoughts. Lenders have been known to drag their heels during a short sale(i.e., take months after a valid offer -- and meanwhile, many homes then go into foreclosure) but a new federal ruling effective July 1 stipulates that if your loan is owned or backed by Freddie Mac or Fannie Mae, the lender must make a decision on your buyer's offer within 60 days. (To be fair, some lenders, such as WACHOVIA, have been better about short sales than others, even before this new rule.) If you rush the process to try to get a rental before your short sale goes through, what you will need to think about is, can you afford first month's rent plus deposit (possibly up to 2 months of additional rent for an unfurnished unit) and also pay the expenses pertaining to your current home AND continue those payments until the short sale is finished? Another thought I have is regarding the timing of your entering the rental market, particularly a city or neighborhood with good schools in the east bay. Right now is the peak time for landlords to secure tenants and the demand typically will not slack until late August. This puts tremendous pressure on you to come out on top as the selected tenant.
So, I think you should get acquainted with the rental market now and see what houses and rents are like in the areas you want. First, make a Tenant Resume (search online for a form -- there are many) that describes your fiscal profile. Remember that a typical rule of thumb is landlords like to see that the rent is no more than 1/4 - 1/3 of your monthly household income. This is the rent range you want to aim for. If you have substantial savings, make a note of that, too. As you look at rentals, test the waters. If you are sufficiently well-off and can afford to uphold two homes until your short sale is concluded, then submit your application for any rental that looks attractive to you now. However, if that is not your situation, then it will benefit you to become acquainted with Property Managers and landlords now and let them know that you are acquainting yourself with the rental market, but you will not be ready to rent until later in the fall. This is important, because even though your credit score likely will have dropped at the conclusion of the short sale, the rental market is also likely to have quieted down in terms of demand. Keep the name and contact information of any property managers and landlords you meet, so if you run into them (or their company)a while later, you can remind them of your earlier acquaintance. The low credit score can be explained in a cover letter -- if everything else looks good, no late payments, good income -- then you are much more likely to be perceived as a wonderful tenant in (say) October, when hardly anyone is looking for housing. Getting to know the market and the people involved in the business will be very helpful to you as you make this change from owner to renter. As hectic as this time of year is in the rental market, easing into it now will help you gain an understanding of how you will need to present yourself as a prospective tenant. Becky
My husband is a Berkeley short sale specialist and this question comes up frequently with his clients. Your credit is hit two ways: the completed short sale, and each month you miss a payment before the sale. Chances are very good that the sale report won't hit until after you've already moved, but if the first missed payment is old enough it may be on your record when the rental agent checks. While this situation is very common these days, there's also a real shortage of rental properties right now, and usually there's a lot of competition for anything available. So your credit needs to be as good as possible, and perhaps you should consider moving before you complete the short sale process - his clients often do that. Heather
I went through a short sale two months ago, and just rented a place. My credit score went from the high 700s to 630, but other than the short sale, everything on my credit reports shows that I always pay my bills on time. Landlords I spoke with were consistently understanding and unconcerned about the short sale; it's all too common these days and not seen as a sign that you're a risk. I had absolutely no trouble renting. Good luck! A renter again
Rental property I own is about to be foreclosed
June 2012In 2006, I refinanced my home and took the money to buy a rental property in the neighborhood. Now, the rental property is about to be foreclosed, but the foreclosure keeps being delayed at what is called the trustee's discretion. I need this house to come out of my name so that I can proceed with a loan modification on my home. Although I received reasonable advice that I would never qualify for a loan mod if I had the debt of the two houses combined, I have not been able to find anyone to talk to who is in a similar position. If you are out there, can you let me know? If you have any ideas about this kind of situation, that would be great.
Hi, If you'd like legal advice on your foreclosure situation, I highly recommend Jean Shrem. She has tons of experience with this sort of thing and used to be a full-time realtor herself, as well. Although I haven't actually used her services, I've spoken with her on more than one occasion about real estate issues and have found it helpful. I also know several folks who have hired her and been really happy with her work. Good luck! Jean Shrem 510.882.9992 jean [at] shremlaw.com
Francesca
Fixing credit after a short sale
May 2012Hi - I'm interested in hearing about others' experience in monitoring or 'fixing' your credit after a short sale. I short sold my home about 6 months ago and have been monitoring our credit since. While my score is surprisingly decent (low 700s), I'm curious as to what else I can do (besides pay everything on time) in the next 2-3 years to 'build' my credit back up so that I can easily qualify for a mortgage again. Also, I've read here and there about ways to get the credit reporting agencies to reflect the loan as ''paid'' versus ''settled.'' Anyone have experience with this? Thanks in advance. Ex-homeowner
We did a short sale in 2009. Our situation was a bit different than yours, in that we had to miss mortgage payments to get the bank's attention. Our credit scores were at 800 before the short sale, and dropped to the high 500s.
Three years later, our scores are back up to 700. We bought a car late last year, and qualified for 0% interest. We are currently looking to purchase our next home. We have qualified for an FHA mortgage at a very favorable interest rate. We did have to wait three years from the date of the short sale to clear FHA eligibility again, but now that that has passed, it seems like nothing happened.
We do want to get our scores back up to where they were, but in my experience there's nothing you can do to move your score at this point but wait. You need to put distance between you and that black mark on your credit. We have no debt besides our new car payment, although we do put all our monthly expenses on an American Express card, which we pay off every month. We have started paying that before the statement closes to see if that moves our score at all. Too early to tell on that, and I can't speak to trying to get credit agencies to list your short sale as paid instead of settled.
Considering what we've qualified for since getting our scores back to 700, you probably don't have a lot to worry about if your score is above that point. But, you cannot qualify for good mortgage rates until at least three years after the close of your short sale. Patience is a Virtue
2 homes underwater need to review options
May 2012I have two homes under water and although I make a good income this is draining me financially. I need a financial adviser who specializes in laying out all options for my situation, including walking away, impact on credit score, possibilities of renting or buying again, etc. What I don't need is investment advice or ''how to build a budget''. I'd like to work with a fee based adviser. Any recommendations would be much appreciated. Thank You! Underwater in two places
There are two things that come up when discussing property that is underwater. The first is basically how much do you owe on the property. The second is how much do you have to gain from keeping the property. Both of these should probably be discussed confidentially and you can call me anytime to discuss your next steps which would be either: Keep the home and possibly resctructure the loan, Short Sale, Foreclose (not recommended), or in some cases I've found the property actually isn't underwater. Jeremy
Happened to a friend of mine, and she decided to short sale the home(s). I would recommend talking with an real estate agent that has worked on short sales before, as there is a lot of negotiations that have to happen between owner and creditors. . Laura Arechiga in the north Berkeley Coldwell Banker is excellent choice. berkeleyboo
Perhaps you have already explored this but I was very pleasantly surprised to find that our income property qualified for the Making Homes Affordable program that Obama created. We were able to do a fast track refi and drop a percentage point to reduce payments without even looking at our tax returns! My brother also got an MHA refi on his underwater condo and is saving $300month in payments .. Most important was date of origination of existing loan , before June 2009. You can also ask existing lender about mortgage ''modification ''which is another Obama program to reduce interest rate if you can prove hardship . Our credit is not excellent, but decent mid 600s and we qualified. janis
Need a Short Sale Specialist in Oakland
April 2012Hello, We are looking for an experienced savvy short sale realtor to sell our home in Maxwell Park. It would be a 'no default' short sale if that makes a difference. I'd love to have some solid recommendations for someone who is tenacious, knowledgeable and realistic. Thank you.
Please consider Pier Porrino from Caldecott Properties. We worked with her for many long months resulting in the sale of our downtown Oakland condo as a short sale. We found Pier to be experienced, professional, and honest at all times. It was not an easy process and sometimes she had to tell us things that we did not want to hear but during the process and now that it's over, we would recommend Pier without hesitation. She knows her stuff AND she put together a great team which included a knowledgeable title company with tons of short sale experience. Erin
Professional for help with short sale?
April 2012I've called HUD and finished the first step towards working with my bank to do a HAFA short sale. But this seems like a long and laborious process with uncertain results, and we've determined that leaving is the best thing for us. Sooner the better with unemployment, growing debt, school timing, etc. I'm wondering what kind of professional we should talk to to find out about the financial implications of stoping payment and then trying to negotiate a short sale. I'd also like to be able to draft a timeline of what to expect, and feel somewhat empowered in the decision. Do we talk to a real estate lawyer? A tax lawyer? Or would a real estate agent who deals in short sales be able to give us the tax and financial advice we need? don't want to jump into an abyss
I think your best bet is to speak with a real estate attorney. Realtors, even knowledgeable ones, are not allowed to give legal advice. I haven't met anyone better than Jean Shrem, she specializes in speaking with people who are underwater, whether undertaking a short sale, loan modification or considering walking away. Her number is 510-882-9992, email is jean [at] shremlaw.com, and her website is www.shremlaw.com. underwater
I generally avoid offering my own services on BPN, in keeping with the purpose and spirit of the forum, and because I have enough people who will promote my services for me. But in this case I'm going to tell you that I can probably give you everything you need to move forward in a half hour consultation, maybe an hour tops. Unless you have HIGHLY unusual tax issues you haven't mentioned, you would not need a tax attorney. Real Estate professionals are not qualified to advise you, although smelling the commission for a short sale, many will tell you they are. You need a short consultation with me or another real estate attorney. I have 25 years in real estate law, including hundreds of mortgage debt and title cases and although the law is complex, your particular situation and related legal issues probably are not. I no longer give free initial consultations because I found I was spending a lot of time giving out free advice to people I never heard from again, but I give steeply discounted initial hour and half hour consultations for simple advice situations like yours. I don't think it would be appropriate to quote prices here, but I can say that my charge for an hour consultation would be less than most people spend on a nice dinner out. Tim
Short Sale/Walk Away/Refinance Question
Jan 2012 I know my Parents Network friends cannot give legal advice, but how about some first-hand stories to share? What made you choose one option over the other (if you are in the same boat)? Our house is currently about $80,000 under water, and we are considering one of three options:
1. Short Sale
2. Simply walking away (the banks will not even return our phone calls, let alone work with us in any way)
3. Stay in the house and renovate a bit to make it the best place for us (redo the kitchen, add a bedroom, and so on)
We do not know what to do, given that both of our children will be entering college in the next few years, and we do not know what impact a short sale or walking away will have on any future college loans and such. Also, what is the damage to our credit in all of this?
If you do not have a first-hand story to share, then perhaps you have someone to whom you can refer us (a loan officer, a mortgage broker, a real estate friend...). Thanks! Under Water, but not drowned yet!
You don't say if you can cover your monthly payment or not. If you walk away or short-sale the house, where do you plan to live, and how much will you pay to live there?
In the bubble, so many people forgot that their house is first and foremost, a place to live, not an investment. If you can make your monthly ''nut'' then forget about being underwater for now. I wouldn't take on any more debt to renovate the house, but if you can afford to spend a little here and there to make it comfortable, enjoy the house for as long as you need a place to live.
BTW, $80,000 underwater is a small amount compared to folks $200K to $300K underwater... Glub Glub
It's really hard to make that decision without understanding how things will play out with your specific situation. I would encourage you to talk to a real estate attorney (I can highly recommend Jean Shrem) or somebody else that specializes in this field. Realtors, loan brokers and other homeowners can't give you legal advice which is what you definitely need to start with - it would be terrible to make an $80,000 mistake. Good luck. In the same boat
Your question is a bit puzzling, as it's missing something. You give as your third option, ''Stay in the house and renovate a bit to make it the best place for us (redo the kitchen, add a bedroom, and so on)''... this suggests there's no actual need to sell this underwater house, yes? If there's no burning need to sell, then by all means keep living there... too many other people don't have that luxury! It's Not Just SpongeBob Who Lives Underwater
So what if the house is $80k ''under water?'' The fact that the house, if you were to sell it now (which you do not say you need to do), would be worth less than your original purchase price, is actually immaterial and by itself should not be a cause to change anything. The important issue is whether you can make the payments you've committed to. If you can, then why not just ride it out until the market recovers a bit, and/or live with the fact that you made a bad decision that cost you money?
The only thing I can think of is that you're having trouble making the payments. But you didn't say so. And if that is the case, I can't figure out why one of your choices is to spend even more money to renovate. Why would you need to add a bedroom now if your kids are within a couple years of going to college? Not sure why you need to do any of these things now
First of all, you are not the only one that lost value in their home. A lot of people lost value in their home and most people are staying in their home.
Banks are very unlikely to reduce principal on loans. I have not actually heard of it. If it was the case, then everybody would do it. Banks may be willing to lower your interest rate if you qualify. To qualify, you either need equity in the home of about 20% of the value, or your mortgage and tax payments have to be some high percentage of your net (could be gross) income, like 50% - don't know all the details, it is a government program.
But, before you make any decision, what is the current fair market value of your home. I would make my decision on the percentage of value that my home has lost. If you home is currently worth 500,000 and you bought it for 580,000 then you lost about 14% percent in value. However if your home is worth 250,000 and you bought it for 330,000 then you lost 24% of your value. In the long term, it will be easier to recover some of the lost 14% then the lost 24%.
And you do need a place to live. If you like your home, and you can afford it. Then you should stay. In my opinions short sales and walking away are for only people that cannot afford their home, those that might have gotten taken advantage of with teaser interest rate, not for those that simply lost value in their home. Anonymous
This response comes from my husband, who is a compassionate short-sale specialist and actually cares about the decisions people have to make in this economy. He has helped many homeowners who are under water and need assistance. He's more than happy to inform you about your options so that you can make an informed decision for you and your family:
''Option 2: If you walk away, you are still responsible for the property, and liable for anyone's injuries, until it's foreclosed by your bank. Afterwards, your primary mortgage will be finished but there will be a big hit on your credit, and home equity lenders and other 2nds may be able to pursue you for years.
Option 3 means you are spending money on a property you may end up losing, if you are having financial difficulty. However, if you aren't having financial difficulty paying the mortgage, you plan to live there for 10+ years and aren't bothered by owing more than it's worth, there is nothing wrong with this option. It will be a long time before property values return to 2007 levels again, though.
Option 1 will eliminate all mortgage and property debts completely and legally, and in most cases you may be able to make a new purchase two years after a short sale. In some cases you can simultaneously buy a new home while completing a short sale on an underwater property. - Heather
I was surprised at how many responses said to keep your home if you can afford it. It is true that your home is a place to live in, but if you're not in a home you want to be in, and you don't see it recovering value soon, then why not walk away?
We were in a home in a questionable neighborhood that was about 35% underwater according to Zillow. It would not have regained its value for 10+ years. We decided to walk away and it was remarkably unstressful. We set the robo-calls from the bank to go straight to voicemail (only ONCE did an actual person call), lived in the house for a year and then moved out once it was up for auction. It ended up selling for $190k while we had paid $375k 6 years earlier. We took a hit on our credit (not sure how much), but are renting in a better neighborhood and bigger house for less money than our mortgage.
I don't see the moral argument for staying with a bad investment. Companies strategically foreclose all the time. James Surowiecki wrote a great article about this recently in the New Yorker. He questions why more people aren't walking away. We did talk to Jean Shrem about the legal ramifications and she was very helpful.
Without knowing more about the particulars I can't say exactly what you should do, but I wanted to offer a viewpoint that I didn't see expressed previously. Good luck! happy we walked
Underwater and want to move - options?
Oct 2011We're underwater on our condo and we want to move (looking for a better neighborhood, better schools, bigger place for growing family). We have good credit and can afford our payments, and so doing a short sale is probably not going to be possible? We're considering renting out our current place at a loss (market rate rent does not equal our payments), then either renting a place ourselves or possibly buying another place if the figures work. However, I've heard that it's tough to get a loan for a new house if your first place is underwater...It's a lot to navigate - taxes, loans, our budget, becoming a landlord, etc...Has anyone faced this situation and found a good solution? We're not sure where to start - should we talk to a mortgage broker or a financial planner? Has anyone been able to arrange a short sale when they have no problems making the payments? Just for background, we put 20% down in 2007, but according to an independent appraisal we've lost all that equity and more, very depressing. Thanks for any advice! don't know where to start
Well, we did just that. Our old house back east is still ours (and under water), but rented, with a year contract. Short sale is probably right out (as it was for us), as the bank may say no, AND if they do say yes, it slows the sale A LOT as they dither about deciding if they will take the offer. At our old house we have a insurance policy for the renters so that if there is anything that needs to be fixed, it's covered, and all they have to do is call--we don't need to get into it at all. We looked for, and found a house here and the banks were happy with the renter's contract covering our old house. You can't lose anything by going to a realtor you like (Ours was Carla Higgens 510.390.6930--recommended A LOT) and asking. Go for it. Wendy
If you want to buy a new home that suits you more, I'd start by talking with a good mortgage broker and real estate agent (who can negotiate short sales). While I wouldn't discourage you from talking to a financial planner, real estate is rarely a financial planner's expertise, and they have their own lens and arsenal of tools - so I wouldn't start there. You'll be able to do a short sale if there is a hardship...hardships don't come in one size and flavor - just because you can currently make the mortgage payment doesn't mean you don't have a lurking or looming hardship. From your post, it sounds like you have one lien and that it is a purchase money mortgage - meaning it's the loan you got to buy the place, not a refinance. Purchase money loans are non-recourse in California, meaning, you won't be liable for the short fall in a short sale. **Remember, this is general advice.** Make sure your RE agent stipulates the non-recourse in the settlement negotiations, and that you confirm your own particular facts. You probably have more options than you think. Jessica
Need a mortgage negotiator for loan modification
Oct 2011Can anyone recommend an efficient, nonshady mortgage negotiator to potentially get the bank to lower the principal amount owed? I'm underwater on my mortgage, trying to do a short sale (unsuccessful so far), and looking at options. THX! Stressed out to the max.
If you haven't already met with an attorney, you should consider talking to Jean Shrem, Shrem Law Group. She's a real estate attorney that specializes in talking to homeowners who are underwater. We went through the loan modification, short sale, foreclosure, strategic default consultation with her and she had a ton of information for us. You can do all of the research on the internet (which we did) and talk to as many people as you want (which we also did) but until you meet with someone who specializes in this field (which we put off) you don't actually know what your real options are. But once we started asking for an attorney her name came up from 3 different sources. The difference between what you would like the bank to do and what you can actually expect the bank to do is eye opening. Meeting with Jean helped us plan a realistic course as to how we needed to proceed without wasting any more of our time or money. She also knows everybody so she can probably recommend a good negotiator if she doesn't do that herself. Her contact info is: Jean [at] ShremLaw.com, 510-882-9992. Good Luck! Underwater
Someone to help with loan modification
Sept 2011We are a family of 3, with the hopes of adding another little one to the mix. Like many people in the Bay area, our mortgage is worth more than our house ($130K more). Right now, we can pay our mortgage/interest at 6.22%/escrow on taxes/HOA fees. We have no debt, except our mortgage. While our current financial situation is okay (not ideal), how are we supposed to manage if we have another kid? The only thing I can think of is reducing our mortgage/interest payments. Is there a way we can qualify for a loan modification? Can you recommend advice or recommend a good loan modification consultant/lawyer/financial advisor, real estate person? Where do I start? My husband is ready to walk away from the house and mortgage, which I feel is NOT an option. Feeling trapped
Hello, I'm a realtor who has been dealing with short sales and I know of friends and clients who have modified their mortgages recently. My suggestions would be: First contact your mortgage lender and determine if they will modify the loan. They'll ask for your financial information, such as W2's, tax returns, etc. If they won't cooperate, there are organizations that help. A friend just got a loan mod through NACA(www.naca.org). The last alternative could be a short sale of your home which doesn't affect your credit too much any more. I can give you more information on this if you need it. holly
Experience with short sale or foreclosure
June 2011Hi, Our home is grossly underwater (have lost about 35% value) so we decided earlier this year to stop paying our mortgage. In the past four months, we have tried to work with our lenders (have two loans) to get our loans modified without success. At this point, it makes the most financial sense to strategically default, which is mostly what we intended to do to begin with. We'll probably attempt a short sale, but are prepared to let the home foreclose. We'd be interested in hearing others' experience with either, and receiving any helpful tips or advice on how to protect ourselves financially and/or how to limit the damage to our credit (if that's even possible, we know it's been impacted quite a bit already). And, very curious as to how your credit was impacted by the short sale or foreclosure and how it's improved over time (if at all). Another Underwater Homeowner
I am an attorney and I frequently counsel homeowners regarding short sales and foreclosures. Without offering any legal advice, I suggest that you consult with a lawyer regarding the legal ramifications of either option. The type of loan(s) you have, how you have used the property, whether you have refinanced your loan(s), the value of the property, who your lender is, etc., all factor in to whether one option may be better than the other, as well as whether your lender can pursue you for a deficiency. Hannah
Who Do I Talk To About Doing Short Sale?
June 2011We are seriously considering doing a short sale for our property in Oakland. Our situation might be tricky as we are currently renting it out. We need to know the tax implications of doing a short sale for what the IRS will consider to be an 'investment property' although the only reason we are renting it out is because we can't sell it in this miserable market, it certainly wasn't purchased as an investment (we live out of the area now)... do we talk to a CPA? A tax attorney? Both? Are there CPAs that specialize in RE tax? I'm confused as to who we should talk to. Would like clarification on that and referrals to either or both, if you have worked with someone competent and professional. - future shortie
I would highly recommend Trish Moore. She is HAFA certified and extremely knowledge on all the different elements of going through a short sale. The amazing thing about Trish is that she is super knowledge (not just with short sales but with foreclosures and loan modifications too) and she's honestly interested in helping people save their homes (if possible) and if not, finding them the best solution so they can move on with their lives. After talking with a number of agents about short sales, I was blown away with Trish's knowledge. She completely understood the system, worked with the bank, did a great job of listing our house, and we're now happily out of our mortgage with our credit still intact. Her website is www.trishmoore.com. Best of luck! Been There
I would recommend that you start with attorney Jean Shrem of Shrem Law Group: 510-882-9992, Jean [at] ShremLaw.com, www.ShremLaw.com. She's incredibly well versed about the legal and tax implications of a short sale. former shortie
From my husband, a short sale specialist:
Your question has a two-part answer. For tax questions, a CPA will be your best authority, and since I'm a real estate broker, I'm not a tax guy. That said, if it's not your primary residence, officially it's considered a ''recourse loan,'' and most likely a short sale, deed-in-lieu or foreclosure will have a tax consequence. However, tax consequences are always less than the principal amount forgiven, so, for hypothetical instance, would you rather pay the IRS $20,000 in income tax, or pay the bank $100,000 plus $75,000 interest over many years if you keep the mortgage, until the property is finally worth what's owed?
The second part is, you will need a short sale specialist real estate agent or broker to actually do the short sale. By an amazing coincidence, that's what I happen to do for a living. Good news is, in a short sale, the bank pays all fees, commissions and taxes, except when they require a seller contribution to approve the sale. However, you can start a short sale and go all the way through until you have the bank's conditional approval letter, and if you don't like the bank's conditions, you can refuse the short sale and either keep the property and keep paying the mortgage, or let it go in foreclosure.
I know a fantastic woman who runs a team that helps people avoid foreclosure and save their credit. She has a website that can answer many of your questions. www.bayareashortsaleangels.com Kerri is knowledgeable, personable and passionate about helping people through short sales- and does it without taking money from the homeowner. Best of luck! Jennifer
Short Sale Specialist in Bay Area
Feb 2011I'd like to get recommendations for a short sale specialist in the Bay Area. We are considering going that route with our property and would like to talk to an experienced, professional short sale specialist. Can be a broker, lawyer, doesn't matter but must have excellent references and lots of experience doing this in CA, in the Bay Area in particular. Thank you! - shortie
the absolute best resource for short sales is Kerri with The Bay Area Short Sale Angels. http://bayareashortsaleangels.com/ It's a long arduous process and most realtors wont touch it, but these ladies have made it their business so they know all the ins and out. Highly recommend them. anon
I highly recommend Susan Perry of Security Pacific Realtors, 510-222-8340 office, 510-821-1585 cell. Susan is very knowledgeable, efficient and works extremely hard for the benefit of her clients. She just closed a short sale for our family that was nothing short of a miracle. She handled every detail of the transaction with professionalism and demonstrated competence. Her foremost goal was to serve her client's interests well. She knows how to work with foreclosure attorneys, lenders, banks, buyers and sellers. She is one of the hardest working women I know and I have every confidence in her ability to handle any short sale opportunity that comes her way. Give her a call! Totally satisfied
Short Sale or Walking Away from Mortage?
Jan 2011I'd like to get pointers about doing a short sale. We have rental property in Oakland, and are considering trying to do a short sale at the end of the tenant's lease. Where would I go to get good, up-to-date information about doing this? Same question for walking away which we are also considering -- should I consult with an attorney? Are there any web sites where one can get reliable info on this? - future shorter?
My advice would be to first contact your primary lender and determine if they would let you refinance or remodify the loan. If neither will be practical or possible, then do a short sale through a realtor(short sales can't be handled ''by owner'' anyway.) It's always a much better alternative to short sale than go into foreclosure. It's best to contact your CPA and also get advice from a tax or real estate attorney. I'm a realtor and would be glad to help you if I can. I'm working for another client now on a short sale, and got certified as a ''Distressed Sales'' agent. Otherwise, I can refer you to advisors who may help you. Sincerely, Holly
You need a real estate agent who knows how to do short sales. Not many of them do. I have one who is great and does short sales galore. It's worth talking to him if only to get some solid advice. Felicia
The house we rent is being foreclosed
Jan 2011Hi BPNers, We live in Berkeley, have been renting a house we like for 1 year. It is being foreclosed. We are aware that as tenants we have certain rights and can't be evicted that easily. We would like to keep the house but what does it mean in terms of maintenance? It's an old house, the heater doesn't work properly, who's responsible for fixing it? If it's the bank can we reasonably expect that they will bother? Who do we pay our rent to? Will it increase? Currently we have an agreement with the (former) owner that we pay half of gas and electricity, he pays the remaining charges, will this remain as-is? Do we have to accept visitors if the house is put on the market? Would it make sense to contract a legal insurance and if so which one? Do any of you BPNers have similar experience you wish to share? In advance, we thank you very much for your help and advise. Berkeley family of 3
Yes, you will have to let the house be shown. If someone buys it to rent out, you will have the first rights. They will likely increase your rent, but it will be capped by the rules of the Berkeley Rental Board (you can check with them on this). However, if someone buys it to live in themselves, you will have to move. The law is pretty clear on that. If I were you, I would plan on moving... It will happen at some point, so you should be prepared.
This happened to us a little more than a year ago so the laws may have changed since then. At the time the law was if you had a lease that wasn't up, you could legally stay until the lease was up. If you had a month to month lease, you had 2 months to get out. For us, there was constant stress related to would the house be auctioned, when, the owners lawyer trying to get us out (what they call ''cash for keys''), worrying that if the owner wasn't paying the mortgage they might not be paying for the utilities either and they would be shut off (our utilities were included in our rent - we learned a very bad idea). In the end it made more sense for us to move, even though we loved the house and the location. We did get a lawyer because the owner had a lawyer who was hounding us with calls and letters to leave (the bank was willing to work with the owner if the house was ''owner occupied''). We were able to negotiate staying 2 months rent-free while we found another place, and getting in writing we'd receive our full deposit back. (We did get a check for the deposit back, which bounced!) Hope it works out okay
Ah yes...fun times. We just went through this same thing with the condo we lived in. Have they finished the foreclosure yet? It took them several months to get around to doing ours. When it was final, they sent a realtor out who was very helpful and let us know our options. We ended up getting Cash for Keys, because they didn't want to honor our lease and they really just wanted to sell it. But we did have the option of renting from the bank at market rent, etc etc. Is your lease monthly? the bank may just ask you to leave after the month is out.
Basically the minute they foreclose the property it is no longer the former owner's, and you should pay him rent anymore. They realtor will tell you that. Official papers will show up. If you know which bank, you can try to contact them to get a headstart on the process and maybe work somethiing out to stay there. good luck. MothlingMama
2009 - 2010 Recommendations
Trying to help a friend get mortgage assitance
Oct 2010I'm trying to help a friend who's become disabled get mortgage assistance. This friend has a young daughter and a big heart and helps a lot of people, and I wish I knew how to help her. Anyone know if something can be done now that she has had a heart attack and two strokes and can't work?
You should contact the Unity Council Home Ownership Center www.unitycouncilhoc.org They are a HUD approved agency that can provide assistance in obtaining loan modifications and other workouts. They have been incredibly helpful in my husband and I's process which was the most frustrating thing we have ever been a part of until they helped us. Good luck to your friend. MB
Foreclosure and possible taxes
July 2010The bank foreclosed on the house we once lived in and then rented out for a brief period of time after moving out-of-state. The bank bought our property back for the amount of the loan. The house has dropped about $150K in value since we bought it. We do not know when they will put it back on the market. My question is: should we expect a 1099 A (?) from our lenders (we have a second mortgage on the home). We are in touch with an accountant who has experience with foreclosures. He says it can take years for a lenders to issue a 1099. His advice is to claim insolvency now to avoid dealing with taxes on the property later. We have substantial unsecured debt, and no savings and no assets other than a car that is paid for, so that may make a case for insolvency since our debts far exceed our assets. My spouse has some property that is being gifted to him by his parents, but he is years away from owning it and we don't think that will exceed our current debts. Has anyone out there been through the insolvency process after foreclosure? Do the lenders always issue a 1099? We're not sure what to expect. Please, no judgment. Obviously we are reeling from this experience and are feeling a great deal of guilt and turmoil. However, right now we just need practical advice from others who have gone through this. anon
Yes, expect a 1099 from the lender. Yes, I would claim insolvency...if you are, you are. My experience is that lenders do not take years to issue the 1099. You say that you have substantial unsecured debt and a second lien...have you explored bankruptcy? I'm not a CPA - my partner and I are Realtors who deal with a lot of short sales and REOs - and there are probably germane details you didn't mention so my suggestion is to get the info; talk to a few CPA and attorneys to get more info and compare feedback on what they say about your particular situation. Good luck, and *don't* feel guilty - I doubt the bankers are feeling guilty. jessica
Whether or not your lender issues a 1099, you would still need to claim the forgiven amount (the amount of the debt minus the FMV of the home) as income. Normally, you would be taxed on that income by the IRS and the state. But there are new federal and state laws that may exempt you from paying taxes on that forgiven debt income. Here is information from the IRS and the CA FTB: http://www.irs.gov/individuals/article/0,,id=179414,00.html http://www.ftb.ca.gov/aboutFTB/newsroom/Mortgage_Debt_Relief_Law.shtml
If you meet the requirements, the forgiven amount would not be taxed by either the IRS or California. I'm surprised your accountant didn't mention this. As for claiming insolvency, I'm not sure if it's so much of a ''process'' as just filling out the appropriate IRS paperwork to prove you are insolvent when you file your taxes. former RE attorney
Underwater 2nd home - need to do short sale or ?
August 2010I have a 2nd home in Tahoe that is now worth significantly less than the mortgage (about 30-40% less). I haven't missed a payment, but we struggle every month to make payments and I'm so tired of not being able to put away any money for savings. Long story how I got into this mess - so no judgments please (divorce settlement is the short answer). Can anyone recommend an attorney or some professional to help me figure out what my options are and the credit implications, tax implications, and so on? My now-husband and I own the home we live in and while this one is also worth less than what we paid, we can manage this just fine. feeling stupid in my real estate life decisions
We have the same exact situation and have had this woman send in a hardship loan modification request as a first resort and we will go from there if we do not get any help.: Nicole Francis raintree financial 800-975-5412 ext 105 530-452-2051 I do not know if it will work but she seems to know what is required. It is costing $500. vicki
Rent out rooms or go through foreclosure?
May 2010I'm sure this is a common refrain, but here goes... I lost my job last year. Before that time, I thought we were broke each time we paid the mortgage and caught up on our property taxes. Now that we've been living on unemployment and disability for 7 months, paid our mortgage until last month and owe nearly $10K in property taxes, I am getting a better picture of what it feels to be scared and unable to care for my family. We have a big house that we can easily share with another family or two individuals.. is it safe to rent out when we have children? Can anyone suggest how to find good tenants who will pay their rent on time? Or, shall we bag the whole thing and walk away from our home? I hate to admit this, but I'm scared that someone will hurt my kids or steal from us, so would rather lose the house. Lost in the Oakland Hills
I know how scary this must be for you. We went through something like that 18 mos ago, though not exactly the same. What we did was to move into a smaller place and rent out the big house. We found renters who manage to pay the whole mortgage, and I can pay the smaller amt of rent that covers where we live. We found 'em on Craigslist, checked their references; they paid first, last, and deposit, which was a lot. Moving out of the house was traumatic and cathartic but doable, and much of our stuff is in storage. We anticipate moving back in someday altho not soon. I am really enjoying my much simpler life. Spiritually, for me it's about wanting what I have, not having what I want. Good luck.
We rented out rooms when our kids were small, and it worked out fine. One person was was really great to have around, the other rather boring. I was never worried about the kids or the rent. It is really a very simple process. Advertise on craigslist, and try to include pictures. Interview applicants. Ask about cleanliness, noise, water usage, sharing the kitchen, schedules and anything else that concerns you. If you think you are compatible, do a credit check. I really think that strangers are less likely to be a problem than relatives. People rarely stop paying rent because having a place to live is important. If you like your home, renting out rooms is a great way to bring some money in. Anon
First, (breathe, and) ask yourself:
1. Do you want to keep your home and live in it long term (7+ years)?
2. If you rent out to two individuals (my bias, for a number of reasons, versus a family), can you afford to keep the house? Do a cash flow/budgeting exercise about that. (See what other places are renting for on Craigslist.) If the numbers work, this could be a great solution (you might end up with some great experiences and good friends).
2a. You'll have to judge what numbers make it affordable with the lifestyle you want to or can manage.
2b. Will you and/or your partner be looking for jobs again? How will you be generating income?
2c. What will you do if you leave? How much can you afford for rent?
Write all the numbers out - get help with that, if you need it - and see what comes up for you and your partner.
Now, *along* with renting out rooms, find out if you can get a loan modification. The government programs HAMP and HAFA do not help most people (and lenders don't have to participate, in any case) but loan mods are getting easier, *and you might be successful.*
Call your lender. And here are a couple of resources to get you started: loanscamalert.org makinghomeaffordable.gov
If you can't afford to stay, you don't have to resort to foreclosure; you can sell - do a short sale if your loan balance is more than the value of the home.
I work with a company that runs reports with the same analytics that the government programs use, so you can go into the process knowing if you will qualify or not - it can save you months of grief. jessica
1. Will the rental income help enough? Depending on the house, the rooms, the location, etc, you will probably get $1000 - $2000/month total income for the two bedrooms. If you still are behind $4000/month, then your problem will not be solved by housemates.
2. I have always enjoyed having housemates. My children, now 11 and 14, have gotten much from knowing these other people. It is my preferred lifestyle.
3. Having other kids in the house could add a lot of tension. Consider college women.
Select your housemates carefully. Put an ad on Craigslist. Get personal references. Go with your gut feeling.
4. I think you will be pleasantly surprised how nice it is to have new friends in the house. Good luck!
Stop Paying my Mortgage?
April 2010So, is there anyone out there with advice/experience with deciding to stop paying your mortgage in the hopes of modifying loan terms and/or reduce principal on an underwater property? People I've talked to say that the lenders won't help until you start missing payments. The property is my primary residence here in Berkeley. If anyone has any insight, I'd appreciate it. broke
I don't really know if you should or shouldn't stop paying your mortgage, but I did want to share that my duplex partner and I didn't stop paying and did get modified. It wasn't easy and frankly the confusion around the process is enough to drive anyone insane, but it did happen and our mortgage was vastly modified. We didn't lower our principle but they did defer a portion of it and lowered our rate a ton. Good Luck! Another modified homeowner
Hi. I'm a real estate agent in Berkeley and just this week attended training on some of the new programs that the government has put into place in order to help homeowners who are underwater. I don't know what kind of help you need exactly, but there is the HAMP program (Home Affordable Modification Program) which helps homeowners with loan modifications and the very new HAFA program (Home Affordable Foreclosures Alternative Program), which just came into effect April 9, 2010. There are many benefits of the HAFA program; among them is a new path to a short sale or deed-in-lieu in which up to $3,000 is given to the homeowner for rellocation purposes. I recommend looking into both these possibilities to see if they are a fit (homeowners have to go through HAMP qualification first before HAFA), or contacting an experienced real estate agent who can guide you further. Good luck. David
I did this last year. I stopped paying in April (BofA loan). Some letters and phone calls but surprisingly civil overall, and I was careful to be civil and tell my story, ''I just can't afford to pay''. Until the third month no one would talk to me about short sales or other options. After that I fell into a different category and was able to negotiate a short sale successfully, closed December 24. I lived in the house for free until October and paid down some of my other (numerous) debts. Until you are no longer the owner on paper you are responsible for the house and a vacant building is at risk, you do the bank a favor to keep it occupied.
This worked very well for me though I was extremely anxious in the beginning. Now I just wish I had done it sooner. It appears I will not owe taxes on the amount that was forgiven. I did suffer credit consequences - score is now in 600s, credit limits slashed on cards, checking account overdraft protection greatly reduced - but I feel better living on a cash basis anyways. My new landlord was very kind and I had no problem finding an apartment in Berkeley despite these events. Research some of the unbelievable practices that lenders indulged in during the bubble and you will not feel so guilty. There are many others who have opted to go this way, though people often are uncomfortable talking about it.
Good luck, do what is right for you and your family. Happier (by far) Renting
Restructuring a mortgage?
Feb 2010any way to get advice about a restructured loan? I have a friend who is upside down and can just barely make it. Are there loans for people who can pay but want to consolidate 2 loans over 6% for something they can breathe with?
You can find agencies that offer housing finance related counseling at http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm . One of these organizations can help you to understand if any of the workout programs that have been developed fit your situation, or if there are other options you might try to negotiate with your lender. Know your options
Wishing you the best of luck with this. Have this person contact N.A.C.A. They have been and can possibly be helpful. One has to sign up and attend their workshop, fill out some one line info, and then meet with a counselor. They are supposed to help folks best who are in alot of trouble. I have had personal expereince with Project Hope. I think they are good people but without much clout. Also the banks keep people waiting for a long time (generally) have amazing hurdles and rules which seem like an excuse to say no ( I know there are exceptions sadly very few..Truly the success stroties I have hear are through NACA ( you can google them). Best of luck! BP
Another Underwater Housing Worry - walk away?
Jan 2010although I know we are so lucky to have a home and one stable income (and one needing work) I am feeling increasingly anxious about the particulars of both the current and future housing market; our housing value is down 50-75%; neighbors on both sides of our house plus at least 2 more on the block have foreclosed and looks like they will be long-term empty; we can make the payments but have little else for vacation/ zero savings and cannot afford to make needed repairs on the house; we have a $400K mortgage in a horrendous school district (WCC) that once held some promise but is suffering even more so than other districts; beginning to feel unsafe and depressed on a half abandoned street.... advice about walking away greatly appreciated, I understand the ''moral obligation'' financial companies reason for ''staying'' but I find this hardly compelling in the face of bailouts at taxpayers expense which are not helping many people at all. Any advice; and hows and who to get help from if you have ''walked away'' welcome. underwater
We bought our home almost 5 yrs ago at a top price in this area for $700,000. Our model just sold on our street for $325,000. I know how you feel! Six homes on our street have foreclosed. If our home were a business and we were paying astronomical costs to be able to be there yet our income can't sustain it, then we'd probably shut our doors. I don't want to be stuck with a mortgage for the next 30 years that will kill me. For us it's a beautiful home, but in the end it is just a house. We can find another home elsewhere. I also came to realize that what is most important is our love for each other as a family and our health. The rest is just ''stuff'' and replacable.
The bottom-line is that we don't like the schools, we don't like the area, and we want to move. Well, this is our opportunity. A year ago we stopped paying our mortgage. A few months after that we contacted an attorney and talked to him about our options. He explained our choices (which are different for everyone based on their set of circumstances) and the best choice for us was to file for bankruptcy, which is what we did. We have saved money over the past year so that we can recoup some of our losses. Our realtor told us to stay in the home until a realtor knocks on your door and offers you ''cash for keys''. Once the home goes on the market, a realtor wants you out of the house. Generally, they will offer you money to move out. I bought a really cheesy e-book, but it gave some great suggestions on how to stay in your home longer. Here's the link: http://www.how-to-avoidforeclosure.info/. We received a ''notice of sale'' from the bank, but based on info in this e-book we were able to talk to our bank and cancel the notice of sale.
So that's our story. My suggestion for you would be to evaluate what is most important in your life and really take stock of what is truly valuable to you. Then look at your home as a business decision. Don't make it personal. I know that this is hard and emotional. It wasn't always easy for me either. However, my husband and I talked constantly about it and helped each other through it. We've become a great tag-team. I wish you much succes with this!!! Am There!
Google Brent White's ''Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis.'' You can download the PDF from many sites. He's a University of Arizona professor that advocates walking away, though corporations call it ''Strategic Default,'' and do it when it helps their bottom line. Sadly, many don't consider this option until they've exhausted savings, retirement, etc. It may be better to keep all that money, default, and know that in 7 years it can all be OK again. Do what's best for YOUR bottom line! JT
I can't give you concrete advise on walking away but I can tell you that the ''moral obligation'' thing is a corporate myth designed to squeeze more cash out of honest people. The fact is (learned from a recent NPR interview) that people pay thousands of dollars extra in closing costs for a clause in the contract that says if you don't make the payments the bank gets the house. In other words, you have already paid for your right to walk away and it's not even a breach of contract! Of course your credit rating will take a hit but that stuff is temporary and you can work through it.
Given the past year or two of bailouts and bonuses, bad loan practices and loan sell-offs; it galls me that banks throw the word ''moral'' around with such abandon. There is nothing moral about it anymore - for anyone. Listen for yourself: http://www.npr.org/templates/story/story.php?storyId=122573604
act in your own economic self interest - they do
Hi there - I'm sorry you're having these worries. I'll get right to the point about ''walking away''. My feeling is that there is really no moral component to this at all. Your mortgage is a contract, nothing more, nothing less. The contract states that you pay XX dollars every month, and if you don't, the bank gets your house. OK. If you feel the consequences of walking away (foreclosure on your credit record, perhaps social disapproval) are worth it, and that breaking your contract is in your best financial interest, then I see nothing wrong with that. Good luck! anon
It's business decision, not a ''moral obligation.'' If you ran out of money, your bank would feel no ''moral obligation'' about letting you stay. It would make a business decision and put you out.
No less a financial institution than Morgan Stanley recently walked away from several properties they bought in SF at the height of the real estate bubble. It didn't make business sense for them to stay. They wrapped their decision in spin, ''an orderly transfer of property back to the lender,'' yada, yada, yada. The reality is they determined the cost of walking away was less than the cost of staying, so they walked. If financial institutions don't have to observe anything but what makes business sense for them, you don't have to consider anything else either.
That said, it is a complicated business decision you'd be making for yourselves (one with long-term ramifications), so you'll want good legal and financial advice before taking that step. But if it doesn't make financial sense for you to stay in your home, you're under no ''moral obligation'' to do so.
Good luck! - One Set of Rules For Business and Individuals
Assuming you have other lines of credit and are starting with good credit, the hit of foreclosure isn't actually that huge. Your credit score will go down, but within a couple years you'd be able to get another loan. And it only goes down a little bit, it's only one negative event on your credit score (assuming your credit history is clean to start). Here's an interesting NYTimes article about the whole thing. Screw the moral obligations, why should homeowners be required to have morals when nobody else touching mortgages are required to? (banks, brokers, etc)
http://tinyurl.com/yk4g3sm
http://www.nytimes.com/2010/01/10/magazine/10FOB-wwln-t.html?scp=1=walk%20away%20from%20your%20mortgage=cse
As a side I'd like to point out that there are huge tax ramifications with losing your mortgage interest deduction. So much so that renting at $2,000 is the equivalent of owning at $3,200. You'll have to talk to a tax person to get exact numbers, these are approx. But you get the idea. -owner occupied homeowning is a business too
I am a Real Estate Broker. Once you get over the morality of leaving the ''BANK'' loan without paying, the mechanics and options are very wide open.
In most cases I see, owners have spent 9 to 12 months after they make their last payment before the lender forcloses and forces them out. This will drop your credit score like a rock... into the 500s and will take a while to recover ...years.
The short sale route seems to make it possible to keep credit in the 600s and is more orderly and much less public than forclosure. the result is the same.. the BANK gets less than their loan.
There are a lot of less ethical options, some legal, some not. I have not seen any of my clients get a loan modification, though I strongly suggest you spend some time trying to get the BANK to do that, as it usually makes the client more willing to let the property go. Do the loan modification yourself, do not pay anyone to ''help'', especially in your first round of attempts. Henry
There was recently an NPR Talk of the Nation program about walking away from your mortage. The message I got is that banks and the media are relying on the middle class sense of guilt and moral values to stay in their homes, when in fact they have the legal right to walk away from the house and the companies that say is inmoral for individual home owners do it when it affects their own profit for much larger sums.
The program also suggested you check your State laws and specific mortage agreeemnt to become familiar with the terms, penalites, fees, etc. before making the decission to walk away from your mortagage.
Check the program at: http://www.npr.org/templates/story/story.php?storyId=122573604 Good luck!
#1: Hello Underwater, [long message in 3 posts here]
I am not a financial advisor, so please seek counsel. But here are my two cents: Stop paying. What you're asking about is called strategic default: voluntarily walking away from your debt because it is a good financial decision. I think you're doing some good and realistic critical thinking.
First, I'll address the moral obligation point you raised: Forget it. Your first obligation to yourself and society is to take care of yourself and your family. You can't afford your home on your current income with the current loan. You can make the payments but you can't afford the payments, because you cannot pay for maintenance, and you have no savings.
To underline your point about the banks and bailouts, maybe you saw this news item last month: Dec. 17 (Bloomberg) -- Morgan Stanley, the securities firm that spent more than $8 billion on commercial property in 2007, plans to relinquish five San Francisco office buildings to its lender two years after purchasing them from Blackstone Group LP near the top of the market. The bank has been negotiating an orderly transfer of the towers since earlier this year... So, I suggest that you negotiate an orderly transfer of your home back to your lender. This is from an abstract of a paper titled, Underwater and Not Walking Away: Shame, Fear, and the Social Management of the Housing Crisis: Norms governing homeowner behavior stand in sharp contrast to norms governing lenders...This norm asymmetry leads to distributional inequalities in which individual homeowners shoulder a disproportionate burden from the housing collapse. (If you, or any BPN folk would like to see the article, I can email it to you.)
Ask yourself:
* What is the approximate value of your home and the balance of your loan?
* Do you want to stay in the house?
* If so, for how long?
#2: If you are under water on your loan by less than 20% (e.g., if you owed the lender $400,000 and the home is worth $320,000 or more) you might consider staying - if you could afford the payments. My opinion is that if you want to remain in the house long-term, you really need more income if you want a good quality of life, not to mention a safety net (savings) and, say, college educations for the kids. (I chose 20% arbitrarily; the figure is not a formal benchmark, but a subjective opinion.) Additionally, statistics show that areas already under water are continuing to decline, so judge your neighborhood accordingly.
Your post suggests that you don't want to stay there (or, possibly, you do, if the payments were lower). If you do want to stay, you could attempt a loan modification with your lender - more easily said than done: Very few loan mods have been successful, either directly with lenders or via government programs (e.g., HAMP). Lenders vary in their willingness and difficulty to deal with. In short, this is a cumbersome process, especially if you don't have a hardship, are current on your loan, and your credit is good. But you can ask, and we can hope that banks will become more flexible.
So, what are the options?
* Ignore it all, with a strong possibility of involuntary foreclosure, down the road...stressful; on your record for 7 years; and makes your credit tumble.
* Bankruptcy: a subject unto itself - seek advice and explore the various forms.
* Sell. It will be a short sale meaning that the sale price will be less than the loan amount. It's in your financial interest to sell as soon as possible, so you don't dump more money into the mortgage interest payments. Or stop making the payments now, as I suggested above, with the goal to sell before the default process leading to foreclosure concludes. Short sales can take a long time.
#3: I can think of three ways to proceed here:
1. Apply via a government program such as HAMP or HAFA (coming soon). A long process with uncertain results...I wouldn't bother, but it is an option.
2. List your property in the traditional manner and hope it sells quickly.
3. Find an all-cash buyer *with the expertise to close quickly* (I know of them), which is the quickest kind of sale.
A couple short sale ramifications:
* Possibility of taxes on the phantom income - cancellation of debt income - which is the difference between the sale price and the balance of the loan. *However, at this time*, the Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence (irs.gov/individuals/article/0,,id=179414,00.html).
* Possibility of deficiency judgments against borrowers, from lenders, for the difference between the sale price and the amount of the loan. You will want to negotiate that the sale price includes payment in full, without pursuit of any deficiency judgment. If there is a 2nd or other loans on the house, those lien-holders can pursue payment, so that would need to be addressed.
This is not an easy decision, and it's a complicated subject with many moving parts and implications specific to individual situations, so please don't take my post as exhaustive. Be organized, persistent, get help, ask questions, and good luck! You have a lot of company. Jessica B
Loan modification and/or bankruptcy
Jan 2010I would love the BPN community's recommentation for a lawyer in the Walnut Creek/Concord area. As with many Bay Area homeowners, we are deeply underwater with our mortgage. We need to talk to a lawyer who could advice us about a loan modification who may also have a subspecialty in bankruptcy as this is a possibility. I don't know if this is possible, but any leads are appreciated. Help needed
I know a wonderful attorney who we have used. She is very professional and is very good at what she does. Her name is Angela de la Housaye.She's based in Walnut Creek and San Francisco. Her number is 925-944-3300. Debbie Hoffman debbiehoffman [at] comcast.net
We opted for going with NACA, I attending the three-day seminar in San Francisco, and they are very clear as to what they can and can not assist with. I worked for a year at it on my own and with two other HUD agencies with absolutly no budging by the bank. NACA made it happen for me. I was ther to see it working for others, and I was worried by the negative posts on the internet about them. It is all volunteer the seminars are huge, the website registration and remod is much slower...so they do not move quickly from what I see on the online process. I wish you the best of luck. Terrie
I don't have a specific RE attorney currently to recommend but I *can* recommend a trustworthy Realtor who is experienced with short sales, foreclosures and REOs: Dennis Keefe 510-685-0000 dennis [at] denniskeefe.com
I wouldn't go directly to a bankruptcy attorney (unless you've already decided to declare bankruptcy without an attorney's input) because bankruptcy is expensive, you lose control (and it stays on your record for 7 years), and you very possibly have more options short of declaring bankruptcy.
But I *would* consult a RE attorney and have him/her work with your lender in a foreclosure or short sale (and to note that in your documentation for the lender, e.g.,: ''Seller has retained a real estate attorney to facilitate the short sale process.'') *You will want to negotiate forgiveness from your lender of any deficiencies.* (Dennis can provide input on that, too, as well as reasonably-priced attorneys who specialize in short sales.)
If you owe more on your loan than your house is worth (''upside-down''), that leaves a loan mod, short sale or foreclosure as options.
Most loan modifications to date - whether via government programs or not - have not been successful. I've read that less than 4% have been successful, and of that 4%, 60% have ended up in short sales or foreclosures. If you can't afford your home, I wouldn't take the time and stress of attempting a loan mod.
But here is a resource for the government programs if you want to explore: - www.makinghomeaffordable.gov - for HARP (Home Affordable Refinance Program) and HAMP (Home Affordable Modification Program).
You have a lot of company: more than 20% of homeowners, nationwide, are upside-down, and the figure is much higher in CA. Be methodical, persistent and Good Luck! Jessica B
Walking away from my house
Dec 2009In 2002, I bought a 780 sq. foot house in Oakland. In 2008, my partner and I added a bedroom/bath. In order to pay for it, I took out 4 construction loans. The plan was to refinance into 1 loan. Market crashed, house is now underwater and Bank of America who has all the loans is refusing to help. While I can continue to pay the loans and stretch my budget, long term it doesn't seem possible. I am looking for people who have walked away as well as names of someone who can help me financially sort through my choices. Rachel
I went to a lawyer Steven Mehlman in Walnut Creek, you can google him. He saved my house, negotiated with the bank for a much lower interest rate, forgave my 7 missed payments and negotiated my second of 125k to 5k and forgave that loan. I am going thru a divorce and the thought of more change for my kids was heartbreaking. I went from paying $4700 a month to $2900, taxes and insurance included. Still tough on one income but it's doable, sort of. He's honest, that's all I can say, very by the book. hang in there because I heard congress is realy coming down on BofA cause they seem to be a very bad offender of not letting people refi. He may be able to do something for you...Good Luck. erin
Had any success with load modification?
Sept 2009Has anyone had any success with mortgage modification? Our mortgage is with Wells Fargo, and they are really making us jump through hoops to even get on a list to be considered. I feel hopeless and frustrated, and almost don't want to bother with it, which I feel is what they want: for me to drop it. Any stories, good or bad, would be appreciated. If you were successful, how did you do it? How long did it take? Was it worth it? Thanks for your advice. Treading water
My husband went to a seminar in Santa Cruz a couple of weeks ago. My parents had a medical hardship and are working on getting a loan modification.
The high points from the seminar: Yes, you can get a modification, people are doing this. It is a drawn out process.
Short sales (selling your house for less than you owe) do not necessarily wipe out your debt.
There was a lot of talk about bankruptcy. They said Home Equity Lines of Credit (HELOCs) are generally wiped out in a bankruptcy. You need to talk to an attorney though.
Don't try to show that you make a little bit of money. Try to show that you make as much money as possible. It shows the bank than you have the means to pay in the future.
Talk to a HUD certified non-profit agency for free advice. Never pay someone to modify your loan...it is a scam. You can call (800)-830-4657 U.S. Department of Housing & Urban Development (HUD) Serves members of the general public Referral to agencies that provide free or low cost advice on mortgage foreclosure and assistance with negotiating with lenders. Call: -(800) 569-4287. Web: www.hud.gov
Homeownership Preservation Foundation HPF is a HUD certified nonprofit agency offering free foreclosure counseling nationwide. HPF is a member of HOPE NOW, a voluntary organization of the mortgage industry that may help homeowners at risk of foreclosure with either repayment plans (which do not reduce the amount you owe but give you more time to pay) or modifications (\xc3\xa2\xe2\x82\xac\xc5\x93workouts\xc3\xa2\xe2\x82\xac\xc2\x9d), which do lower principal and interest to reduce the amount of money you owe. If you agree to a repayment plan or modification, make sure it is a long-term solution you will be able to afford over the remainder of your mortgage. National toll-free hotline at: (888) 995-HOPE. Information about HOPE NOW is at www.995hope.org. Diane
Renting after Short Sale or Foreclosure
August 2009 I have just declared Ch 13 as my home that I bought for 535,000 depreciated to 180,000 and payments exceeded my ability to pay when I changed employment. I will have to move from my home in two months and am wondering how to handle my credit issues/bankruptcy with potential landlords. Any hopeful and positive advice would be appreciated. thanks.
August 2009
Has anyone had any experience trying to rent here in the bay area after having a Short Sale or Foreclosure on your credit record? I would love to know if it is even possible to find a home in a decent neighborhood with decent schools with damaged credit. Thanks
Can't speak for other landlords, but I have a couple or rentals and will accept someone who has gone through bankruptcy or has had poor credit except for my house in Berkely due to the rent board.
We moved from the Central Valley to the bay area after foreclosing on our house. We found a house that we liked here and were very up-front with the landlords about our situation. Aside from the foreclosure, we had perfect credit and our report showed that. Their response was ''so many people are in this situation right now.'' You may also want to give them references to others who can vouch for your ability to pay bills on time if that's an issue for them. I think as long as you are honest, a landlord will appreciate that. I don't know what the rental market is like right now, but when we rented 8 months ago, landlords seemed desperate to get people in their homes. Good luck! Happy in the Bay
My ex isn't paying the mortgage on our condo
August 2009I purchased a condo with my ex-boyfriend approximately 2 years ago and we are both listed as co-owners on the property and loan. He lives in the condo with his new girlfriend but the mortgage has not been payed in over 2 months. He refuses to work with me on any solution for sale or short sale. I was willing to walk away from it and let him keep it in order to provide safety for my Son and I but my credit is getting ruined at this point. The Bank will not remove my liability from the loan because the loan has not been current. Can anyone provide any advice on what my options might be? I am feeling like I am at his mercy and need help making the right decision on how to proceed. Thank you! Survivor
Accept what is and be glad you got away with yourself and child intact. Just walk away. Be glad he isn't doing his best to hang onto the condo. In a few months, he will get kicked out and the bank will take it over. Your credit will be shot. Accept it, and move on. There's no better time in this country's history than now to be defaulting on a mortgage, and people are very understanding. You can recover from this. Again, the things that really matter have already been taken care of.
Short sale or forclosure advice please
July 2009 I've spent countless hours trying to figure out if we should short sale on our home or do a foreclosure. We live and rent here in california but own a condo in AZ. I understand that if we short sale on our home we will have to pay taxes - a huge figure as we are selling it for 90K less than we bought it. If we foreclose do we also pay taxes? I have asked SO many people but everyone has a different story/interest. The realtors prefer us to short sale as they get a profit in the sale and they say we should definitely short sale. Others say that we should foreclose as we don't have to pay taxes. Who can answer my question?? My tax attorney is out of town and I don't know who else could be of help. My countless hours on the internet researching has me so confused as well. And, we do not care about our credit at this rate. So that is not a factor in consideration. Just the $15K or so that we will have to cough up in taxes. Advice much appreciated!
I'd recommend talking with a real estate attorney. They can cost upwards of $250/hour but you probably only need 15-30 minutes of time to get this straight. I use a guy who charges in 1/10th hour increments (at least he did for me on a larger job), so he's worth contacting. He's very knowledgeable and also kind and thoughtful (rare combo in the RE business!): Rick Addicks mail [at] rickaddicks.com (415) 883-0365
Steve
Bank says we don't qualify for a loan modification
April 2009
I have begun talking with my mortgage holder about loan modification since my loan is now ''upside-down''. I got so far as to have them input my ''financials'' but was told we didn't currently look like a good bet for them to recommend modification because we need to have between $300 and 500 more in income per month. This seemed awfully close to me, and the rep said I can call back to update my financials at any time. When talking to her, though I had thought I was fully prepared with all the info I needed, it turned out I still had to make some estimates. I plan to call back and offer (after doing the research)actual numbers for everything that I had to estimate. I also neglected to mention our (albeit small) savings. I have two questions for the community, in case any of you have knowledge of this process. (I understand that BPN is not here for legal advice, just wanting to know your experiences or thoughts.) She asked for the amount we pay on credit cards each month - not for the balance, and not for the minimum amt due. We pay more than the min amt due each month. Would it help in this scenario to just make the minimum payments due instead? This would result in more cash in pocket each month. (Though of course we wouldn't be paying our credit cards down.) We also just received a big tax refund. I had planned to put most of it towards credit card debt. Should I instead put it into my savings account so that I can report a larger savings balance? I would have assumed they were going to take into account credit card balances but could it be that they don't? My goal: I would like the loan to better reflect the actual value of the house, so that we can reduce our monthly payments. We are making ends meet at this point but it's very tight due to a recent lay-off, and we have no room for emergencies. Thanks!
HUD counselors are available for free.
I wouldn't take any direct action with the lender until you are clear about your options. To get true help, I understand you have to get beyond the first line of phone answerers to the part of the company that has the power to help.
Be careful of any loan modification company who takes money up front to 'help' you. A company with integrity will analyze your situation and, only if you fit the criteria, take you on to truly help your situation.
I am testing the waters on this via my financial planner, Gordon Carlson and Associates (who will do the analysis for free because we are clients)http://www.gordoncarlson.com/
He has helped another company form who will actually do the work. As I understand it, they will only get paid if there is a successful result.
Their website is resultsadviors.com. Here's the contact person: Kim Cahill 949-528-6684 (Direct/Office) 949-528-2597 (Fax) kim [at] resultsadvisors.com
Sandy
It would probably help to talk to a mortgage broker you can trust, they should be able to take into account your recent tax refund and of course the credit card debt. I've worked with Tom Nitsan, at MPR Financial, and he's always been very honest about what we could and could not afford -in our case it made no sense to refinance. Try giving him a call at (510) 527-6146. Good luck! Anna abellomo [at] gmail.com
A few thoughts - I don't think the house's current low value matters at all, just forget that. Although separately, that depreciated value can get you lower taxes... another subject. Also, the credit card balances don't matter. I'm wondering if you can just report the minimum payment but still actually pay more on the cards if you want to - I'd ask, then I'd do in the short run while you're trying for the modification whatever is necessary to get that (i.e., just pay the minimum).
By all means, minimize (or ignore?) expenses and maximize income to get within that range. Think of everything you can and ask this person where else you can lower expenses and raise income beyond all of your ideas. I'm not sure about savings and tax refunds, but I'd certainly try to find a way to convert that to income definitely. I'm not an expert but I hope that helps. Good luck. Anon
Just wanted to tell you and anyone else about this real estate attorney that saved my house. My payments dropped by a 1/3, saving me $1700 a month. He got me into a 30 yr fix with a 5% interest rate, got my second to go away for 5k (it was 125k). I sound like an ad but i'm really grateful for what he did for me and I want to send business his way. He was such an advocate for me, never saying no to the banks and he was relentless. It cost about 4k but I figured over the life of the loan I saved 500k. I must say though, it was really scary. The banks would not take me seriously until days before my scheduled auction on the county steps. (scheduled to take place the day after my already planned 7yrolds b-day party). Good times. I know I got a lot of grey hair out of it and quite a few bottles of wine were drunk but now i can stay in my house. His name is Steven Mehlman, he's out of Walnut Creek 925) 935-3575 You can email me if you want and tell him Erin told you about him. good luck
Pay $2500 for a loan modification?
March 2009I have friends, a young couple, who bought a house last year that is now valued less and they bought it with one of those interest only loans that is ballooning. They are distraught and I think they've fallen prey to an ''agency'' that has asked for $2500 to help them. It sounds fishy to me. However, when I tried to figure out who they could go to to see if they would qualify for the mortgage relief recently passed, I can't figure out who they go to. Their loan is with Wachovia and they were told that because they haven't been late yet, there is no help for them. Do they have to stop paying their mortgage in order to get help? This will happen soon anyway and they are thinking about just walking away. I would think they could talk to someone certified to do an FHA loan or call Barara Lee. Does anyone know or will getting into this program be so difficult no one will be able to take advantage of it? anon
Tell your friends: (1) do not stop paying their mortgage, the loan modification programs backed by the Treasury that Obama recently announced only apply to people who are current on their mortgage, whether or not your friends qualify is another issue but if they do they must be current on their mortgage. (2) they can get free mortgage counseling from a HUD approved non-profit mortgage counselor who will walk them through their options and through the loan modification process if they qualify. To find one near them they can go to the HUD website. good luck
I'm sorry about your friends' situation, but your instincts are correct: NO reputable mortgage help organization will charge $2500 upfront. This sounds like a scam. Suze Orman says these companies are scams. If the loan is with Wachovia, they need to keep calling and calling until they (hopefully) get some help. If Wachovia has sold their loan, then they need to find out who owns it now. Here is a helpful link about the government mortgage stability program introduced earlier this month: http://www.suzeorman.com/downloads/HomeownerAffordabilityStability.pdf
Suze said to qualify for some of these mortgage relief programs, you DO need to be delinquent on your loan. Karen
I don't know about Wachovia, but my mortgage is with WaMu, and when I first called for help, was told the same thing--that since I'm not late with payments, they can't help me. I started looking into other options (including talking to one of these ''consultants'' who wanted to charge me $2,500 to help). Then I went on the HUD website and called every single agency that is listed as being a resource for my city. I got replies form most and, interestingly, slightly different services or advice offered. I went to a counseling session with the one that seemed most helpful, and was basically told that I do, in fact, qualify for mortgage assistance, but I might need to be persistent, as the bank's first reply will always be ''sorry, we can't help you,'' unfortunately. The magic number, apparently, is 31%--if your mortgage payment are over 31% of your income, you probably do qualify for some sort of assistance. I had to be very persistent, and use phrases like, ''While I am not currently in default, I will be if my mortgage is not modified.'' I'm still sorting it out with them, but it looks like something positive will result. Now it's just a matter of dealing with the bureaucracy, calling back every week to see where my application is in the process. I can't stress enough how important it is to keep calling back--they are very backed up with people in trouble, and things fall through the cracks. Mariah
Do not, do not, do not pay money for mortgage assistance. Please have your friends read this article from the March 16 Chronicle. http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/03/16/MN2A16DOBH.DTL=mortgage+scam=001=1000 If the link does not work, just search for ''mortgage scam'' at http://www.sfgate.com/
You're right! They shouldn't be paying any money upfront for help with mortgage rescue. I'm a journalist and have done stories about all the mortgage rescue fraud out there. The fact is even if a company isn't fraudulent, no one needs to be paying money for this. There are HUD approved housing counselors who get grants to offer this help FREE. Here's the hotline to learn about the HUD approved mortgage/housing counselors in their area: 800-569-4287. hope this helps
Beware! Be VERY careful with people who claim that they will fix your mortgage woes. We're in the same boat as your friends. Bought our home 4 years ago with a horrible adjustable rate mortgage and way upsidedown with no way out. We fell victim to an ''agency'', Short-Refi.com aka Wizard Lending who claimed they would negotiate with the bank and get us a great new rate and possibly a principal reduction. We lost over $1000. 2nd worst mistake of our lives (after the mortgage)! In the end they did absolutely nothing to help us so we took matters into our own hands. I think it is true that in order for the bank to pay attention to you must be late. We too were told by our bank, Indymac, that in order to be considered for a loan modification we would need to be delinquent (I know, it makes no sense right). Once we were 30 days late they were much more willing to work on a negotiation. Call the bank directly and keep calling until you get to talk to someone in the right department like loss mitigation to begin the process of applying for a modification. Since March 5th much has changed thanks to Obama and many banks now have been given an incentive to work with people in troubled loans. Check out the HUD website for free counseling. There are certain criteria that must be met in order to be considered for modification- most importantly the borrower has to prove that they make sufficient income to make a modification worthwhile but no so much that they could afford the loan without a modification. It's worth a try If all goes well our interest rate will be reduced from a 6.7% adjustable to a 3% 40 year fixed. Hey, if they can't keep the house under the current terms anyways why not let the loan become delinquent and see what happens. Worst case scenario is they deny a modification and go for a shortsale. DON'T hire anyone to negotiate on your behalf unless they're an attorney, even then I don't know. These days it's not necessary- banks don't want to deal with any more foreclosure. Wish I'd know that before we spent the last of our savings on greedy swindlers. Good luck! Underwater looking for the life raft
Here's a great website about the new help with mortgages: financialstability.gov
Nervous about a short sale - what would you do?
Feb 2009Hello-
We purchased our home in 2006 at the height of the market. We paid 590 and today our home is worth 330. Our mortgage is high and has not yet adjusted -- that will happen in 7 years. Our neighborhood is riddled with foreclosures.
Neither my wife nor I work in the city where we live. Knowing that our house will not recover in 7 years and that we won't be able to afford the mortgage when it does reset, we are looking at our possibilities.
Does it make sense to do a short sale now or wait seven years and then do it? Either way, we cannot stay in this home forever. I looked at rentals in the city where we do work and we could easily get something for 1500 less than what we are paying now; a factor that is very appealing.
Our child starts school this fall so that is a consideration as well; we don't want to be constantly moving. Stability is important.
We've talked to three real estate agents who all suggested the short sale. But being responsible adults with excellent credit who have yet to default and that sunk more than 150k in this home, I am nervous about being branded with a scarlet letter. We both have our jobs and we are luckily in industries that appear quite safe at this point.
What would you do? Stay for 7 years and then short sale or do it now -- is there any option for us so we don't self-destruct our credit? under water and not yet drowning
If you are currently able to pay your mortgage each month I personally think that you should do nothing right now and wait to see how a variety of different factors pan out. Of course a realtor is going to tell you to do a short sale, they want the listing and the commission, times are hard for them. No one knows yet the final details of Obama's housing plan - you may be eligible for relief but maybe not since the current numbers don't help many in the bay area (no more than 5% underwater and no more than $417k mortgage - but this may change). You may be able to work out a loan modification from your lender, they are becoming more willing to do this now that the writing is on the wall. Also, 7 years until your payment goes up is a long time - who knows what will happen to the economy in 7 years. I would not make any major decisions now based on what COULD happen in the next 7 years. Your house is not just a piggy bank, it is your home, you bought it because you loved it and wanted to live there, right? It is also the only significant tax deduction left in the US (when you look at paying $1,500 a month in rent you have to factor in how much more you will pay in taxes without the house). If you have the money each month to pay your mortgage be happy that you do and wait it out, we will come out of this but wide spread panic makes it worse. If you do end up moving in a few years, so be it, lots of families move when their children are young and it is fine. Kids are far more resiliant than their parents. Hang in there, everyone feels uncertain, you are not alone. anon
Well, it's not a problem until it's a problem, and it's not a problem now. If you want to move, I suggest you rent out your house. Selling now, or short selling, seems like a bad idea.
Who knows what will happen in the next 4 years. Also you might have a conversation with your mortgage holder to see if they can convert you to a fixed mortgage at a good rate -- we have a neighbor who struck a good deal with his mortgage holder such that he could keep in his house. The last thing they want is more short sales or foreclosures. GOOD LUCK Tamar
There are really two questions here:
1. Do you want to live in this house? It sounds like the answer is ''no'' - it is not convenient to work and it is costing you more than you need to pay to get a decent place to live.
Think about how many years you would need to stay in the house just to get your 150K back (which presumably would only happen after your house appreciates to 150K more than you have on the current mortgage). Then factor in the $1500 a month more that you are paying in the meantime. It may be really hard to ever get your money back. A lot of people are in your same boat.
If you have other really important reasons to stay in that area - close to family, really attached to neighborhood/school etc., then factor that in as well. But ask yourself if you could keep those benefits but find a cheaper place to live.
What if you put that $1500 a month you are saving into your retirement funds? Or to pay off your credit cards? How would being closer to work affect your quality of life.
Don't become a prisoner of this particular house or situation so that you compromise your long term financial or personal well-being.
2. If you decide it doesn't make sense to stay in the house, the question is how to you get out of it the best way possible. Get good legal advice - my understanding is that the effect of short sales on your credit can vary depending on state law and what the bank does. You might want to wait until Obama's bill goes through and see if that helps you at all. Acorn is an organization that has fought for consumers and homeowners for many years - they may be able to help you get good advice: http://acorn.org/. Don't depend solely on the real estate agents. And remember, if you are way overpaying for this house, and anything happens to your jobs, you might end up in foreclosure - which could be worse than any effect of a short sale
So sorry you (and many other Californians) are in this mess. Good luck!
Hi~ I am not a mortgage professional nor a real estate professional, but just another home owner with a similar issue. Our advantage is that we don't have small children. You said your child will be starting school in the fall, which mean whatever you decided to do you need to do it relatively soon. Since the market is saturated with homes that can't sell, people losing their homes due to foreclosure -- it is a possibility for you to rent the house out and relocate to where you and your husband both work? You can get a property manager to look after it for you. I wouldnt encourage a short sale because in this economic climate, if you have good credit, that may be your only saving grace should you need to borrow money. Renting it out to a family member, a church member or someone who has been thoroughly checked out, might work. Whatever you decide to do, good luck! angie
Thoughts that come to mind:
1) Wait to see the effects of the new stimulus package. At least talk to your broker about how it might affect you. It seems to be mostly addressing toxic mortgages and people who really could never afford their home to begin with, but I was surprised that it also reinstated last year's jumbo conforming loan limits which had just been reset in January. It wasn't clear they'd be trying to help out people with mortgages over $700,000, but apparently they are!
2) Rents go up but your mortgage doesn't. Do you know if there are rent control limits in the area that you are thinking of renting? Because rents have recently taken a hit as well, and if they can go up again when the economy recovers, you may not be saving as much as you think you will when you take into account rent increases, lost equity, tax rebates, and the cost of selling and relocating your home. Do all the math first so you know what you're really getting/losing.
3) Did you discuss at least refinancing with the mortgage company? Especially if you mention to them that you are considering a short sale if you can't find another way to save money. Rates have gone down recently and you may have some leverage trying to get a better deal.
4) Is it really the price that's got you down or the lifestyle constraints? In other words, would you consider moving even if your home price had stayed the same? What attracted you to the house to begin with? Has that gone, or are you just feeling down about the price you could get if you sold it?
5) On the Mortgage Matters blog at bankrate.com, someone had posted about a similar situation. The blog writer responded that you should take into account that something you buy, whether it be a car or goods from the store, immediately gets devalued once you've bought them. In normal circumstances, a house does lose some value as soon as it's sold (just not in pristine selling condition any more and it costs something to even try to sell it again). We've just gotten used to house prices going up rapidly so that we could feel better about the big financial crunch/responsibility house ownership brings.
6) You could even write to the Mortgage Matters guy, Holden Lewis, for advice. He seems really level-headed and, unlike any mortgage broker or realtor, he has no vested interest in helping you cut a new deal whether or not it is for your personal benefit. R
Ugh. I feel for you. It is tough trying to figure out the right thing to do. I would suggest going to the bank now and trying to figure out a solution. Everyone has empathy for most people in short sale/foreclosure now...but seven years from now...maybe not. Just a thought. -anon
You may want to find someone to discuss something called a loan modification. My understanding is that you write a letter to the bank and they readjust your loan amount to the amount that your house is now worth.
You can also find out about refinancing your current loan; I'm not sure, but I think that this also could readjust your loan amount to your home's current value. anon
Foreclosure - is it our path?
Jan 2009I never thought that we would ever be in this position, but here we are. These are the facts: our credit is very poor right now, because we've been late with our bills for the past year. My husband was out of work for most of last year (he started working again 6 weeks ago - yay!) and last year my job was eliminated while I was on maternity leave. We sat down and really confronted our finances and they're bad. Really bad. Currently, we need $2,100 more per month to pay all our bills. We cut all extravagant spending. The kids haven't had new shoes for the past year, we take hand-me-downs and live very frugal. Our mortgage is around $650,000 and a home identical to ours just sold for $297,000 one block over. Many homes in our area are in foreclosure and the development of our new neighborhood has been stopped. We live in a secluded area that was going to be the next hot place to be developed. None of that is happening and it doesn't look like it will happen in the next 10 years. The developer has gone into bankruptcy and has no plans to invest money here. We haven't been able to pay our property taxes for the past 1 1/2 yrs and owe about $18,000. We're looking at our options and are considering the following: we want to stop paying our mortgage and keep that money and save it for the next 6 months, or so, until our home is foreclosed on. We then want to move to a town nearby and rent a home for a few years. I realize that our credit will be shot, but it's already pretty darn bad as it is. A short sale isn't going to be a solution, because of the dramatic drop in value of our home. Has anyone gone through this? How bad was it to recover from a foreclosure? Were you able to rent and eventually buy again? Sad Homeowner
I'm sorry for your difficult situation. I'm no financial advisor and couldn't begin to offer advice. But I did just read an interesting article along these lines in the Jan. 12, 2009 issue of Newsweek by money writer Jane Bryant Quinn that may be beneficial as you weigh your options. She says the right time to go bankrupt is when you're finanically stuck but still have assets to protect. You can use Chapter 7 (once in 8 years)so she advises drawing up a ''no kidding'' plan for living on your income when you're finally clear. She advises trying not to go bankrupt until you've found a job and can see what is ahead. Quinn also says it's a mistake to tap your retirement accounts to make minimum payments on monstrous bills. IRAs and 401(K)s are largely protected in bankruptcy, as is most 529 college savings money. Quinn says this money is your future--leave it alone. She goes on to say that your health is also your future and that you're doing no one any favors by forgoing medical treatment because you can't pay. Bankruptcy eliminates medical as well as consumer debt. Quionn says do not try to preserve your house if you're going broke. Stop making payments, stay there while foreclosure is underway, then move out and rent. If the mortgage is underwater, you're already functionally renting because you have no equity. Good luck to you and your family. anonymous
It seems like in your situation there is very little that you can do other than what you have outlined. I would use the additional cash that you are saving to pay down your other credit cards, and create a cash balance which would be enough to pay for a first, last and security deposit. Walking away from a home in these times is a choice many are making who are in your shoes. You will have a serious credit deficiency in your credit report, which is why it is important to keep your credit cards current, so that you do have some flexibility later on. Good luck. Patrick
Have you talked to your mortgage company yet? You should see if they are honoring the ''Hope for Homeowners'' Program. That allows your mortgage principal to be reduced closer to you appraisal value so that you may afford your mortgage again. All banks do not participate, however. Option 2 is to go to www.cccshope.com and fill out your information. They will help you analyze your financial situation, budget etc and submit information to your mortgage company regarding your situation. Short Sale may be an option, and the balance is forgiven. Foreclosure should be your last option, even if you are delinquent in payments. drea
I can't remember if you mentioned whether loan modification as something you had already tried. If not, you may want to look into that. I don't know too much about it, but I believe it has something to do with having a financial advisor assist you in basically getting your mortgage amount reduced to the amount that your house is now valued at (sorry for the poor grammar!). So if your mortgage is for $650K, but the house is now valued at $300K, the loan modification would reduce your mortgage amount to $300K (and therefore, your payments). I believe that you may need to skip three monthly payments in a row to qualify to even be considered, but of course ask about this. I think the idea behind loan modification is that, the bank/lender/mortgage company will lose much less money in reducing the amount you owe them, rather than foreclosing and having the house sit empty, going through the foreclosure process, etc. Good luck! worth a look!
2007 - 2008 Recommendations
Short sale on our house?
Oct 2008Hi- I am not asking for advice per se, but am curious...has anyone here ever done a short sale? What sort of mark did it leave on your permanent record? Could you still rent/buy a home or even get a car? What happens down the road when you are able to buy again?
We are thinking of a short sale, not because we cannot afford our house (we are fortunate) we just want to be in a better school area for our daughter next year and don't want to wait years for the market to rebound. Our house has tanked 300,000 in value in 1.5 years and is heading south at the rate of 10k a month.
Has anyone else done a short sale? want out. now.
You must be kidding here! Really, short sales are for folks who MUST give up their homes due to financial inability to pay, not for folks like you who ''just want a better school''. The bank who holds your mortgage has to approve it and you have to be in danger of foreclosure. Either rent your home or plan to stay. Just be greatful you have options! Anon
I have had experience with several Short Sales as a Credit Union employee. Here is our take on the situation. Your credit will go down to the E category right away. If you want to rent a place do so while you have good credit.
You will need to save for cars or use sub-prime lenders for vehicle loans. Expect to pay between 16% and 18% for a car loan if you borrow.
About being able to buy a house again \xe2\x80\x93 my colleagues and I go back and forth about this. If your loan is through a Credit Union and the Credit Union takes a loss, you will never be eligible to borrow from that Credit Union again. Not in 5 years, 10 years or ever. This is because of the bylaws. That said, I believe that banks will look at your credit in 3 \xe2\x80\x93 5 years and say, oh, they got caught in the mortgage mess in 2008 and you will be able to borrow from a bank again. You will need a 20% down payment and expect to pay 9.00% on your first mortgage for a few years. For at least 10 years you will need to make a 20% down payment.
Also, you are responsible for the taxes on the amount the bank / Credit Union lost. Let\xe2\x80\x99s say its $300,000. Your federal tax liability (28% bracket) is $84,000 and your state tax liability (10% bracket) is $30,000. You can avoid these taxes by filing bankruptcy. But forever more you will have to declare on a home mortgage form that you filed for bankruptcy. Be Careful with this Decision
Foreclosure experiences and advice needed
August 2008We are unable to keep up our mortgage and pay school tuition for our three children. We want to voluntarily give our house back to the bank. We need advice, experiences, and recommendations for someone to help us through the foreclosure process (most notable tax and credit ramifications). We've pretty much made up our minds, so please no advice on how the prevent a foreclosure. We really need honest and insightful experiences and advice. Of course we are signing this post anonymously, but are also willing to talk off post. Thank you in advance READY TO MOVE ON
My friend Ildiko Pali is an expert on foreclosures (preventing or handling them in the best possible way). Although she's in SF, I highly recommend you check out her website: http://www.princeton-realestate.com The second button from the bottom on the left links to Bay Area Short Sale Services,an article written for realtors that will give you both good info and an appreciation of her expertise. I'm sure she can help you. Her phone number is 415.923.7628. Good luck! Terry
www.firststepequity.com I just joined their site because I am wanting to buy a home, but without a down payment. They hook up people like me who want to take over payments of a mortgage if the owner will quick claim the title over to me. Some people can offer more than that - they take over payments and also pay back the last months of delinquent mortgage in order to dig you out of your hole.
I don't know much about all of this foreclosure stuff, but I would like to get out of renting. I am sorry to hear about your situation. May the winds of change bring you good fortune. Heather
I work for a Credit Union and we have had a few members in your situation. I feel for you, and I know that many credit unions are being forced by regulators to merge because of the foreclosures. So I will not sign my name or give the name of my credit union - also no lectures.
What you are doing is called a deed in lieu of foreclosure. It is perfectly legal and saves the financial institution time and money. In essence you agree to sign the deed to the home over to them and to vacate promptly (at or before signing). The institution may want to do a walk through so they could see the home is left in a condition that they can sell.
The amount of the loss the financial institution takes is taxable to you. For example: you have a $650,000 mortgage, the home sells for $500,000 and they pay a 5.00% commission, title insurance fees, back property tax, etc. The financial institution nets after expenses $435,000. You have a tax liability for $215,000 additional income.
Now, as for your credit report the Deed in Lieu is preferable to a foreclosure. 7 years vs 10 years of negative history.
However, you will now want to get rid of your tax liability all or in part. You will need to file Chapter 7 bankruptcy for this. Congress has passed laws to absolve you of taxes on the majority of this loss, but to do so, you must file BK and the judge will have to review your assets.
The BK will be with you for 10 years.
Your FICO score will drop below 500 and remain there for at least a year, so you will want to rent a house or apartment BEFORE you sign the Deed in Lieu. Also, you will need to forever more state on requested loan form that you have filed for bankruptcy. I know our Credit Union has a policy of EVER giving unsecured loans or credit cards to members who have filed BK for anything other than medical reasons, so you just may have to be careful. Also, the judge in your bankruptcy case could require you to cancel all credit cards. Good Luck to You in the decade to come
How to Buy Foreclosures
May 2008I am interested in learning more about buying foreclosed properties. I have no idea where to begin, what to look for, or what is required. Does anyone have any experience with this? Ideally I would like to purchase the properties and either rent them out or fix them up and sell them. Thanks! k
Google ''Buying foreclosures'', But be very, very wary. You've got to know the legal issues inside and out, have mucho capital and impeccable credit, and know a LOT about real estate! Good luck
Attorney specializing in Foreclosures
Jan 2008I am looking for a real estate attorney or firm that is experienced in matters of foreclosure and mortgage discounts. Someone located in Berkeley or Oakland would be preferable... Many thanks
I work with Miller Starr Regalia, known as California's preeminent property law firm. We are based in Walnut Creek and have attorneys experienced in matters relating to foreclosures. You can find out more information about Miller Starr at: www.msrlegal.com. Best of luck- Chad
Facing Foreclosure
Nov 2007Hello everyone, like a lot of people in the bay area we are debating on foreclosing one of our homes (we own two). Currently we have good credit 760+ and I know that will go down the drain. My question is this: We have a few credit cards with a 0 balance, will we be able to keep this or can the credit card companies cancel them? Also is there a difference in your credit i.e cards, car loans, personal loans vs Mortgage Loans? Any advice would greatly be appreciated Worried Mama
In some circumstances, there are options that can protect your credit, even if you lose the home. Depending on whether you have a little equity, and the location of the home, you can postpone the foreclosure and sell it, even in this tough market..sometimes using a short-sale. Talk to a knowledgeable broker or attorney quickly while you still have options. Tim
Why choose foreclosure? Foreclosure simply means you make the lender do all the work of selling your house and it will effect your credit far worse than doing a short sell.
I assume that you feel you cannot sell your home for the value of your loan (otherwise, you would just sell it and call it a day). Many lenders will work with you on this and allow you to do a 'short sell' -- that is, you sell it and they accept the amount of the sale as payment for your loan. It hurts your credit, yes, but not nearly as much as foreclosure will. Ask a real estate professional that you trust about this -- they often negotiate with the lender on your behalf. Best of luck! anon
don't do this! surely you can sell your home at a reduced price?
''like a lot of people in the bay area we are debating on foreclosing one of our homes (we own two)''... well, no, like a small percentage you have two homes; also *you* don't foreclose, your lender would foreclose *if* you don't pay your mortgage. Why don't you *sell* one of the two homes (even if at a loss), and presumably have more of a possibility of paying any resulting debt (e.g., if the home goes for less than the mortgage balance) than paying two mortgages, while living in the remaining house? I would think that just failing to pay one mortgage, and letting the chips fall where they may, would be the worst outcome... shouldn't you be consulting a credit expert, though? A House in the Hand Worth Two in the Bush
You should probably talk to a financial counselor or bankruptcy attorney, broke as you are, just to get a handle on the consequences of allowing foreclosure. Perhaps see if Nolo Press has any titles on the subject.
My knowledge is based on reading financial articles--I'm not an expert, so take that into consideration. However, it's my understanding that once you default on one creditor, the others (who monitor your credit score) can and often do revoke your credit, so you'd be risking it all. I don't know your financial situation, but it might be worthwhile to call the bank now and see if you can negotiate a reduced payment schedule (like interest only) for a while. Truthfully, I doubt a bank will want to deal with a foreclosed property in this market, so if you are committed to avoiding foreclosure, you may be able to persuade them to temporarily take less money. You could also consider selling the property at a low price--even in a bad market, you can usually sell property if it is priced low enough. Good Luck
You should talk to someone in the real estate field or your lender about options. You can consider a Deed in Lieu of Foreclosure, which will keep the foreclosure off your credit. You should also ask your lender about options. I've heard of some lenders working with borrowers to ease the payments. Also, if you have some equity in the property, rather than letting it foreclose, you can put it on the market for a low price. Anon
Sorry about the difficult situation you are in. Have you considered other options such as deed in lieu of foreclosure (if the house is only worth the amount you owe) , or ''short sale'' (if you owe more than the house is worth right now)? As for your credit questions: The credit card companies will not benefit from closing your accounts in anyway as long as you keep them in good standing. They are more than happy to keep a good customer.
As far as differences in different types of credit: They are all weighed the same in calculating your FICO score. One difference I can think of is that some creditors, such as some credit unions, do not report to all three credit bureaus so they don't impact all three of your FICO scores. Mortgage companies do report to all three. If you want to see who is reporting to what agency you can buy your Experian, TransUnion and Equifax credit reports from www.MyFICO.com without lowering your FICO score. You might already know that every time you get a free credit report you lower your FICO score so it is better to buy it from that website. Please feel free to email me with more questions. S. R
You can get a lot of information about how the adverse credit report from a foreclosure will affect your financing options by checking out the myFICO forums at http://ficoforums.myfico.com/. You'll find very relevant information there from folks who have ''been there, done that''.
I strongly encourage you talk to an accountant and have him/her explain the tax ramifications that could result in your decision let it foreclose. Paying $100 - $200 now could save you $1,000s later. I work for a good one (credentials - CPA, JD) and would be happy to recommend him. PJ
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