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What about foreclosure am I missing? (long) - Page 2

post #21 of 153
I thought foreclosure was for those who couldn't pay their mortgage due to job loss or tons of medical bills not just to get out of a house that is too small and doesn't have a big enough yard. Am I not understanding the OP's situation correctly?
post #22 of 153
Quote:
Originally Posted by Holiztic View Post
I believe your car insurance can go up with a low credit rating, also getting phone service and even power can be affected by bad credit. Please correct me if I am wrong anyone, as my DH and have always had good credit, but I believe I have read these things.
This is all true, but there is SO much more that bad credit can do to your life. You can't open a bank account, get long distance, no credit cards. I'm sure there are more, lots more things. I have bad credit. Even when I was trying to establish good credit starting out, I was marked as being risky. So I don't know how they (the system) figures it. Some people can get good credit some can't. I don't know, don't understand never have. I wouldn't risk it if I weren't in a desperate FINANCIAL situation. I would stay for the remainder of this downturn. Get a second job to pay for my home. DD can always be taken to the park. It's a couple short years.
post #23 of 153
I can't comment much on the laws in your state because I don't know them. But if you cannot afford your house and can't sell it or rent it out, then it does seem logical to me to go this route. You already realize you have to weigh your inability to pay (quantify that) versus the cost to society and to your own credit and financial circumstances. Good luck. It sounds like a hard decision.
post #24 of 153
Quote:
Originally Posted by Holiztic View Post
I believe your car insurance can go up with a low credit rating, also getting phone service and even power can be affected by bad credit. Please correct me if I am wrong anyone, as my DH and have always had good credit, but I believe I have read these things.
That's true. The deposit you pay for gas and electricity are huge with a low credit score, and your car insurance is based on it, too.
post #25 of 153
I just heard a news report on NPR about this this week. They were talking about people who were so upside down on their loans that they were just walking away, even though they could afford it. The cold, hard logic was that they could walk away and in a few years it could be off their credit and they could buy a new house then. Whereas if they kept the house that they had now, paid a higher amount than it was worth for 10 years, MAYBE if they were lucky they could break even. If they walked away, they could save money, etc.
post #26 of 153
What about doing a short sale? Someone please correct me if I'm wrong. From what I've read a short sale is not as big of a hit on your credit, especially if you do not fall behind on your payments. I've read that you should be able to buy another house in 2 years, but with a forclosure its atleast 5.

I would talk to a real estate agent and a real estate attorney about it.
post #27 of 153
I suggest talking to a nonprofit financial counselor and housing counselor. They can give you a good idea of what to expect if you do foreclose and can look at your budget in a totally nonjudgmental way and help you figure out the best thing for your family. If you go to the HUD website, they can help you find reputable counselors in your area.

Good luck.
post #28 of 153
Quote:
Originally Posted by treespeak View Post
Additionally you need to find out if you would owe the IRS money based on the amount you of loan you were "forgiven" by foreclosing...that amount can, depending on circumstances, be concidered a type of "income" and you can owe taxes on it. From the IRS website:





I would get assistance from someone with professional legal experience in foreclosures before taking in action.
We had a home forclosed on, didn't think alot about it until tax time, and got screwed like 25 k in taxes on a forclosed home! ouch.
post #29 of 153
Quote:
Originally Posted by lisa_nc View Post
I just heard a news report on NPR about this this week. They were talking about people who were so upside down on their loans that they were just walking away, even though they could afford it. The cold, hard logic was that they could walk away and in a few years it could be off their credit and they could buy a new house then. Whereas if they kept the house that they had now, paid a higher amount than it was worth for 10 years, MAYBE if they were lucky they could break even. If they walked away, they could save money, etc.
This is where we are as well. For now, we have chosen to stay in our house, but I'll admit, the temptation is great to walk away. Because our mortgage is well above what houses rent for around here, a rental would save us money every month, and at the end of 7 years, we'd come out ahead by just.getting.out of this horrible investment called a house.

So far, we're staying put. But, we have considered it. OP, you're not alone in thinking about this.
post #30 of 153
Quote:
Originally Posted by alana1980 View Post
What about doing a short sale? Someone please correct me if I'm wrong. From what I've read a short sale is not as big of a hit on your credit, especially if you do not fall behind on your payments. I've read that you should be able to buy another house in 2 years, but with a forclosure its atleast 5.
Short sale is only possible if there's someone willing to buy, and a bank willing to lend to them. The OP stated in her original post that the state of the HOA at this moment would prevent both of those things.
post #31 of 153
Quote:
Originally Posted by Karry View Post
I thought foreclosure was for those who couldn't pay their mortgage due to job loss or tons of medical bills not just to get out of a house that is too small and doesn't have a big enough yard. Am I not understanding the OP's situation correctly?
you know what? every foreclosure situation is unique. I just walked away from my house because my DH died and everything was in his name. The bank URGED me to do it actually. cheaper than probate and fixing it up to sell.

please don't judge others as you don't have any idea what their life situation is.
post #32 of 153
Quote:
Originally Posted by cristeen View Post
Short sale is only possible if there's someone willing to buy, and a bank willing to lend to them. The OP stated in her original post that the state of the HOA at this moment would prevent both of those things.
yup, a short sale isn't always the answer. and the banks certainly don't make it as EASY as it sounds.
post #33 of 153
Quote:
Originally Posted by rainbowmoon View Post
you know what? every foreclosure situation is unique. I just walked away from my house because my DH died and everything was in his name. The bank URGED me to do it actually. cheaper than probate and fixing it up to sell.

please don't judge others as you don't have any idea what their life situation is.
If the home and mortgage was in your husband's name only, it sounds like you walked away from your husband's estate, not your debts. Not at all comparable to jingle mail when the payments are what one signed on for.
post #34 of 153
Quote:
Originally Posted by llamalluv View Post
If the home and mortgage was in your husband's name only, it sounds like you walked away from your husband's estate, not your debts. Not at all comparable to jingle mail when the payments are what one signed on for.
um excuse me but NO..the mortgage was in his name but considering I've been paying the mortgage for 3 YEARS on my own and the property is legally mine (I'm his heir). we bought the house TOGETHER even though my name was not on the deed. every penny of equity was paid by me.
post #35 of 153
I'm in a similar position to the OP. We bought at the peak of the bubble. We're not in a position to sell right now, we don't have any equity due to dropping property values in our area. Our house is nice but it has its faults and we'd prefer a bigger and better one. DH's hours just got cut and we're going to be in fairly tight financial straits making ends meet until one or both of us get new jobs, and you know what the economy is like. DH works in RI, which has the second highest unemployment rate in the nation. So, basically the same deal.

It's never crossed my mind to just walk away from the house. I'm flabbergasted.

This reminds me of littering. If you don't want that McDonald's bag in your car, and you throw it out the window... sure, it's not your problem anymore, stinking up your car. Nice for you. But *somebody* has to clean up your mess, and if *everybody* does what you do, what kind of world are we going to live in?
post #36 of 153
To the op, hugs.. this is a hard decision to make.

My SIL and BIL are walking away from their home. They bought three years ago. 850K dollar home in SoCal, 100K down payment. Loan amount of 750K dollars. Their home now apraises at less than 350K.

The market history is a doubling of value every ten years or so... They would be making 4500.+ mortgage payments for 10 years or over 500K in payments to break even, to come back to zero net gain.

Really, do the math.. it makes no sense for some people who purchased or refied at the wrong time to continue to pay. In my IL's case, they are better off financially letting the house go. Even if they are forced to rent for the next ten years, rents are less than half for a comp. home, then they are free to save half of the $$ for the next ten years.. and come up with a 250K dollar down payment.

There is nothing shameful or morally wrong about doing what is best for your family. Even my Rush listenig super conservative FIL agrees with what they are doing.
post #37 of 153
Quote:
Originally Posted by boobybunny View Post
To the op, hugs.. this is a hard decision to make.

My SIL and BIL are walking away from their home. They bought three years ago. 850K dollar home in SoCal, 100K down payment. Loan amount of 750K dollars. Their home now apraises at less than 350K.

The market history is a doubling of value every ten years or so... They would be making 4500.+ mortgage payments for 10 years or over 500K in payments to break even, to come back to zero net gain.

Really, do the math.. it makes no sense for some people who purchased or refied at the wrong time to continue to pay. In my IL's case, they are better off financially letting the house go. Even if they are forced to rent for the next ten years, rents are less than half for a comp. home, then they are free to save half of the $$ for the next ten years.. and come up with a 250K dollar down payment.

There is nothing shameful or morally wrong about doing what is best for your family. Even my Rush listenig super conservative FIL agrees with what they are doing.
I am going to say this in the nicest way that I can, because I don't want this thread to get closed down... but reading that post made me feel sick to my stomach.

Is that what everybody is going to do? Just walk away? What is going to happen to this country? My head is spinning.
post #38 of 153
Quote:
Originally Posted by chinaKat View Post
I am going to say this in the nicest way that I can, because I don't want this thread to get closed down... but reading that post made me feel sick to my stomach.

Is that what everybody is going to do? Just walk away? What is going to happen to this country? My head is spinning.
it's happening more than you think. and to higher cost homes too even. I live (rent) on a property that was bought for 1.2 million that is appraised at $650k. it's going into foreclosure too.
post #39 of 153
I would absolutely rent something and send the keys to the lender. If you know an assessment is coming that you can't afford and that there is no way you can keep your current condo long-term, it seems really stupid to continue throwing money down a hole -- you're not going to be able to stay in your house long enough to recoup it's current value (either through inflation or through gradual increases in value, which I don't think will be happening for a while), much less the $60k that you'll have to pour into it.

The idea that you should lose something like $100,000 so that people on the internet will feel that you acted morally is asinine. You've got to protect your family and your future and from what you've laid out here it really sounds like foreclosure is the best way to do that.

Also, re: Taxes: The HOPE Act, which passed Congress back right before the election had provisions that put a moratorium on debt forgiven as a part of a foreclosure being seen as taxable income, so assuming that you can complete the foreclosure process before that law sunsets (which I think is the end of 2010, but it might be 2011), there shouldn't be any tax consequences for you as far as the house going back to the bank.

Quote:
Originally Posted by llamalluv View Post
I'm confused about how the mortgage you signed 2 or 3 years ago is costing you more and more? Especially if the value is decreasing, your property tax should be decreasing as well. Contest your assessment if you have not seen a decrease.
Assessments tend to be based on average home values from anywhere from the last 18 months to the last 5 years, depending on your city and state. It's going to take a while for the lowered home values to create property tax decreases for homeowners. If it ever does -- we still need to fund municipal services like police, fire, and schools.

Quote:
Originally Posted by Mama Dragon View Post
The reason we're in this financial crisis is people not paying for the homes they got. You can afford the house you are in. While I hear you on the lawsuit, you are going to be better off in the long run to just wait. There's millions of families living in smaller homes. You can come out of this with a bigger house in a couple years AND good credit. I would never in a million years throw away a good credit score (you can't do ANYTHING with bad credit, not even rent).
This? Is flat-out NOT TRUE. Blaming individual homeowners for "not paying for the homes they got" is a vast oversimplification of what caused the financial crisis -- which was partially bad actions on the part of the federal reserve by keeping interest rates artificially low, but mainly the actions of banks who sold mortgages off as securities rather than keeping them on their books. Selling off mortgages meant there was no incentive on the part of banks to be careful who they were lending to because they weren't on the hook, so basic ideas of affordability were completely ignored.

It really frustrates me and makes me angry to see us blaming individuals for a crisis that was caused by corporate ignorance and greed. When corporations make decisions that are in their financial best interests, we cheer them on and their stock prices go up. Why do we guilt and punish individuals when they make the same kinds of decisions based on the same sort of facts?

Quote:
Originally Posted by alana1980 View Post
What about doing a short sale? Someone please correct me if I'm wrong. From what I've read a short sale is not as big of a hit on your credit, especially if you do not fall behind on your payments. I've read that you should be able to buy another house in 2 years, but with a forclosure its atleast 5.
A short sale would make only a marginal difference in the OPs credit, and it would be very hard to find a buyer considering that they'd have to disclose that there is likely to be an assessment of $60k coming up. This is really a situation where going straight to foreclosure (or deed in lieu of foreclosure) is probably the best bet.
post #40 of 153
While corporate greed and lack of government oversight plays a big part, people (NOT the OP) getting mortgages they couldn't afford, interest only loans and all that, when they knew they shouldn't, also played a huge part. The American citizen CAN say no when offered a loan, really. People who got the loans are as much to blame as the corporations. Again, this part isn't relevant to the OP, only to the financial crisis. Guilt? Yes, I think people who got loans they shouldn't have gotten should feel some guilt, I know I would. I could have qualified for a $250,000 loan with no hard proof of income and bad credit, but I didn't. That would have been profoundly stupid. I used common sense, unfortunately not all home buyers have the same. Again, not talking about the OP (don't want her to think I'm dumping on her).


Quote:
Originally Posted by Belleweather View Post
This? Is flat-out NOT TRUE. Blaming individual homeowners for "not paying for the homes they got" is a vast oversimplification of what caused the financial crisis -- which was partially bad actions on the part of the federal reserve by keeping interest rates artificially low, but mainly the actions of banks who sold mortgages off as securities rather than keeping them on their books. Selling off mortgages meant there was no incentive on the part of banks to be careful who they were lending to because they weren't on the hook, so basic ideas of affordability were completely ignored.

It really frustrates me and makes me angry to see us blaming individuals for a crisis that was caused by corporate ignorance and greed. When corporations make decisions that are in their financial best interests, we cheer them on and their stock prices go up. Why do we guilt and punish individuals when they make the same kinds of decisions based on the same sort of facts?
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