Graceful Foreclosure?

[mamarhu]

I'll spare you the long, dismal story of how I got to this point, but I am about to give up on trying to keep a lovely house that I can't live in and can't sell. Even the "investors" I have talked with offer me $20,000 less than I owe on it. Renting it out is not an option. I have been making the mortgage payments for 8 months, nearly $1000/month, but I just don't see any point in continuing, and I simply don't have any more money anyway. I am (almost) at peace with the idea of letting go of the idea that I would see my investment ($40,000) returned.

So how do I go about getting out from under it? Do I just stop making the payments? Do I write to the bank and tell them I am finished? I know this will mess up my credit for years to come, but is there anything I can do to make it less? How long will this remain on my credit report anyway?

It feels morally wrong to default - I promised to make the payments, and I don't like breaking a promise. But I really have no choise, and I will only go much deeper into debt (loans and credit cards and the like) if I keep trying to maintain this impossible budget. I need to make the decision soon, as a big bill ($2,000) is due next month for increased insurance since it has been vacant.

Any advice is welcome. I am a wonderful person, but finances are clearly not my strong point!

[tofumama]

Can you refinance? Have you called the ban and talked to them about this? Usually banks don't want to foreclose b/c they don't want your property. I would try to call them and see if something can't be worked out. Or, try to refinance at a lower rate, consolidate your debt, etc. Most banks have some sort of 'financial advisor' you can talk to for free to discuss what would be best for you. Forclosure is a nasty mark on your credit. However, I have known people who filed for bankrupcy, and rec'd credit card applications (and got them) several months later. Rule of thumb, I believe, is the 'mark' will be there for 7 yrs. HTH, good luck mama!

[MPJJJ]

It will stay on your credit for 7 years. We went through the same thing 3 years ago, only we were sold a house that has a leaky roof and water accumulated in the walls, rotting the beams and growing mold that caused my son asthma. We lived there 2 years, he was born 3 weeks after we moved in. The insurance was prepaid for the first 3 years and they would not fix all the problems. We could not rent nor sell it because the walls were rotting and the wall in our bedroom had caved in. It was an aweful mess. We just stopped making the payments on it, and didnt answer the door when after a while someone would stop by. It went on our credit a few months later.

There is life after foreclosure. We've just been offered a $125,000 mortgage loan. We've chosen not to buy a house at this time simply because we plan to move back to NC in a few years, but we can definately buy a car/house if we want to.

[ustasmom]

I would tend to think that it would be better to sell it and take the loss. Won't the bank sell it and then you end up owing the difference between what it sells for and what you owe on it? You might be able to control the loss better.

[Oh the Irony]

you mentioned the investors that are trying to give you less money than it is worth. have you tried putting it on the market with a realtor?

i also agree that you should call the bank and talk to them. they may have some ideas to give you some space to sell the house--if that is possible.

sorry you are going through this.

[mamarhu]

Yes, I have tried to sell it. 1st realtor never even showed it once. Second managed to show it to one family that I sent to her. Each were 6 month contracts. I can't even sell it and take a loss - I have no more resources left at all. Refinancing would only prolong this - it really isn't sellable now (damage since it has been vacant, not covered by insurance), and I couldn't continue to make payments even reduced by half. Believe me, I have looked at every option I could think of.

I do feel a sense of relief, having decided to let go. Even if I have to declare bankruptcy, I need to close this chapter of my life, and move on. Lots of emotions and dreams are wrapped up in this house (see my posts of 6-10 months ago for a long and very sad story) and I need to get out.

So, what happens if I just stop making the payments? I don't think they have debtor's prison any more, do they?

[rsps]

I found some interesting info here:
http://www.bankrate.com/brm/news/mtg/20001019.asp

apparently sometimes a bank will even agree to let you sell for less and take the loss themselves (it might cost them less than the forclosure process).

good luck

[MPJJJ]

If you just stop making the payments they will eventually come and put a lock on the door, and go to court to get the rights back. You will not have to do anything. If they have your contact info be prepared to get a lot of phone calls, you may even have someone show up at your door to ask your plans concerning the house, but you can ignore these. It wont last long.