Update: Trying to avoid foreclosure by working with the bank on a quick sale #132 - Page 2

[jennica]

Originally Posted by jennybear

I'm sorry you're in this situation--it sounds stressful.

My opinion: aside from significant tax/credit/financial consequences for you, I simply think that going into foreclosure is unethical if you can avoid it. You were aware of the loan terms when you signed and now, as unfortunate as it is, you'll need to make some tough choices (like working f/t) to make this right.

While I think that some lenders were certainly predatory, I also think that people who took on dangerous I/O or ARM mortgages should accept some responsibility too.

I see what you are saying. I kind of agree. However, though we did know the terms of the mortgage and agree to them, we also did not know that gas prices would skyrocket, property taxes would inflate adding on hundreds to our house payment over the years, and that we would end up charging groceries. I don't want to add to the problems and I feel it is a bit unethical, but at the same time, I don't want to bust my butt to pay a payment I can't afford. And to what end? How long is this housing market going to be bad? Three years, five years, ten years? Am I supposed to put my life on hold for years and take a stupid job that pays nothing and never see DH or DS, for YEARS, waiting for the market to pick up? This last year has just been so hard. I've been looking for a job, but we live in a small town and there isn't much available. We could make it work, but it's just really depressing to think about that life that I would need to keep up for an indefinate amount of time.

[jennica]

Our mortgage was locked in at 5%, so if we refinance, we will end up with lower payments then the increase with the ARM, but higher payments than our original ones. Also, property taxes keep going up, and gas prices do to. It seems like we can just never get ahead. So refinancing could be an option, to proivide a bit of relief for the moment, but how long can we make ends meet like that? The payment would still be about $200.00 higher than our original payment was.

We can't sell one of the cars because there is no public transit from here to DH's job. MN public transit sucks. He car pools right now, so only drives two or three times a week, which has helped. Besides, it is not a huge expense to keep both cars because they are both payed off, so we don't have any car payments. Our plan was to keep them both until they stopped running, since that would get us the most for our money with them.

Also, we are going to look into a guick sell. We just found out about that last night from FIL. I'm going to call the bank again today and see if I can talk to someone who cares. Not likely but I'll give it another shot.

[heatherdeg]

If your going to look into selling the place, at least TRY to renegotiate the rate or recast the loan first. You have nothing to lose. The pp is right in that you'll need to speak to someone higher up with the authority to actually do that. Start off by asking to speak to a supervisor. Be polite to the rep--ask them if they have the authority to renegotiate the terms of your loan. They'll likely say "No" and then ask to speak with someone that has that authority. You're right in that stuff keeps going up, but you would at least buy yourself a year before property taxes increase... at which time the market is likely to get better (it's been predicted to recover in late 2008/early 2009 for many of the markets in the country).

You would kick yourself if you let your house go before exhausting EVERY other possibility... right? Have faith. Know that if you persist long enough, you'll find a way to keep it. Many of the banks are renegotiating terms. They have way too many people like you on their hands. They are as nervous about it as you are. Granted, there are some banks that won't talk about it UNTIL you're in foreclosure; but foreclosure is a long process (here in NJ, the average time from foreclosure beginning to leaving your home is 18 months--and it has nothing to do with the system being backlogged). My neighbor went into foreclosure and the second he got the letter, he found out he could liquidate part of his 401k without any penalty. So he did that and they now have their home and are getting back on their feet.

Just keep on with it. You will find the answer. There are lots of good options here that include keeping your home.

[jennica]

Originally Posted by heatherdeg

If your going to look into selling the place, at least TRY to renegotiate the rate or recast the loan first. You have nothing to lose. The pp is right in that you'll need to speak to someone higher up with the authority to actually do that. Start off by asking to speak to a supervisor. Be polite to the rep--ask them if they have the authority to renegotiate the terms of your loan. They'll likely say "No" and then ask to speak with someone that has that authority. You're right in that stuff keeps going up, but you would at least buy yourself a year before property taxes increase... at which time the market is likely to get better (it's been predicted to recover in late 2008/early 2009 for many of the markets in the country).

You would kick yourself if you let your house go before exhausting EVERY other possibility... right? Have faith. Know that if you persist long enough, you'll find a way to keep it. Many of the banks are renegotiating terms. They have way too many people like you on their hands. They are as nervous about it as you are. Granted, there are some banks that won't talk about it UNTIL you're in foreclosure; but foreclosure is a long process (here in NJ, the average time from foreclosure beginning to leaving your home is 18 months--and it has nothing to do with the system being backlogged). My neighbor went into foreclosure and the second he got the letter, he found out he could liquidate part of his 401k without any penalty. So he did that and they now have their home and are getting back on their feet.

Just keep on with it. You will find the answer. There are lots of good options here that include keeping your home.

But I don't want my home! I hate this house, I hate this area, and I hate being trapped here!

If it is true that the market will recover that soon, then maybe it would be worth staying. It just doesn't seem like that because the market is just steadily declining and so many people are foreclosing that it seems that that will disrupt the economy in general, which will make it less likely that people will buy houses, for a long time to come. Am I missing something?

[candiland]

Call your lender, explain the situation, and ask if they're willing to agree to a short sale. Basically, people are finding themselves "upside down" due to ARMs. Meaning they owe more on the house than it's worth right now, even after owning for quite some time. (Sold high in the good market, worth much less on today's market). For many lenders, foreclosure can cost more than simply forgiving the outstanding debt due to this problem. You'd still sell, obviously, but that's better than foreclosure. Call and try to arrange something like this. Many lenders have new "short sale" depts. for exactly this reason. It's more and more common. Good luck.

ETA: I see someone already talked to you about this. You're right... it's worth a shot!

[heatherdeg]

OH!! SORRY! I didn't realize you were miserable there! LOL!

Then maybe it WOULD be best to just be out of there if only for your mental health.

Nobody KNOWS when the market will recover. The economists can "forecast" which is nothing more than an educated guess. And truly, even the forecasts are very specific to where you are. Where are you?

Our brokerage attends an excellent market forecast twice/year with a firm that has been dead-on for many years. So I know what they think for where *I* am (in Central NJ) and how things are affected... but it differs even by the county. And even then, things happen to our country and economy that change the forecasts.

It's a guessing game. Educated guessing, but guessing none-the-less. The thing about real estate is that at some point, it recovers. It's just a matter of how long it takes and whether you can wait it out. If you're unhappy, it's not worth it. I'm not saying to go into foreclosure, but certainly get out.

Sorry for the misunderstanding! :

[beachmouse]

I'm in the tough love camp here. I know what it's like to be living in a place you despise, and I've had to take the job I despise in order to make ends meet.

But I'd still figure out a way to keep from going into foreclosure because of the long-term tax and credit effects. Talk to a lender about refinancing.

Also appeal your property tax assessment. The taxable value of your home should be based on its value now, not what it was at the peak of the market. Review your homeowners and car insurance. The last time we shopped around for homeowners, we cut our yearly bill for that in half.

[normajean]

Originally Posted by jennica

Our mortgage was locked in at 5%, so if we refinance, we will end up with lower payments then the increase with the ARM, but higher payments than our original ones. Also, property taxes keep going up, and gas prices do to. It seems like we can just never get ahead. So refinancing could be an option, to provide a bit of relief for the moment, but how long can we make ends meet like that? The payment would still be about $200.00 higher than our original payment was.

I think that anytime you sign a loan contract on a house, there is no way of knowing "for sure" that gas prices & taxes won't skyrocket, that the economy/housing markets won't tank, etc. It's one of those leaps of faith you take on an investment.

However, I also think that anytime you sign a contract its reasonable to expect that prices of things will go up to *some extent*, and $200 a month is within the scope of reasonable on a purchase as major as a house.

For me, it would be easier to scrape together another $200 a month from the original payment, (but still less than you are paying now,) than it would be to deal with the frustration of trying to rebuild my credit for 7 years, or trying to buy a house again in 2 years with rotten credit which will equal very high interest rates. You could very well end up buying another house in 2 years and paying as much as you are now for a smaller place, simply because even if prime is at 5% 2 years from now, you won't qualify for it with a foreclosure on your history.

Long term I think to refinance would be the better option, even if its temporarily for a couple of years until you can sell to find something cheaper or while waiting for the market to pick up again.

Foreclosure sounds like the easy way out right now, but I don't think in the long run it really will be.

[Heather423]

I am sorry you are so stressed about this. That is a tough situation. I know you can never predict the future. It is tough being away from family. I moved away from the city to be with family so they could provide daycare for me. My mom takes care of DD while I work full-time. If I didn't work full-time I would be in the same boat as you. You can always look at it as a temporary solution until you get out of this mess. REMEMBER: this is all temporary!

I would not go into foreclosure. Especially if you have good credit. It effects you more than just 2 years. I would GO to the place where you originally got your mortgage and speak to the person who helped you. Most financial experts say if you are having problems making payments, then talk with someone at the institution immediately BEFORE missing any payments and they can usually work with you. They can maybe let you miss a couple payments, or a forebearance, ask them if there is anything they can do for you. I would not talk with someone from a collection agency. You can also talk to a different bank about refinancing. The rates in MA are about 6.25% right now for a fixed rate. Some banks even offer 40 year loans and maybe able to buy you some time until the market turns around. Someone else also suggested the interest only loans as well. Not the best thing, but maybe able to buy you some time until you can sell.

You can look into what the rents are for that area, and see if you can rent out your house and move back closer to family/friends. Maybe your family/friends can take care of your DS while you work and catch up. Do you have an extra room you can rent out and take in a roomate? I like the idea that someone suggested taking on childcare out of your home. That will definitely cover the extra expense for your mortgage and give you a little $$ to put towards your groceries. You can work and still be able to stay at home. Maybe you could get a job in a daycare as an assistant, that way you can be with your son.

I know this is becoming a national problem and I think there has been some federal legislation that has recently passed to fund all these foreclosures so the economy doesn't nose dive.

I found this when I did an online search

http://www.ucma.com/ They have a free consultation, it can't hurt!

http://www.hud.gov/foreclosure/index.cfm

I understand it sounds so easy to just walk away, but I would exaust all other options you can first.

Goodluck and keep us posted.

[CathMac]

Originally Posted by jennica

...
Also, we are going to look into a guick sell. We just found out about that last night from FIL. I'm going to call the bank again today and see if I can talk to someone who cares. Not likely but I'll give it another shot.

Selling a house quickly means pricing it correctly. I suggest you invest some time in trying to find a good realtor and getting several recommended sale prices based on "comps" (comparable houses) in your area. Once you are reasonably certain you know what the house is worth (based on square footage, number of bedrooms and bathrooms, size of the yard, location, etc.) price it on the low end. You want to attract as many potential buyers as possible as quickly as possible with a price that is almost too good to be true. You should consider "rounding down" to get it into a range that's perceived as affordable. Kind of like stores do ($1.95 instead of $2.00) but on a larger scale. A good realtor should be able to help you figure out what the "sweet spot" is. As an example, there may be a dramatic difference between $151,000 and $145,000.

Make sure you know what you are getting for their commission and that they will market it properly. You want it on the Multiple Listing Service (MLS) which increases the chances that they'll have to split the commission but gives the house much more exposure in the market. Speaking of MLS, try visiting "Realtor.com" so you have an idea going into it of whether the realtors' comps are on target. It can be hard to tell what is near you but if you study the listings oftentimes the clues are there. I live in a small town but some neighborhoods are better than others, I can usually tell where something is if they mention the grade school or middle school.

Also make sure you know how often will it be advertised and how. Will it be in the papers or in the TV listings? Make sure this is included in the contract, don't just take their word. Also consider negotiating the length of the contract. If they aren't doing a good job you don't want to be stuck with them. Also, it doesn't hurt to try and negotiate the commission.

Start decluttering now and if the house needs any inexpensive work at all (e.g. mainly elbow grease) start with that now. Curb appeal is critical so start tidying up the yard if it looks a little run down. If you have an attractive recent picture of the house in the Spring or Summer that might look better in a listing unless you still have some leaves on the trees and the Fall color is coming in.

As far as contacting the bank, if they are local or if they have a local branch I would try visiting instead of calling. It's a long shot but you may have better luck that way.

I hope some of the PPs are correct and that the bank is willing to negotiate. I understand that you want to get out of the house anyway but if you can reduce your monthly payments and buy yourself some time you may buy yourself some time to sell the house on more favorable terms.

Finally, a last ditch suggestion would be to rent it out if you can do so for an amount that would cover your mortgage and taxes. If you can find a cheap or free place to live (perhaps with a friend or relative) you may even be able to save some money.

I wish you the best of luck and FWIW I commend you for taking the bull by the horns rather than playing "wait and see".
~Cath

[chinaKat]

Originally Posted by jennica

However, though we did know the terms of the mortgage and agree to them, we also did not know that gas prices would skyrocket, property taxes would inflate adding on hundreds to our house payment over the years, and that we would end up charging groceries. I don't want to add to the problems and I feel it is a bit unethical, but at the same time, I don't want to bust my butt to pay a payment I can't afford.

Wow. Just... wow.

I realize the OP is in a tough place, but I'm pretty flabbergasted that people actually think this way.

I guess I come from the "you made your bed now you lie in it" school, though. Which is probably why I wouldn't touch an ARM with a ten foot pole.

I'll bet there are hundreds of thousands of Americans making this same argument today. I'm no economist, but I suspect that things are not going to be looking so hot when these folks all come to the same conclusion and bail on their mortgages simultaneously.

[Knittin' in the Shade]

Originally Posted by chinaKat

Wow. Just... wow.

I realize the OP is in a tough place, but I'm pretty flabbergasted that people actually think this way.

I guess I come from the "you made your bed now you lie in it" school, though. Which is probably why I wouldn't touch an ARM with a ten foot pole.

I'll bet there are hundreds of thousands of Americans making this same argument today. I'm no economist, but I suspect that things are not going to be looking so hot when these folks all come to the same conclusion and bail on their mortgages simultaneously.

I couldn't agree with you more.

OP, I'm sorry if you'll be offended by this, but I think it really needs to be said. You got into this situation, and it's completely irresponsible (not to mention unethical and just plain unwise) to purposely default on your mortgage. It's awfully convenient to just not have to deal with it anymore since you don't want to live in that area. But really, the responsible, grown-up thing to do would be to do exactly what you would if you did indeed love the house and area and wanted to stay there - just because it's not all new and shiny anymore doesn't mean that you're not responsible to do what you signed on the dotted line to do.

[ShaggyDaddy]

Originally Posted by chinaKat

I'll bet there are hundreds of thousands of Americans making this same argument today. I'm no economist, but I suspect that things are not going to be looking so hot when these folks all come to the same conclusion and bail on their mortgages simultaneously.

I work in the mortgage industry (in one of the harder hit companies: Hint the Nation's largest home lender). I can tell you 100s of thousands have already made this choice.

While I tend to be a "you made your bed" type of person, Personal responsibility can only go so far. Mortgage companies have foreclosure built into their business plan. If you have no defaults, you are not lending enough. That is OFFICIAL policy of most banks. You have to have some defaults or else your lending standards are too tough and you are not lending as much as you could.

In the typical foreclosure, the bank loses 20-30% of the value of their loan. What we are seeing now is that the mortgage companies gave away so much free money in the form of ARMs that they knew would likely result in foreclosures that they inflated home values by giving everyone loans beyond their income. Now that home values are deflated somewhat, a mortgage company stands to lose not 20-30% but 50-80% in some areas. Because of this mortgage companies are rushing to restructure cruel and unusual loans which were designed to cause defaults.

So although each individual should get a wake-up call for falling for the ARM trap, you can't just blame the mouse because they got stuck in a very complicated mouse trap. Sure the mouse gets some blame, but you have to place the blame firmly on the group... Consumers who borrow too much are guilty, banks who lend too much are guilty. The concept of "The American Dream" is guilty. Not everyone wants, needs, or can afford to be a home owner, but we are all lead to believe that is the only option.

[CathMac]

Originally Posted by chinaKat

...
I realize the OP is in a tough place, but I'm pretty flabbergasted that people actually think this way.

I guess I come from the "you made your bed now you lie in it" school, though. Which is probably why I wouldn't touch an ARM with a ten foot pole.
...

Originally Posted by Knittin' in the Shade

... It's awfully convenient to just not have to deal with it anymore since you don't want to live in that area. But really, the responsible, grown-up thing to do would be to do exactly what you would if you did indeed love the house and area and wanted to stay there - just because it's not all new and shiny anymore doesn't mean that you're not responsible to do what you signed on the dotted line to do.

chinakat and Knittin' in the Shade,
Would it kill either of you to temper your harsh comments with helpful or constructive advice or at least some words of encouragement?

My impression, FWIW, is that she would like to honor her obligation. However, she wouldn't be much of a Mom if she didn't at least think about the cost to her DC in terms of quality of life and longterm savings when you consider the possibility that they could become slaves to this mortgage only to wind up losing the house anyway.

How often do you think her DC would see her parents if they worked as much as it sounds like they'd need to, especially when you factor in commuting. And what kind of shape do you think they'd be in when DC did see them?

My guess is that she is tired, overwhelmed and possibly depressed. It may well have been easier for her to stick her head in the sand and post here after the house was in foreclosure. I suspect both of you would have been more compassionate then and yet in this scenario she is trying to be responsible.

JMO, ~Cath

[chinaKat]

Originally Posted by CathMac

chinakat and Knittin' in the Shade,
Would it kill either of you to temper your harsh comments with helpful or constructive advice or at least some words of encouragement?

The OP asked for honest opinions in her initial post. That's my honest opinion.

I'm honestly amazed that so many people here think it's okay to walk away from a financial obligation. Comments like "well, if it makes you feel better maybe you should just get out of it" astound me. And the very idea that it's somehow more okay if the OP doesn't *like* the house... whoa.

Seriously, there is a lot of good financial advice to be found in this forum. But there is also some really questionable behavior that gets encouraged, in the name of being "supportive". I don't think I'm doing anybody a disservice by pointing that out. Sorry if it sounds harsh.

[Knittin' in the Shade]

Originally Posted by CathMac

chinakat and Knittin' in the Shade,
Would it kill either of you to temper your harsh comments with helpful or constructive advice or at least some words of encouragement?

I think it is both helpful and constructive to advise her to fulfill her obligation and responsibility. It will destroy their credit to foreclose on this home - the ramifications of it will be far reaching (much further than the 2 years she wrote about in the OP.) I can tell you that a lot of employers pull credit records of potential employees (including my DH's very large company) and they screen out applicants who have filed bankruptcy or foreclosed, because it signals irresponsibility that they don't want in an employee.

My impression, FWIW, is that she would like to honor her obligation.

My impression was exactly the opposite. Her pros and cons list seemed to me to be very stacked towards making it look like foreclosure was the best option.

However, she wouldn't be much of a Mom if she didn't at least think about the cost to her DC in terms of quality of life and longterm savings when you consider the possibility that they could become slaves to this mortgage only to wind up losing the house anyway.

How about considering the possibility that if they foreclose on the home the DC will now be homeless, with the possibility of t being very difficult to find a rental since most landlords do credit checks, as well. If they are willing to foreclose on a mortgage, I don't think it's unreasonable to expect that they'd have NO qualms about not paying rent every month.

How often do you think her DC would see her parents if they worked as much as it sounds like they'd need to, especially when you factor in commuting. And what kind of shape do you think they'd be in when DC did see them?

As other posters already showed, there are options that she can consider that wouldn't mean putting DC in daycare and communting. Doing home daycare, working opposite shifts from DH, short selling the home, renting it and finding a rental for themselves, etc. Let's not really pretend that the only options here are her getting a full time job and putting DC in daycare or foreclosing on the house.

[beachmouse]

Originally Posted by CathMac

How often do you think her DC would see her parents if they worked as much as it sounds like they'd need to, especially when you factor in commuting. And what kind of shape do you think they'd be in when DC did see them?

It's not an ideal situation, but it's reality for a lot of people. And at the end of the day, those people make the decision to do the responsible thing, and make it work long enough until things get better. (spouse gets promoted to a better paying job, child reaches school age, and other parent goes back to work, other parent goes to school and upgrades skill set, other opportunities come up)

[mtm]

I'm a Canadian so don't know how things work in the States. What are the long term financial implications of defaulting on your house? Will you be able to rent with bad credit? Will you be able to buy a new place? How long will it stay on your record? I'm sorry you don't like your house and you are in over your head but I think you should research how it will affect your family long term.

[CathMac]

Originally Posted by ShaggyDaddy

...
Mortgage companies have foreclosure built into their business plan. If you have no defaults, you are not lending enough. ... You have to have some defaults or else your lending standards are too tough and you are not lending as much as you could.
...
What we are seeing now is that the mortgage companies gave away so much free money in the form of ARMs that they knew would likely result in foreclosures that they inflated home values by giving everyone loans beyond their income. ... Because of this mortgage companies are rushing to restructure cruel and unusual loans which were designed to cause defaults.

So although each individual should get a wake-up call for falling for the ARM trap, you can't just blame the mouse because they got stuck in a very complicated mouse trap.
...

ShaggyDaddy,
Thanks for the informed perspective. This might suggest that they couldn't afford the loan when they got it. Furthermore, the bank should have realized it even if the OP and her DH were too unsophisticated or optimistic to realize it.

ETA, Do you have any tips for the OP on how to get the bank to the negotiating table?
~Cath

[CathMac]

Originally Posted by Knittin' in the Shade

I think it is both helpful and constructive to advise her to fulfill her obligation and responsibility. It will destroy their credit to foreclose on this home - the ramifications of it will be far reaching (much further than the 2 years she wrote about in the OP.) I can tell you that a lot of employers pull credit records of potential employees (including my DH's very large company) and they screen out applicants who have filed bankruptcy or foreclosed, because it signals irresponsibility that they don't want in an employee.

My impression was exactly the opposite. Her pros and cons list seemed to me to be very stacked towards making it look like foreclosure was the best option.

How about considering the possibility that if they foreclose on the home the DC will now be homeless, with the possibility of t being very difficult to find a rental since most landlords do credit checks, as well. If they are willing to foreclose on a mortgage, I don't think it's unreasonable to expect that they'd have NO qualms about not paying rent every month.

As other posters already showed, there are options that she can consider that wouldn't mean putting DC in daycare and communting. Doing home daycare, working opposite shifts from DH, short selling the home, renting it and finding a rental for themselves, etc. Let's not really pretend that the only options here are her getting a full time job and putting DC in daycare or foreclosing on the house.

Knittin' in the Shade,
I would agree that the comments in bold above are constructive and important to consider. I hope the OP takes them to heart.

As you may recall she is already taking steps to try and sell the house or come to some sort of arrangement with the bank, so I don't know why you assume that she would rather default. My guess is that will keep her busy for a little while, if my experience with beaurocracy is any indication.
~Cath