100k negative equity, to keep or not to keep??

[cassandbrook]

We are 100k in negative equity on our primary residence due to the housing market fallout in Oregon. Our city is 4th in the nation for property value decline.
We stopped making the payments this year when we decided that we were going to file chapter 7, we felt it was best to start over and be rid of the negative equity. We marked voluntary surrender on our BK forms, now our bank (Bank of Amer) is calling and asking for some kind of loan mod and wants us to fax paperwork. Should we try to stay? We can technically afford the payments, but it'll be a long time before we have any equity in this house. We just feel its a waste because we are so underwater.

[HHM]

I wouldn't bother, that is too much negative equity to dig out of. You can always participate in the the loan mod process and see how far you get, but right now, I haven't heard of anyone getting a loan mod that adjusts principal. If all they are offering is the standard 3 month trial payment, etc, don't bother, you are wasting money.

[inacorner]

I'm in the same condition. My condo has dropped $100k in value on a $250k mortgage and to top it off my monthly payments are well over 50% of my income. The only thing pushing into BK is the condo, otherwise I'm alright with all my other debt. I've just started to not make payments cause I can no longer afford it.

If they're willing to work something out look into principal forgiveness, but also look into the tax consequences and fine print to make sure the amount agreed upon will be forgiven and no third party (such as insurer's of the loan) have an option to come after the loss.

[cassandbrook]

Ahhh, relief to hear you say that. That's been my gut feeling, but hubby is very attached to this place and would cut off his right arm to stay here.
They haven't offered to reduce principal, in fact I don't exactly know how they think they'll reduce our payments, we are in a 5/1 arm interest only with 4.875 fixed right now for 3 more years. So in 3 years our payments will go up, just when we are getting back on our feet.....

[cassandbrook]

Forgot to say WE HAVE PMI, so that may make the difference. I hear they are less willing to work with the PMI folks because the Bank has nothing to lose, they are fully insured for the amt of the loan.

[StartingOver08]

Forgot to say WE HAVE PMI, so that may make the difference. I hear they are less willing to work with the PMI folks because the Bank has nothing to lose, they are fully insured for the amt of the loan.

You are right that PMI makes it much more difficult to work out any sort of modification or even short sale. PMI covers the top 19% to 35% of the loan depending upon the policy that was taken out at the time the mortgage was issued. Most of the time (here in Fl anyway) the mortgage insurers have been extremely uncooperative - they have been requiring either a lump sum payment at closing (in the case of a short sale) or a note to be signed by the seller for repayment over X years (I have seen anywhere from 10 yrs to 20 yrs at zero interest). The lender is covered, but in order to collect they must foreclose. So you are right....walk away. Stay as long as you can to save your funds and then get started with something new when you are on your feet again. Remember, no one looks out for you - you are the one that has to make sure you are taken care of in this situation. $100k is a lot of ground to recover in this type of market. You can probably recover more quickly by cutting your losses and moving on just as you had planned.

[OhioFiler]

Ahhh, relief to hear you say that. That's been my gut feeling, but hubby is very attached to this place and would cut off his right arm to stay here.
They haven't offered to reduce principal, in fact I don't exactly know how they think they'll reduce our payments, we are in a 5/1 arm interest only with 4.875 fixed right now for 3 more years. So in 3 years our payments will go up, just when we are getting back on our feet.....

Hubby's emotional attachment to the place is your biggest obstacle. $100,000 negative equity leads me to suggest you dump the place. If he likes it that much he can buy it back in a couple years for at least $100,000 less than you owe on it now.

[AngelinaCatHub]

Hubby's emotional attachment to the place is your biggest obstacle. $100,000 negative equity leads me to suggest you dump the place. If he likes it that much he can buy it back in a couple years for at least $100,000 less than you owe on it now.

You have a point but remember, just "buying it back" may be a problem since they are bankrupting and surrendering the house within the bk. Won't be a simple just buy it back thing unless they can save cash by that time.

There are many little bargains out there such as starter houses like two bd one bth on a small lot that can still be had for pennies on the dollar. If I needed a house I would go after one like that for cash. Contract for Deed if not cash. We are so fortunate that our place is paid for. One good reason to live in Florida is that bk cannot touch your house (except for the mortgage) and if it is paid for, they cannot take it for assets. 'Hub

[OhioFiler]

You have a point but remember, just "buying it back" may be a problem since they are bankrupting and surrendering the house within the bk. Won't be a simple just buy it back thing unless they can save cash by that time.

There are many little bargains out there such as starter houses like two bd one bth on a small lot that can still be had for pennies on the dollar. If I needed a house I would go after one like that for cash. Contract for Deed if not cash. We are so fortunate that our place is paid for. One good reason to live in Florida is that bk cannot touch your house (except for the mortgage) and if it is paid for, they cannot take it for assets. 'Hub

I agree. His willingness to "give his right arm" for the house should be incentive enough to figure a creative way to buy the house back in a couple years. My instinct is after they leave the house he'll lose his emotional attachment to the place.

[Amy26]

I know its very hard to do...but I had to do the same thing...my place upside down by 150k... would take forever and a day to get it back. And its only a 790 sq ft condo. I love the place, but just makes sense to get rid of it. Will be better off in the long run.

[debtmonster]

WALK AWAY! My house probably a good $60-80k underwater and I left it. Right now it's sitting empty and being used for "free storage" for some of the large items we could not take with us. As soon as I hear about a sheriff notice, we will have to get a moving truck and remove our appliances. The local storage here is $260 per month, so I'd rather everything sit in the house for free right now. Being that foreclosures are taking forever, I can keep our stuff there for almost a year without paying a dime.