Is walking away from our house a good idea?

[DebtStinks]

We bought our house in 2005... $356k fixed rate at 5.65%. The house is now worth around $115,000. A home that sold for $399k about 2 months after we bought our home was just sold as bank owned for $127k. We are in the Central Valley of California and god knows when prices will return to the 2005 levels. We are going on 16 months of no payments... no action from BofA at all.

Walking is the only thing that makes sense for us. It would be an epic financial failure to keep my family in this house. Cause guess what... no one else is looking out for you or your family's future. Make the decision that is best for your family and don't look back.

[lolie]

DebtStinks,
I totally agree. 16 months...Really??? Did you stop paying after discharge or before?

We included our house in the BK and we are with Chase. Our attorneys actually sent Chase a letter stating our intention to surrender and asking when and where they would like us to send the keys. Our attorney doesn't seem to think we will hear back from them at all. So until we get a NOD, we are saving our money and not moving anywhere.

We bought our home for 445K and is now worth less than 200. We are in an 5.25% fixed rate, but changes to adjustable this year. We are in Northern CA and have family member in the Mortgage biz. They are saying 14 years to come back and even then you may break even. Isn't that scary?

Keep me posted if you ever hear from BofA. I'll be posting once I hear from Chase.

Good luck to you. In the meantime, enjoy living mortgage/rent free. I know I will.

[btbeme]

I really dont understand why people on this site are so for bailing on real estate.

Actually, I believe that it is the same reason a lot of people file a BK - it is because the benefits outweigh the penalties involved.

Here in Phoenix, we purchased a house with $180k down in 2005 after leaving CA. We could - and still can - afford the mortgage.

However, we owe - OWE - $660,000 on a home that is now worth $400,000 according to local realtors and a recent appraisal. So, we are, in essence, $440,000 from where we started. Taking into account "normal" appreciation rates and "normal" amortization rates, it would be about 17 years before we saw a break-even point between what we owe and what it is worth.

In the meantime, we could purchase or rent an identical home in the neighborhood for about $1200 a month less than our mortgage payment. Do the math, and that is $14,400 a year, or about a QUARTER MILLION DOLLARS in cash that we can either drop into a mortgage or drop into a savings and investment account for ourselves, our kids, and our grandkids.

Choosing the mortgage route also means being "tied" to the house until we can afford to take a loss or eke out a small profit by selling. In the meantime, illness, school situations, job situations, etc will all have to pass us by while we sit and wait.

I believe that my moral responsibility is to first take care of myself and my family. Since the banks are being funded with my kids tax dollars before they are even old enough to have a job, the math is pretty simple for me.

Walking away is not illegal - there is a penalty. Arizona protects the buyer pretty well, and a Ch 7 protects the buyer even more. The penalty of a foreclosure on my record, alongside the BK, is of very little concern to me. Your mileage may vary. Morally, I believe saddling society with broke retiree-aged people, graduates with $100,000 in student loans, and a bankrupt Social Security system that we ALL pay into - well, that is immoral.

And, if you feel that I have little or no concern for anyone else's tax dollars, well, nobody has lined up to pay my mortgage, medical bills, or even my lunch.

[Brazzy]

Maybe I should have rephrased my opinion. I do not disagree with anyone who thought it would be in their own best interest to let their house go. What I was talking about was the advice given on the forum. You find time and time again people looking for advice on short sales, loan mods, or just asking for opinions as to what a person should do with their house. Immediately people jump on board and say that the person should let their house go without knowing all the facts.

There is nothing illegal or immoral about letting your house go in BK. All I'm saying is just because its the right choice for one person doesnt mean its the right choice for everyone. There are variables that should affect people's opinion.

[horse]

Well...I don't have any good feelings towards this house...except for the fact my three dogs love the fenced in yard and there is a parkway right next door for us to walk them. But...a fence and park are things you can find elsewhere. We are approx. $30000down in the value...but then we also are facing about $30000 -$50000 in repairs. So...it's a tough decision. So far...my husband wants to stay (but he's also the one who insisted we buy it even though it didn't look so hot) and my daughter likes it too...and says that she might someday move back home (LOL). So...I'm suppose to base my future security on what they want. Argh...it's frustrating. I think if I had a new place all lined up and ready for us to move into it might be okay for my husband but I know he hates the looking for places to live part of it all.

[horse]

Someone should start a new business that helps people who foreclose on their homes find new places. I've been checking craigslist...and that's not much help. We need people who are willing to take a risk in renting to all of us who filed for BK.

[Brazzy]

Well...I don't have any good feelings towards this house...except for the fact my three dogs love the fenced in yard and there is a parkway right next door for us to walk them. But...a fence and park are things you can find elsewhere. We are approx. $30000down in the value...but then we also are facing about $30000 -$50000 in repairs. So...it's a tough decision. So far...my husband wants to stay (but he's also the one who insisted we buy it even though it didn't look so hot) and my daughter likes it too...and says that she might someday move back home (LOL). So...I'm suppose to base my future security on what they want. Argh...it's frustrating. I think if I had a new place all lined up and ready for us to move into it might be okay for my husband but I know he hates the looking for places to live part of it all.

The beauty of it all is that you have the option to not reaffirm and just keep making your payments. If down the road you find its not working out for you you can just walk away. No lender is not going to allow a retain and pay on a house. The Bank doesnt want your house and they especially dont want it right now. You dont have to make the decision today you can easily wait it out and see what the future brings. In that scenario everyone wins.

As for Horse's idea its a great idea, except its easier said than done and the housing provided wont exactly be top notch. Its just a tough situation for everyone.

[miindebt]

Does anyone know if you can stay and pay in Michigan or if you have to reaffirm to stay in your house? I thought I read somewhere on here that in MI you HAVE to reaffirm to stay - really curious about this!

[hedgecat]

I am on month 9 of not making payments to BOA (I'm not in my house either). I put the house on the market, tried short sale (not advisable - read the forum), tried deed-in-lieu (even with a lawyer's letter), and finally filed Ch. 7. Discharged and BOA still won't do anything with it (I want them to take it from me - I know I shouldn't care but I want it out of my life and into someone else's). Wanna bet, I'll still dealing with this at 18 months? Sigh....

[screentest]

Here is a little article on the housing markets that will NEVER recover. My area of the U.S., Riverside County California came out #1 overall. Sacramento also made the top 5.

http://www.businessinsider.com/thirteen-housing-markets-that-will-never-recover-2010-5#1-riverside-ca-housing-prices-are-down-52-and-unemployment-is-at-18-13?source=patrick.net

These markets were so overinflated, those that purchased or re-fied at the top of the market are just never going to see any improvements. This coupled by an unemployment rate of above 14% makes for a long ride.

I am right there in the trenches as I owe 650k on house now worth 280k.
My once nice neighborhood of families is turning into abandoned homes and rentals. Those of us still here are just playing games with the bank until the inevitable occurs. No, my house will never again be worth 650K.

Its going back to the bank after my BK is finished.....its my only way out.

ST

[penniless]

I'm about 25-30k underwater with 20k in repairs needed to sell our house. We didn't reaffirm and plan on stop paying once our chapter 7 is closed. I hope to have 10-15k by the time we need to move out and see it as a 50-60k business decision. We can rent a nicer house in a better neighborhood for the same payment.

It will be so nice to be completely out of debt for the first time in 10 years.

[tknj99]

If you dont reaffirm the primary residence and continue paying on the first, I understand that you can still stay in the property. But what happens if you have a second mortgage that you stopped paying for and has been charged off? What would be the consequences later down the line with the charged off loan - could they sue me still post-BK? or would it just be that they could only wait until the property sells or forcloses in the future to try and get a slice?

[newbie2]

If you dont reaffirm the primary residence and continue paying on the first, I understand that you can still stay in the property. But what happens if you have a second mortgage that you stopped paying for and has been charged off? What would be the consequences later down the line with the charged off loan - could they sue me still post-BK? or would it just be that they could only wait until the property sells or forcloses in the future to try and get a slice?

If you didn't reaffirm the 2nd then no, they cannot sue you for the balance. They cannot try and collect the debt, they can only foreclose.

[keepinitreal]

If you dont reaffirm the primary residence and continue paying on the first, I understand that you can still stay in the property. But what happens if you have a second mortgage that you stopped paying for and has been charged off? What would be the consequences later down the line with the charged off loan - could they sue me still post-BK? or would it just be that they could only wait until the property sells or forcloses in the future to try and get a slice?

The second mortgage holder can foreclose on your property if they think there is enough equity after subtracting the first & second mortgage to make it worthwhile for them.

If you don't have equity, you could save up money and offer them a lump sum to release their lien. Then you wouldn't have to worry about them anymore.

[Ann]

Does anyone know if you can stay and pay in Michigan or if you have to reaffirm to stay in your house? I thought I read somewhere on here that in MI you HAVE to reaffirm to stay - really curious about this!

miindebt, you can retain and pay in Michigan. I live in Michigan and my lawyer told me to NEVER reaffirm a mortgage. I intend to continue making my mortgage payments to my first but am planning on offering my second to settle with me.