Decision time....

[clunk]

I'm post discharge so I'm not sure if this is the right spot for this, but if it isn't please let me know. That said, I'll move on.

We're post discharge and our home is about $70k underwater as of now($35 on the 1st and $35 on a HELOC). We chose to stay and pay thru our BK, and have recently decided to stop payment on the second(we attempted to settle, they weren't interested). That's the background, now to the meat and potatoes....the way I am seeing this long term I have 3 options

1-status quo, minus payment on the second. Hope they charge off the second, move closer to work(current commute is an hour) into a rental. Rent our current home during this process, hope to settle the second after charge off and retain home as a rental property. Pros, tax benefit....cons, additional burden of responsibility, being a landlord ect.

2-short sale the property, move into a rental wait our 2-3 years to purchase again. Pros, no unneeded responsibility, fresh start. Cons, loose tax benefit, starting over

3-foreclosure, stop payment, save payments up for large nest egg. Let property go into foreclosure and move on. Pros, large savings opportunity. Cons, STRESS, no definitive date to move on(depending on when the bank decides to foreclose).

We are leaning towards options 1 and 2, with 2 being the favorite. We wouldn't mind keeping the property and renting it but some of the responsibility that comes with it, is discouraging. A short sale of the property, will in our mind gives an opportunity for a fresh start, similar to what our BK did for us.... My question, am I missing anything? I'm planning on discussing all of this with our accountant to determine what the tax/financial impact of what the above choices will be, when we do our taxes.

[Floridagail]

Number3, A once in lifetime free rent offer. Stress gets better with time when you have nice bank account savings. You have plenty of notice to move.

[kmattin]

Number 3. Save, save and save some more. What state are you in?

[keepsmiling]

Another vote for 3.
Shortsales are a major PITA. Talk about stress! dh has been trying to get one closed for YEARS.
As for #1--- now that you are thru bk, if you stop paying the second, you've got a better chance of getting them to agree to a settlement. But if you'd really prefer to be closer to work, that's a moot point.

[LadyInTheRed]

Another vote for #3. You will get notice of the foreclosure before it happens and will have plenty of time to move.

If you wanted to stay in the property longterm, I'd say to stop paying on the 2nd and settle later. But, being a landlord is risky and can end up costing you money.

[clunk]

The risk involved with being a landlord is a little discouraging. Option 3, while temping has several different issues associated with it. First is when the property is actually foreclosed on(several in the area are going on 2+ years) the mandatory waiting period starts at that point. As mentioned above both my wife and I commute two hours each day and are looking to cut that back to a tolerable level. To me at first glance the short sale process offers the potential for the quickest results. I know that some go long, but so do some forclosures....so in the end it stripping out the similarities between a short sale and foreclosure, my decision will be between rent free living(forclosure) or potentially getting a shorter commute.....

[laurannm]

Agreed with clunk. We are in a very similar boat as the OP, with the diff being that we had to relocate due to job and couldn't take full advantage of living rent free. Our thought process is that with a short sale, we can potentially get our names off the title quicker then waiting who knows how long for a foreclosure. In my case I don't really find the short sale process stressful at all. Other than the initial paperwork which is a little time consuming, it's just a matter if sitting back and waiting for the bank to approve.

My only concern with that strategy is whether or not we are inadvertently stalling a potential foreclosure by going the short sale route

[clunk]

My only concern with that strategy is whether or not we are inadvertently stalling a potential foreclosure by going the short sale route

I Agree 100% with that statement. I have to remind myself that this like many other things is a process, and if it doesn't work out in a short sale at least I knew that I had tried.

[Drazil65]

Also, if you are going to stop paying while going through the short sale process there is nothing preventing the bank from foreclosing during that process. While we were waiting for BOA to approve a short sale offer (after 3 months of waiting they rejected offer) they started the foreclosure process a couple of months after that. We had stopped making payments (we had a tenant in there but after they moved out we decided not to continue to pay mtg) and put the house on the market as a SS (with the banks blessing), we rec'd our first offer about 8 months into the process. They took 3 months to reject the offer and buyer walked away. The 2nd offer came about 2 months after that and that buyer walked after about a month (purchased something else) but as we were over a year at that point of no payments they started foreclosure.

My point is that if you wait through the SS process and keep on paying you will probably be ok but if it sells and you have to move in 45-60 days you have not saved anything. If you stop making payments during the SS you can run the risk of foreclosure anyway. I would skip right to #3 and start saving, you probably have 1.5 to 2 years of free rent.

[brokeinfl]

Are the banks more likely to jump at foreclosure on a discharged mortgage? Or does it just go through the same pre discharge process?

[Floridagail]

I know 2 people who did shortsales , both sorry they did. They got told at last minute , they had to put their money on the table to close. And another lost their belonging, because the realtor let the people move in b4 closing. A shortsale only helps the Bank.

[tobee43]

Are the banks more likely to jump at foreclosure on a discharged mortgage? Or does it just go through the same pre discharge process?

that depends entirely on the bank. we are waiting just about 5 years now and still no movement on the foreclosure and our bk (which included the mortgage) is getting gray hairs

we left and did a number #3....saved enough for the move. stayed a few years, found a place with owner financing jumped on it and this year we should owe this home free and clear and the other one still is sitting in another state with trees growing inside of it. (true story).

also how long a foreclosure takes depends on whether you live in a judicial or non-judicial state. those in judicial states it takes much longer as the process must go through the court system while those that do not go through the courts process quicker usually.

[brokeinfl]

Five years, WOW. Thanks, we are in middle district Fl. and were also contemplating #3. Still can't quite wrap my brain around walking away from a mortgage, but If we could stay a year or so without paying, it would give fresh start a whole new meaning.

[tobee43]

Five years, WOW. Thanks, we are in middle district Fl. and were also contemplating #3. Still can't quite wrap my brain around walking away from a mortgage, but If we could stay a year or so without paying, it would give fresh start a whole new meaning.

yes 5 years, but we haven't continued to live there! although, i have heard stories actually one that someone is going on 6 years now. also, now we live and we filed our bk in the middle district, the lady around our corner her mortgage was used as an example by the courts as fraud and she gets to keep her house with no mortgage!! wow...our sub division and since i'm involved with the hoa, i know the foreclosures etc., but they have been taking up to three years in this area. i hear now the banks are moving a bit quicker in some areas, but it's still hard to say. i would likely think, and this is based solely on what i have seen in the past, i think you would have at least a year once the bank starts the process, but a real indication is check to see in your area just how fast they are moving them to get an idea.

[cgfromnc]

I would vote #3 and stay in the house for the following reasons:

1. For getting a new loan in the future- currently there is no difference in lending guidelines between a short sale, FC, died in lieu, etc. a loss on property is a loss on property as per current underwriting rules (there is talk of showing favoritism to a "borrower assisted" loss such as a short sale - but its just talk). So basically, why put yourself through he headache of helping your lender - and it WILL be a headache.
2. Save as much as you can while you stay - I know people that have stayed 2 or 3 yrs....rent free
3. Lender may still offer you some type of modification that is unpublicized/advertised (principal reduction, low rate, etc). If you move out it may be harder to get anything else done with your current loan.

ultimately you may have to move at some point but it could be a while before the lender forecloses (although they will likely threaten to - just remember they have to follow the legal process to take possession then get you out - so there should be plenty of time to coordinate a move)

Good Luck