I'm walking from my underwater mortgage

[keepinitreal]

January 31, 2010

I stopped paying my $1,450-a-month mortgage on my 200-year-old, four-bedroom home in September 2008 -- after making the hard decision to walk away from my mortgage because it is hopelessly underwater.

It is not an easy decision to walk away from your home, and in the beginning I actually felt like a loser. That was the hardest part.

You see, I was raised to live up to my financial responsibilities. I was taught plenty about personal responsibility. But in this case I had no practical solutions to my financial dilemma -- I lost my job, was turned down for a mortgage modification and owed a lot more than the house is worth.

I am a single parent with three children, one with medical issues. So, with only unemployment benefits and child-support money, I decided to pull the plug on my mortgage payments.

Thus ended my financial commitment to the place we've called home for seven years. But I have no regrets. It wasn't the American Dream -- I moved here after my divorce.

This house originally cost $100,000. In 2005, as the housing market heated up and I needed cash, I refinanced it. An appraiser said it was worth $154,000 -- which I thought was too high but nonetheless accepted. I cashed out the house at that value.

Today, with the housing market in bad shape, the house is worth about $120,000. On top of that, it is starting to fall apart. Several thousand dollars worth of repairs here; a thousand dollars there -- it all adds up. At 51, I am in no condition to do the repairs myself, with a bad leg and a touch of arthritis. Why would I invest my money, anyway, on a declining asset I never intend to own?

The main toilet is broken upstairs; the roof is leaking into the kitchen ceiling, the ceiling is falling down. The floor in the back room is coming apart.

I used the money I accumulated from not paying the mortgage to pay off all my credit-card debt and clean up all my other debt -- except for the house.
The lenders flat out refused to modify the loan, and now I am too far behind to catch up. I am sure my credit score is affected. But I hope the credit agencies will take my special circumstances into account and give me a break.

Sometimes, sitting in the living room in the still of night, it breaks my heart, thinking about what could have been. This place offered a pretty good home to the kids, and it still looks kind of nice. But the kids' stuff is packed away neatly ready to be taken away. We want to move into a two-bedroom apartment in the area.

I feel no shame. I am not suicidal. When I think of what really counts, I do not think of money; I think about the health of my children. Besides I am not the only one.

Not too many people around my neighborhood are aware of my predicament, at least not until now. There are no foreclosure signs up -- because there is no bank forcing it. I am getting advice from a company that specializes in my situation, a situation shared by a growing number of folks just like me. It's called -- get this -- You Walk Away.

I am single and dating again. How do you tell people, "I am going to walk away from this house?" Some did react strangely when I first said that -- but others are supportive.

Whatever the case, I am ready to go. I hope to be out of here by the summer. I want to get this over with.

http://www.nypost.com/p/news/business/walking_from_my_underwater_mortgage_9ZrbOV91v4EUGbJYD2ashO

[BrokeOR]

"How do you tell people you are walking away from your house?"

A good question, in that (depending on where you live and your profession), many will judge. Here's my situation:

We had a HORRENDOUS year (last quarter 2008 and 2009) in which our income shrunk by $80,000. We lost our butts in the few investments we had, discovered our home (which we had financed with 20% down in 2005) was worth half of what it was in 2007, 37% less than when we bought it and $135,000 less than we owe and needs a new roof and extensive driveway work. And our son began his freshman year of college, that we had saved for (but had to spend the savings to live).

Yep. Sort of typical! to our friends, we have given a short run-down of the business situation (not a surprise, since our industry is as underwater as our house). We characterize the refusal to try to save our house as a business decision. Who keeps an asset that has become a liability?

We care about our neighborhood. To that extent, we have gone to the mortgage company to try for a short sale. A sale, even a short sale, would protect the neighborhood (very nice) from having a beautiful home stand empty and unmaintained (big yard, pool etc). Waiting to hear from the mtg company. Unique neighborhood would attract an offer, who knows if it's enough to satisfy the mtg co?

The point is: Good friends will understand a business decision, as long as you understand how it happened. The rest? You've got other things to concentrate on than changing the minds of everyone.

[realestatee]

Don't be sad

Don't be sad, you are not alone. Locally, in Gulf Breeze, Florida there was recently a ruling by a judge where a couple was in foreclosure proceedings with a bank and the judge awarded them a home! And not the bank!
I am not saying that it can happen or not, but you never know..

We are underwater with a rental property and a vacant lot and Wachovia "modifed" first mortgage on rental at 15%!!!! and we still have 2nd and today I called Wells Fargo about a balooning lot mortage and they said "we have no options for you". And added, "its called investment 101" what was the plan anyway""? I wanted to say: the plan was your basic American Dream that's all! But its not going to happen. Not sure what is going to occur with all this.

[LostNFound]

We are also underwater with our rental properties. We currently own 5 of them and only 1 will possibly generate $10K after the sale. We will probably pursue selling it as an option as the only "good" and "paying" tenants we had just moved out of the house.

The worst situation we have is a home loan (for a rental) for $60K through Countrywide. We put 20% down and currently, the home is worth only $27K !!! Are you kidding me? WOW.

We are considering walking away from a couple of properties. I'm not sure because it's complicated when you have 5 of them. We have 2 tenants out of 6 that are paying the rent. We are using our personal income to pay the mortgages and stagger them from month to month (falling 30 days late every other month on each). We are in our late 30s and have 3 children of our own. We have lost our personal savings and know that we will never get it back out of the houses be bought in hopes of using for our retirement.

I struggle with the thought of walking away because I can work 2 jobs and my husband is working like a dog so that we can make empty mortgage payments. We can still almost make it. But I can't save for my kids college (one is going to be a Senior next year, the other a Sophomore and our youngest a 1st grader). I can't afford to pay for any repairs on the properties (praying every night that nothing goes wrong). I am stressed out and I feel that I have no life, no fun and no way out unless something can sell this summer. Where I live, homes don't sell very easily in the dead of winter.

To complicate our issues, we owe $100K in credit card debt and stopped making payments on those a year ago. I have no idea why I'm not seeing a court summons or judgment against us?? More praying? I dunno.

Walking away is becoming more and more appealing...my nerves are almost shot.

[realestatee]

walking away from underwater mortgages - reply

Don't feel bad, you are doing the best you can. We are not able to file bk because we don't qualify for ch7 and ch13 is not the way to go either, since at foreclosure they may sell our properties for less than what we can get with short sale. Sooo...we signed a contract with a realtor yesterday to do a short sale on a rental property, hoping like &(*&(*&( that it will sell. Got our first collections call yesterday too, coincidentally, told them that after they "re-structured" our mortgage our int rate and payment tripled and we are not collecting rent, even the collections agent was in dismay.. as to how our mortgage rate could go up to 15%... He apologized for the situation we are in. That was mind boggling, but I appreciated his sympathy. We have another property that will balloon in April.. This time we are going straight for the short sale. I am no longer negotiating with them.
As far as credit card debt goes, try debt reducing companies, they may can negotiate it down for you. Some people walk away from that all together.

[LostNFound]

It's interesting that you don't qualify for Chap 7. I haven't actually been able to sit down with a lawyer yet. I am self employed (daycare), so I have to get all my taxes (income/expenses) in order before he will meet with me. I'm a little worried because we DONT make very much money on paper, but our GROSS income is actually pretty comfortable for us (if we didn't have the rental properties).

In November, my husbands truck is paid off and my leased car is returned so that's almost $800/mo more income into our household. I'm thinking we may not qualify either.

Maybe I need to think about a short sale also? Now, you've got me thinking! I wish lawyers would talk over the phone. I probably would have been in to see someone 6 months ago.

[BrokeOR]

LostNFound:

UPDATE: I did some searching and found a local realtor (licensed, with a reputable firm) who is specializing in short sales and has worked many successful short sales with my lender (Wells Fargo). Surprise-he worked with an aquaintance of mine who I had no idea sold short, but I was able to get a good reference from him.

Here's the really great thing: I have stopped going through any of Wells Fargo's hoops. My realtor does all the talking and negotiating with them. He knows the exact procedure that they themselves would follow (list price, when to lower the price if no offer etc.) and best of all, he has people at the bank with whom he has personally worked with, so he doesn't have to re-explain himself over and over to 6 different people over 6 different calls.

Bottom line: If you are contemplating a short sale, do some research to find someone in your area who is specializing in this. I simply Googled "short sale specialist realtor (my town's name) and bam-his blog on short sales was the first link.

BTW: We are filing BK and will be adding any deficit from a short sale, should this happen. If you are NOT filing, get some advice on how to handle the difference, or you could end up out from under your mortgage only to find that the bank is still pursuing you.

[LostNFound]

Thanks for the tip!

As my luck would have it, I received a letter yesterday from a law firm in my state. They are giving me until March 25th to dispute a credit card debt for about $23K. I will dispute it in hopes of putting them off a little bit until I know my situation.

I did more searching on the internet and found a BK attorney that lives several hours away and is willing to meet with us over the phone. We have an appt for March 8th. I've submitted all the answers to questions he had in an online worksheet. It's close to our actual circumstances, so we will see how this goes.

I read online that the max income for a family of 5 is $79,000 (gross) and I think it's going to be close. My bottom line is terrible, but if they go by gross income, then we probably won't make the cut either and I'm not thrilled with the idea of a Chap 13. I guess I have no choice but wait until our meeting and see where it takes us. I'll report back on the BK thread when I hear something.

Thanks again!

[BrokeOR]

Here's the link that will give you the definitive answer for your income limits in Chapter 7.

[removed URL, unofficial link]

Additionally, there is some really good pre-planning info in this Forum. It's a "sticky" in the Chapter 7 section called A Comment About Expense Questions. Some great links and advice that will help you plan for your bankruptcy and see what's realistic. I found it very helpful, especially at night when I couldn't call my attorney!

[espo1357]

"How do you tell people you are walking away from your house?"

A good question, in that (depending on where you live and your profession), many will judge. Here's my situation:

We had a HORRENDOUS year (last quarter 2008 and 2009) in which our income shrunk by $80,000. We lost our butts in the few investments we had, discovered our home (which we had financed with 20% down in 2005) was worth half of what it was in 2007, 37% less than when we bought it and $135,000 less than we owe and needs a new roof and extensive driveway work. And our son began his freshman year of college, that we had saved for (but had to spend the savings to live).

Yep. Sort of typical! to our friends, we have given a short run-down of the business situation (not a surprise, since our industry is as underwater as our house). We characterize the refusal to try to save our house as a business decision. Who keeps an asset that has become a liability?

We care about our neighborhood. To that extent, we have gone to the mortgage company to try for a short sale. A sale, even a short sale, would protect the neighborhood (very nice) from having a beautiful home stand empty and unmaintained (big yard, pool etc). Waiting to hear from the mtg company. Unique neighborhood would attract an offer, who knows if it's enough to satisfy the mtg co?

The point is: Good friends will understand a business decision, as long as you understand how it happened. The rest? You've got other things to concentrate on than changing the minds of everyone.

Still can't bel. that some of you are at the stage where you would even ask that question about what others will think...

Its very silly for an adult to ask those questions. When I find myself doing that, I really need to get a life.

Thankfully, I have stopped with that warped thinking.

You must always remember that we live in a fallen world, a messed up world, so what others think is absolutely meaningless.

[tjsmiley]

BTW: We are filing BK and will be adding any deficit from a short sale, should this happen. If you are NOT filing, get some advice on how to handle the difference, or you could end up out from under your mortgage only to find that the bank is still pursuing you.

You could have just included the house in BK and not bothered with a short sale.