Facing Foreclosure....

[Mech]

So heres the situation.

 

Parents help my roomate and I buy a house 2.5 years ago. Things were going swell, then everything went to hell.

 

Original plan was to live in it for a few years, make a quick buck and sell.

 

Long story short..

 

Foreclosure was the only option.

 

We now owe more than its worth. Market may not recover for at least 3-4 years, IF EVER.

 

My roomate and I have been living together for 6 years now (apartments prior to house.) He has 2 kids and

a wife. If we stayed here, we may end up having to live together for 10 + years. Neither of us wants that.

We want out.

 

Now, I have two loans. 1st and 2nd. With the 1st loan, i know for a fact they cannot come after me. The second they

they might be able to do something.

 

What "something" is, im not sure. The only thing i would be worried about is if they try collect money. I'm not worried about the credit

ramifications, I know all about whats going to happen to my credit.

 

So my dad has been in real-estate for 40 years, but has never dealt with a foreclosure. He tells me that our 1st loan is a non-recourse loan. But the second is not.

tonight he calls me and tells me to check out this site:

 

http://www.youwalkaway.com/

 

on the front I see this...

 

"Your lender WILL NOT be able to collect any deficiency or loss they may receive by you walking away!"

 

This is what got me worried and prompted me to make this thread. As far as i knew, this whole process would be cut and dry, guess not.

 

So i called my step dad, and hes been a loan agent for a long time. He tells me that the only thing he can think of is that I might have to end up paying taxes on the

amount of the second loan. The loan is for 70k, so it could be 17k. not good. But he doesnt know this for sure.

 

So i need to do some research here. The you walk away site may end being worth it even though they charge 1,000. but talking to an attorney might just as much.

 

I thought i would swing it by you guys and see if anyone has had any experience with this, or knows anything about it.

[questnation]

pm'd u about this

[chiplee]

All I know is there could be a difference between recourse loans for tax purposes, and recourse loans for lending purposes. I can't imagine your first mortgage is a true non-recourse. I don't know why such a thing would even exist. You have to be "at-risk" in the eyes of the IRS to qualify to deduct mortgage interest. And who would insure a non-recourse loan? And if they would it would cost so much that it wouldn't even be worth it. I'm really interested in hearing how your dad came up with the notion that your 1st is non-recourse. Either way, they don't have to be allowed to take the house and be legally allowed to pursue recovery of money owed to them for it to be considered a recourse loan. They just have to be allowed to take the house. They own the house anyway. They're just going to exercise their right to sell it to someone else. If they can take the house, it's recourse, by my understanding, but again, that's for tax purposes. Otherwise people would just walk out with, you guessed it, no recourse all the time. Maybe I'm confused but if you could get a no-recourse home loan, what would be the incentive to make your payments when times got tough? Edited March 20, 2008 by chiplee

[GoldNBlack]

I certainly wouldn't send them any money... There has got to be some local resources you can deal with face to face. Money back guarentees are worthless if you ask me. That's like a stamp saying, "yeah, we're going to rip you off and hope you can't jump through the hoops to get your money back.

 

I'll see if I can get a hold of our real estate agent friend. Maybe I can get some advic e from him.

 

Steve

[Kr0nus]

Why not just short sell it? You might still owe some money on the loan, but it won't have the lasting effects of a foreclosure.

[Chad]

Yah, how far upside down are you, ball-park?

 

How long can you afford to stay as-is assuming things didnt' get any worse?

 

If they got better, how much $$ before you were break-even minus realator fees (6-8%)?

[Caliber308]

If you decide to just "walk away" from it, dont plan on buying anything on credit for 7 years. Thats how long a foreclosure stays on your credit report. Most landlords require a credit report on prospective renters, I did. If the report came back with a bad payment history or a foreclosure, id pass on them. Real Estate is cyclical. It usually turns every 3 to 5 years. My advice would be to stick it out. After all, you still have a roof over your head.

 

CALIBER 308

Edited March 20, 2008 by Caliber308

[marso]

After a friend and I were laid of from the Space Center He moved all of his 401k and retirement money to an IRA, filed bankruptcy and let the mortgage company forclose on his house. In Florida they can't touch IRA money. I on the other hand decided to do the honorable thing and pay as much as I could before letting things flounder while I "restructured my finances". Well guess who took longer to build his credit back up. Me. One year after his bankruptcy he was getting credit card offers. High interest but still he got them. Within 3 years he bought another house with some of the money from his IRA. I am still renting because I spent all of my money trying to pay everone off. He's had 3 new cars financed also. I have a Quest that needs thousands to make it like new. I don't know what your state is like but it paid to file bankruptcy back then. They since changed the law a bit but it's still in your best interest to file if you can't recover from debt. What ever you do don't liquidate your assets like I did. Your money will make you money.

[Mech]

Yah, how far upside down are you, ball-park?

 

How long can you afford to stay as-is assuming things didnt' get any worse?

 

If they got better, how much $$ before you were break-even minus realator fees (6-8%)?

 

Well, theres no way to tell, unless the house was sold. I know for sure, we cannot sell for more that what we owe. We owe 670k, and i'd be suprised if the house could sell for 600k. and home values are getting worse by the month.

 

Its not a matter of affordablility, its about being trapped. forced to own this home, and that aint cool. We can afford the payments, but the market is not going up ( at least here in cally) for at least 2-3 years at minimum, and my opinion could be alot longer than that.

 

 

 

 

 

If you decide to just "walk away" from it, dont plan on buying anything on credit for 7 years. Thats how long a foreclosure stays on your credit report. Most landlords require a credit report on prospective renters, I did. If the report came back with a bad payment history or a foreclosure, id pass on them. Real Estate is cyclical. It usually turns every 3 to 5 years. My advice would be to stick it out. After all, you still have a roof over your head.

 

CALIBER 308

 

Good point. Luckily, i have a cousin that lives in AZ, and he owns a house, and said he would rent me a room. I'm not going to waste years of my life being stuck here. Besides, things here in cally are getting ridiculous. Why should I be unhappy and miserable, for what?

 

 

After a friend and I were laid of from the Space Center He moved all of his 401k and retirement money to an IRA, filed bankruptcy and let the mortgage company forclose on his house. In Florida they can't touch IRA money. I on the other hand decided to do the honorable thing and pay as much as I could before letting things flounder while I "restructured my finances". Well guess who took longer to build his credit back up. Me. One year after his bankruptcy he was getting credit card offers. High interest but still he got them. Within 3 years he bought another house with some of the money from his IRA. I am still renting because I spent all of my money trying to pay everone off. He's had 3 new cars financed also. I have a Quest that needs thousands to make it like new. I don't know what your state is like but it paid to file bankruptcy back then. They since changed the law a bit but it's still in your best interest to file if you can't recover from debt. What ever you do don't liquidate your assets like I did. Your money will make you money.

 

 

Yea, the less money i have to shell out the better. Screw the loan companies.

[IntercooledFlatty]

pack your stuff in a uhaul (with the fiji on a trailer) burn the house to the ground, let the mortgage company deal with the insurance company and move in with your girl :hmm3grin2orange: simple

[Mech]

:iagree:

[Edde]

All right Mech! Stickin' it to the MAN.

[Mech]

Why not just short sell it? You might still owe some money on the loan, but it won't have the lasting effects of a foreclosure.

 

Because, foreclosing buys us time.

[Kr0nus]

Because, foreclosing buys us time.

 

What do you mean buys you time? If you foreclose the house is gone and your credit is screwed right? With a short sell you are still going to owe some money, but it doesn't screw up your credit.

[Fanta]

I still say you should move out to GA. I mean $600k? Holy hell, you could buy a 6,000sq ft 2 story house w/basement on 5 acres, a 4 car garage, and like 6 bedrooms and 5 baths for that much out here! with no emissions!

 

marso has a good point that I never knew existed. I would exercise caution on how you really go about this so you don't end up shafted for the next 10 years.

[Mech]

What do you mean buys you time? If you foreclose the house is gone and your credit is screwed right? With a short sell you are still going to owe some money, but it doesn't screw up your credit.

 

it can take up to 8 months for them to kick you out.

 

I'm researching the technical legalities. It looks like cally is different from other states in respect to them being able to come after you and what they can do.

[Mech]

I still say you should move out to GA. I mean $600k? Holy hell, you could buy a 6,000sq ft 2 story house w/basement on 5 acres, a 4 car garage, and like 6 bedrooms and 5 baths for that much out here! with no emissions!

 

marso has a good point that I never knew existed. I would exercise caution on how you really go about this so you don't end up shafted for the next 10 years.

 

dude, you have no idea how ridiculous it is out here. and not just houses :mad:

[Kr0nus]

it can take up to 8 months for them to kick you out.

 

I'm researching the technical legalities. It looks like cally is different from other states in respect to them being able to come after you and what they can do.

 

Why wait for them to kick you out? Just sell it and move. Or you can continue to live in a house that you can't afford and basically throw money away. Just my opinion though. You see the axe coming and it seems like you just want to draw this out to the bitter end. I would just cut my loses and move.

[Kr0nus]

Also, when you said your parents help you buy did they co-sign? If so you are probably going to screw up their credit too if you foreclose.

[Fanta]

Why wait for them to kick you out? Just sell it and move. Or you can continue to live in a house that you can't afford and basically throw money away. Just my opinion though. You see the axe coming and it seems like you just want to draw this out to the bitter end. I would just cut my loses and move.

 

 

sell it for less - cut your loss, move to GA, get back on your feet and pay off the rest eventually

 

Mech - I have an idea - I had a friend who used to live here when she was little who moved ot SanFran in middle school come back and visit. Long story short, she lives here now

 

I'll be honest though - me and my friend have been kicking around the idea of going 50/50 on a town home and such, but I guess the whatever happens when you can't pay it always scares me Even though this is further down the road, I like the plan ahead.

Edited March 21, 2008 by Fanta

[Kreal]

$600,000 ? Are you kidding me? Is that the house in the background of your sig pic? If so, then my house would be $1-2 Million if it were in CA.

 

DO YOU KNOW what kind of a house you could get in other areas - for 1/4th the cost? That is insane, totally insane!

 

I can't seem to understand some things.. $50k-$100k gets you a good house around here. $3k-$5k gets you a great Conquest/Starion around here.

 

But, it's $600k for that house in CA, yet members who have SQs in CA are selling their cars for $3k-$5k.

 

How can you possibly afford that costly of a house ? I can't even imagine the house payment. You must make a lot of money out there. What is the current minimum wage? Do you have a $1 Menu at McDonalds or is it $20 Menu?

What is the current price of fuel?

 

 

As for advice,

 

If I were you, I'd sell it for what ever you could. Move away, far away, and simply work at paying off what you owe. The others are right when they say for SEVEN years you will have destroyed credit. You'll have a hard time getting a cell phone, any credit cards, finding a place to rent - definitly won't find a place to buy. You're screwed for the next 7 years.

 

Good luck in what ever you choose to do.

[Edde]

sell it for less - cut your loss, move to GA, get back on your feet and pay off the rest eventually

 

Problem here is you can't get the title released to a new buyer.

 

Folks are walking away from houses with neg equity everyday.

[chiplee]

$600,000 ? Are you kidding me? Is that the house in the background of your sig pic? If so, then my house would be $1-2 Million if it were in CA.

 

DO YOU KNOW what kind of a house you could get in other areas - for 1/4th the cost? That is insane, totally insane!

 

I can't seem to understand some things.. $50k-$100k gets you a good house around here. $3k-$5k gets you a great Conquest/Starion around here.

 

But, it's $600k for that house in CA, yet members who have SQs in CA are selling their cars for $3k-$5k.

 

How can you possibly afford that costly of a house ? I can't even imagine the house payment. You must make a lot of money out there. What is the current minimum wage? Do you have a $1 Menu at McDonalds or is it $20 Menu?

What is the current price of fuel?

 

 

As for advice,

 

If I were you, I'd sell it for what ever you could. Move away, far away, and simply work at paying off what you owe. The others are right when they say for SEVEN years you will have destroyed credit. You'll have a hard time getting a cell phone, any credit cards, finding a place to rent - definitly won't find a place to buy. You're screwed for the next 7 years.

 

Good luck in what ever you choose to do.

 

where've you been bro? everyone knows cali housing got out of control. A buddy of mine got stationed there and bought a 1400sq/ft 9 year old place for $675 and that was san diego, where I think housing was more reasonable than where mech is. The market fell out from under my friend like days after he bought so he's stuck holding it. He can only afford it because his wife is a captain also, so they're on double housing allowance and double my salary.

[Edde]

where've you been bro? everyone knows cali housing got out of control. A buddy of mine got stationed there and bought a 1400sq/ft 9 year old place for $675 and that was san diego, where I think housing was more reasonable than where mech is. The market fell out from under my friend like days after he bought so he's stuck holding it. He can only afford it because his wife is a captain also, so they're on double housing allowance and double my salary.

 

Yup - it's all relative. Kreal needs to get out of Ohio and see either coast. These prices aren't unusual at all and the economies are entirely different.

 

I have a 1150 sq ft one level wood frame house on a slab and these peaked at $550k.

[Kr0nus]

I think it's funny when people are so surprised about the CA housing market. Take Kreal for example, you live in Ohio, what exactly is in Ohio? Pretty much nothing, you got Cincinnati, but that is about it. CA is the 6th largest economy in the entire WORLD, just behind Japan. There is a lot of money out here and a lot of people making a whole lot of money. Most of the technology companies at least have a branch out here if not their headquarters. We can ski and surf on the same day. CA is also one of the few states that can be it's own country. We can provide pretty much everything we need in house. California is nice, but you have to pay for it.