Foreclosure

[Manmohini]

Ladies, I would appreciate informed opinions. When does one just throw in the towel and opt for foreclosure on a property that won't move?

Details: I have had my home on the market for 2 years in a town I no longer live in, a town which is an hour away from where my husband and I both work. This means I am maintaining two homes--this house and a condo that I rent. Three of the top real estate agents have shown the house. I have come down in price far below the appraised value and am willing to part with it for what I owe or less. I have even applied for a short sale with the bank but the only offer I've gotten on the house was 1/3 the value of the loan. The bank won't go for that. The auction company doesn't think it can get what we would need for a short sale since property values are dropping dramatically now. I have a newborn now and the house is draining us dry every month with upkeep and mortgage. We tried renters, but they thrashed the place, and the place is delicate--a miniature Victorian. The town is depressed so it's hard to find respectful renters. The market in that town is completely glutted and has been since Spring 2006. Moreover, most of what we pay every month is interest, property tax, and mortgage insurance. The principal budged only $1500 last year.

Anyways, sorry to bore everyone with those details, but I am ready to give up mostly because I can't continue to throw money down a rathole every month. Both my husband and I are professionals but we pinch pennies constantly and go without necessities like dental work for example. Is it worth it to trash my credit for seven years? I have heard that I could reapply for credit in two years (but the rates would be high) and that in seven, the foreclosure would be wiped from my record. Right now, I am thinking it is worth it because we can't live decently on our income when 1/3 of it goes to keep up a place we don't live in. Moreover, I have only taken out one loan in my life--this mortgage--so I don't live on credit and can probably do without for a few years.

Every month, I feel as if we are being slowly crucified. What would you do? Opinions please.
Manmohini

 

[chefkate]

No help to offer but WOW!
Sorry you're going thru this.

We're ready to build our next house but the values are down 20% in our area and I refuse to lose that much money on our house.

Good luck!

 

[melimcn]

I'm very interested to see what responses you get here. DH and I are about to enter into the "double mortgage" land ourselves. We're hoping that we don't have that amount of trouble selling, but you always have to consider worst case scenario, which it sounds like you'er in.

I wish you luck, and a buyer!

 

[spyrosmom]

If your credit basically non existent except for this mtg, you may just want to file bankruptcy. Unfortuneatly if you're working, you'll probably have to file a ch 13 and still pay for it, although you'll be paying less. You can maybe then sell it for the new value agreed upon in the bankruptcy. A BK will knock about 200 pts off your credit score, but you can apply for new loans immediately (with HIGH interest rates), but in a 13 they will only be granted if the trustee of the bk gives the ok. Or you could file a ch 7 (if they allow) the house will be sold, and you will owe nothing else. The leftover funds will be discharged debt in the bk. The bk will stick on your credit for approx 7 yrs.

If you just surrender the house to the bank and let them foreclose, you are still responsible for any deficiency left from the sale (at least here in Illinois - check your local laws) and the lender can get a civil judgement and then garnish your wages, meaning you'll pay for the house one way or the other. A judgment hangs out on your credit report for roughly 20 yrs.

If you do surrender to the bank, you'll probably be forced into the bk anyway to get out from under what you still owe after the sale. Given that all the options pretty much suck, I would file a ch 13 and try to pay the lesser amount until the house can be sold. You may also want to try negotiating a contract modification w/ your mtg company. They may extend the term of your loan to lower the payments and keep you in the house. The extended term will eventually raise your payoff due to the extra accrued interest, but the lower payments may allow to maintain until the house can be sold.

Also keep in mind that a slip in your credit could impact other things in life most notably insurance rates. Insurance companies get nervous and think that if people can pay for what they have (regardless of the situation) they will trash what ever it is they do have and become reckless, thus the rates go up. Also if husb has any credit cards, and you file a joint bk (excluding any credit cards) they may raise their rates under a universal default clause, and also may do so if you are behind on the mtg.

It all unfortunalty not a good situation. I would seriously consider sucking up your pride and calling any and all family/friends and start begging and pleading and borrow from them from help. Goofed up credit can seriously hurt. I can't tell you what to do because I know its a tough situation, and I don't know that I know what I would do. But I do wish you the best of luck, and hope some of this helps!!

Nan

 

[nkuangel]

My advice to you would be to go to a financial planner or someone who is an expert in foreclosures. This is a huge decision that could affect you for a very long time and you need someone who can help you weigh the risks and benefits of foreclosure versus paying the mortgage and waiting for a buyer. Also an expert may have other options that you are not aware of which may not involve such drastic measures.
I personally would want someone who knows the system inside and out.
Good luck
nkuangel

 

[lesliew]

I'm sorry you're going through this. Nan pretty much covered everything and I wanted to second her advice about seeing if you can borrow from a relative, if possible. Not only will bad credit effect cc rates and insurance, but many companies now check credit histories on prospective employees. Should you or your DH want to look for another job in the near future, bad credit can be a factor in whether they hire you or not.

 

[Aquajock]

In all honesty, I think you need good qualified legal advice for something like this. It's a little starry-eyed, in these days of the subprime meltdown with concomitant tightening of lending standards, to think that a foreclosure will only affect your credit for seven years. Even if that's the case, seven years is a long, long time, and a lot can happen to the lending climate in that time (a lot has already happened, but that's another thread).

Also re the suggestion about bankruptcy (understanding that I am NOT a lawyer and have never involved myself with bankruptcy laws past and present) you might not be able to exclude the house from the bankruptcy estate since you no longer occupy it, PRESUMING (big presumption) that you in fact would be able to file for the form of bankruptcy that wipes your debtload clean(er).

You are indeed in a tough spot, and I repeat that IMHO you need good legal advice from an attorney skilled at personal financial matters.

A-Jock

 

[jonahnah]

I don't mean to be blunt, but can't you move back into your house and suck up the long commute? I think that's a better option than foreclosure or bankruptcy. I understand there are extra costs associated with the commuting (gas $, longer childcare coverage, personal "wear and tear"), but when I lived in CA, 90 minute commutes (or longer!) were not uncommon. Even here in CT, many people commute an hour to their jobs in NYC. You can do it for a couple of years while you are trying to sell the place. Are you in a lease in your condo?

Jonahnah
Chocolate IS the answer, regardless of the question.

 

[JMFRANE]

My DH and I bought a house seven years ago and still had our other house. We didn't want to have two mortgage payments so we got a renter in there. It worked out so well that we still have the house along with two more that we rent. If you do go that route, just be picky about who you rent to.

Joanne

 

[Miss Lee]

I'm sorry for what you're going through -- this really is a crappy time for home sellers. I come down on the side of either moving back to your home and commuting or maintaining your property as a rental. My DH has about a 45 minute commute on top of a 12 to 14 hour work day, and several of his colleagues have a 60 to 90 minute commutes. This is very common! It's not easy, but I think it beats the alternative.

 

[jojocpa]

I agree with what Nan said. You will still be on the hook for the difference between what the bank sells the house for (if they foreclose and sell it) and what you owe on it. If you can't sell it for what you need to pay off the loan the bank won't either. But before I would surrender to bankrucpty I would consider renting it or moving back into it.

Jo

 

[Georgia Peach Fit]

I am not an attorney but I am a paralegal for a firm that specializes in bankruptcies. First and foremost, I would definitely recommend seeking legal advice, there are many options out there to avoid foreclosure. I must say since I am not an attorney, please don't construe any of what I am telling you as legal advice, just my experience. AND I am in a totally different state that you are.
Bankruptcy is a Federal Proceeding, so the Chapter 7 and Chapter 13 bankruptcies are generally the same, but each state has different exemptions for real estate and personal property, and each state has different determining factors as to which bankruptcy you can, or MUST file. I did want to clarify, however, that Chapter 13 is not going to reduce your mortgage payment. Chapter 13's are a 3 year minimum, 5 year maximum court supervised repayment plan. Only under very rare circumstances can you pay a mortgage thru a Chapter 13. It is impossible to cram a 15-30 year mortgage into a 3-5 year plan. We have paid mortgages in Chapter 13's on very, very rare occasions and if I remember correctly it was because the client had less than 5 years left on the mortgage. A Chapter 7 would allow you to let the house "go back" to the lender and you would not be responsible for any deficiency. But, they will still have to go through the normal foreclosure proceedings once they receive bankruptcy court permission to do so. At least this is how it is in Georgia; your state may be different. Anyway, just wanted to give you a little bankruptcy insight...

You might want to look into doing a short sale, or a deed in lieu of foreclosure, but please talk to someone before doing so. I know that most bankruptcy attorneys in my area do free consultations, including us, so you might be able to get a professional opinion without having to pay for a consultation. The attorney may have some great alternatives that will keep you out of foreclosure and out of bankruptcy. HTH! Good Luck!