Seriously considering home foreclosure

[FoolFromAZ]

Originally Posted by noppenbd

It is not whether your wife's name is on the title, it is whether her name is on the mortgage. If she is on the mortgage and you default her credit will be trashed. Also, can she even qualify for a loan based on just her income, with all the credit card debt you all have?

If $315K seemed reasonable when you bought the house, why is it now suddenly unreasonable? If you are able to make the payments, I think you have a responsibility to pay your debts. Old fashioned maybe, but this country needs a little of that right now.

I thought we could get 3 bedroom house for 120K these days. That would bring my monthly mortgage payment to less than $1000 and my wife is making 55K so she should be able to get loan for that amount.

[FoolFromAZ]

Originally Posted by minnie1928

You bought the house, then you should pay for the house. You are able to make the payments because both you and your wife are working. Big deal...that's often how it goes! Yes, the house is worth less, but it's a paper loss. If you walk away then you are just as responsible as those others that you mention that are causing you pain from their mistakes.

We are (the US) on the verge of financing a $700 billion bailout. Actions like this only make a bad problem much worse.

Suck it up and accept your responsibilities. No one held a gun to your head to buy the house or the $40,000 of stuff on your credit cards. If it's getting tight, get a second job.

I agree with you. Its not ethically right to walk away from home just because others are doing. but whole thing is really frustrating.. thats why i was thinking like that. but i dont think I wud do as long as I dont find any problem with this job.hd

[ScrimpAndSave]

I don't think it is ethically right.

You bought it - you pay for it. Or, put it on the market.

[LivingAlmostLarge]

I am unsure what to do. How do you know your wife will get a loan in her own name and how do you know that you will get a 3 bedroom house for $120k? Those are assumptions.

If you can guarantee it, then I guess if it's okay with your wife, you can do it. But realize when they pull her credit and pull yours for loan approval they might see the credit card debt you want to hide.

Also realize that walking away could be hurtful long term. I am not sure but could they potentially come after you after they short sell it? I mean if they foreclose but you have say $100k in a taxable account can they come after the assets?

Someone more versed in real estate will have to answer that. If you want to do this, I would talk to a real estate attorney and ask if they can come after you. And ask if you buy a home before your house goes into foreclosure, what will happen to that current home? And if they can put a lien against you for the balance of the foreclosure.

[disneysteve]

Originally Posted by FoolFromAZ

I have been paying my bills on time. never late on any of the bills. making monthly payment is not a problem. Its really frustrating to see your house price going down and people in your community walking away one by one.

I suspect the folks walking away are in a very different situation than you. They probably can't afford the payments. They may have bought with ARMs or IO loans that are now adjusting sharply higher. Perhaps they had hoped to flip the house or refi before that happened and now they can't sell so they're screwed.

You bought the house. You can afford the house. You plan to remain in the house. Keep paying the mortgage and ignore the folks around you. It doesn't affect you.

[boosami]

In what state do you live? People living in states with so-called "nondeficiency" judgement clauses in the foreclosure law have a loophole that basically allows homeowners to buy a new home while allowing their current home to foreclose. On top of that, it effectively eliminates the bank's ability to sue you or attempt to collect the money.

WSJ Article Link: Some Buy a New Home to Bail on the Old - WSJ.com
Foreclosure Law by State: State By State Foreclosure, Deficiency and Redemption Periods

[momof1in150]

Originally Posted by FoolFromAZ

I thought we could get 3 bedroom house for 120K these days. That would bring my monthly mortgage payment to less than $1000 and my wife is making 55K so she should be able to get loan for that amount.

In this market you are going to need a down payment to get into a mortgage. On a $120K mortgage you are going to need a 3-20% down payment. While your wife MAY qualify it is VERY hard to get a mortgage. Even the most qualified individuals are having a difficult time.

[tripods68]

I sense that you "envy" your neighbors in some way for "walking way" from their homes to save money. I suspect you aren't in deep financial trouble either; Otherwise, you wouldn't be late paying bills. That's my psychoanalysis bubble take. Take it for what it is

There's actually a better options. Try to find ways to cutback on your monthly expenses. List your income/expenses. If that means no movies, vacation, or entertainment, or no new clothes for a while, maybe a year or so, your debt (except housing) could be paid off a lot sooner. By then, the "monkey" will be off your back and you can breath a sigh of relief. More importantly you'll have a new perspectives by then. Just try it.

[FoolFromAZ]

Originally Posted by LivingAlmostLarge

I am unsure what to do. How do you know your wife will get a loan in her own name and how do you know that you will get a 3 bedroom house for $120k? Those are assumptions.

If you can guarantee it, then I guess if it's okay with your wife, you can do it. But realize when they pull her credit and pull yours for loan approval they might see the credit card debt you want to hide.

Also realize that walking away could be hurtful long term. I am not sure but could they potentially come after you after they short sell it? I mean if they foreclose but you have say $100k in a taxable account can they come after the assets?

Someone more versed in real estate will have to answer that. If you want to do this, I would talk to a real estate attorney and ask if they can come after you. And ask if you buy a home before your house goes into foreclosure, what will happen to that current home? And if they can put a lien against you for the balance of the foreclosure.

LAL,

Yes those are assumptions. But I thought they are very much possible. 3% down for FHA loan. We can arrange 10K for the down payment, worst case we can borrow from our parents. I think getting 110K loan for my wife should not be a problem. only 4K of CC debt on her name. She has employment history of one year and she is making 55K which will go up once she gathers experience. Finding 3 bedroom / 1500 Sq Ft home for 120K is very much possible in the current market. I see houses even for 100K. lot of foreclosures, some houses are really in good condition when I checked on ZipRealty.com

As I mentioned earlier we were just talking about this. We are just checking what are all the things that we need to consider if we let the house foreclosed.

I understood that there are quite a few things need to be considered by reading others opinion on this.

- I am in to IT. will find any problem with my current job or if I had to look for a new job in the next 7 yrs, will I find problem due to this FC.
- How wud I get rid of 40K of cc debt. Will I be able to pay it off or move some to wife CC and still keep her credit score good to obtain home loan.
- Will I have to pay any tax, etc.,

[FoolFromAZ]

Originally Posted by disneysteve

I suspect the folks walking away are in a very different situation than you. They probably can't afford the payments. They may have bought with ARMs or IO loans that are now adjusting sharply higher. Perhaps they had hoped to flip the house or refi before that happened and now they can't sell so they're screwed.

You bought the house. You can afford the house. You plan to remain in the house. Keep paying the mortgage and ignore the folks around you. It doesn't affect you.

Yes Steve. Thats what I have to do. I am just trying to keep all the options open.

[FoolFromAZ]

Originally Posted by boosami

In what state do you live? People living in states with so-called "nondeficiency" judgement clauses in the foreclosure law have a loophole that basically allows homeowners to buy a new home while allowing their current home to foreclose. On top of that, it effectively eliminates the bank's ability to sue you or attempt to collect the money.

WSJ Article Link: Some Buy a New Home to Bail on the Old - WSJ.com
Foreclosure Law by State: State By State Foreclosure, Deficiency and Redemption Periods

I am from gilbert, arizona. I too read the WSJ article. Infact that article too made me thinking more about this route.

[FoolFromAZ]

Originally Posted by tripods68

I sense that you "envy" your neighbors in some way for "walking way" from their homes to save money. I suspect you aren't in deep financial trouble either; Otherwise, you wouldn't be late paying bills. That's my psychoanalysis bubble take. Take it for what it is

There's actually a better options. Try to find ways to cutback on your monthly expenses. List your income/expenses. If that means no movies, vacation, or entertainment, or no new clothes for a while, maybe a year or so, your debt (except housing) could be paid off a lot sooner. By then, the "monkey" will be off your back and you can breath a sigh of relief. More importantly you'll have a new perspectives by then. Just try it.

you got it tripod.

I have already posted my income and debt few months ago. I have cut down my expenses as much as I could. We currently get around $3500 after all the xpenses and paying our CC debt. We still have over 40K of CC debt. It was over 60 some time back. I also got car loan of 24K. paying $540 everymonth.

[tripods68]

That's a good article. That's exactly what my buddy did.

I think Short Sale would work a lot better. Short Sale only stays in your record i believe 3 years correct me if I'm wrong.

[Ima saver]

I think you should stay put in your home.

[momof1in150]

Originally Posted by tripods68

That's a good article. That's exactly what my buddy did.

I think Short Sale would work a lot better. Short Sale only stays in your record i believe 3 years correct me if I'm wrong.

A short sale that deals with bank forgiveness of debt only works if you are behind on your payments. We had a real estate attorney in the office on Wednesday explaining how they work. If you aren't already behind paying your mortgage you can't do a short sale unless you have the means to make up the difference - personal loan or cash.

Some banks require you to have approval before you can list your property as a short sale. There is a very long list of requirements that the bank requires from the seller for a short sale (W2s, bank records, hardships, paystubs, etc) and if they see that you have other money and a good paying, steady job they aren't going to forgive the difference between the sale price and what you owe. The other thing is that each state has tax implications. RI doesn't tax forgiving debt but some states treat it as income and you will receive a 1099 for the difference if the bank forgives it.

Moral - talk to a lawyer or a RE agent who has dealt with short sales.

[boosami]

You could also try a deed-in-lieu of foreclosure. It's similar to a short sell in that it's a negotiation with the mortgagee. You basically give ownership of the property to the bank and they consider your mortgage partially or completely settled. It is a way to free yourself from some or all of the debt (and the property). If they sell at more of a loss than they expected down the line, however, they may be able to come after you for the difference. It shows up similarly as a short sell on your credit report.

Just like you, lenders want to avoid foreclosure--it is a time-consuming and expensive process for them to go through.

[boosami]

Originally Posted by tripods68

I think Short Sale would work a lot better. Short Sale only stays in your record i believe 3 years correct me if I'm wrong.

Short sales and deed-in-lieu will stay on your credit report 7 years, just like a foreclosure. Your score generally will recover enough in 2-3 years to be approved again for another home loan, which might be where that figure came from.

[Madwand]

Find a Realtor that has experience in short sales. Selling short sale has no tax penalty at this time. The tax penaly has been lifted until our economy turns around. You will also preserve most of your credit this way.

Scott

[CCFREEDOM]

If this is any help at all. I bought a house in 1988 for $250,000..then it started declining in 1990, I live in California and in 1994 we had a devastating earthquake and I live right in the middle of it..The home next door to me sold for about $150,000...the house next to me the people just walked away after the earthquake and the bank sold it for $160,000. I was a single mom to 2 children, no child support and making $2,000.00 a month.. 10 years later that same house was worth $700,000. I could have walked way, yes..but it was my home, my responsibility. I never saw walking away as an option..

Right now the house I am living in cost me over $800,000 3 years ago, probably worth $200,000 less than that..but I like my home and its just a matter of waiting to see what happens the next 5 years. I am working on modifying my loan with the bank and paying a lower interest.

Its tough to see the way things are going and probably think to yourself that you could have waited..but its already done and we just have to sit tight and wait.

[tripods68]

Originally Posted by CCFREEDOM

I am working on modifying my loan with the bank and paying a lower interest.

With modifying your loan this negatively impact your credit also?