financial advice....please (Chicago, Virginia, Time: short sale, real estate, foreclosure) - Illinois (IL) - City-Data Forum

treadingwater · 02-23-2010, 08:48 PM

So, here is the situation. My husband and I purchased our home 4 years ago for 410k$ we own a rental property that we rent out that used to pay for itself but now is on the downside about 300$ per month. Last year the exact same house down the block from us sold for 160K$ less than what we paid for. We investigated the value of our home and found out our mortgage was upside down over 100K$. My husbands company got bought out by another company and his yearly pay decreased from 130K$ per year to 65k$ per year. Our monthly mortgage went up 200$ per month due to our escrowed taxes. We lapsed in our mortgage payments to catch up with other bills and repairs needed in the other property. We can reinstate the mortgage with savings that we have but we are at the point where we dont know if its worth it or not. We are actually thinking about going into the forclosure process just to get out of this bad situation because our home will never be worth what we paid for it and we will be in a loose situation even 10 years from now if we try to sell it. I know this is a radical approach to saving your financial situation but I need advice on if this is something we should really do or should we do everything we can (even if it means just barely making it each month) to save the house we are in and try to sell the property that actually has equity in it. Any advice would be so appreciated.

chet everett · 02-23-2010, 09:11 PM

Without more info it would be too hard to say there is "no way out" , but without knowing more about what you have into each property and the odds of the lender trying to get eveybit of your dough it is too tough to tell you what to do.

Generally things are still moving very slowly as far as lenders actually foreclosing, and even when they do it is stll relatively uncommon for them to not prefer some settlement / short sale.

Probably worth trying that with the caution that w/o good representation the lender won't give you any relief from a judgement.

I guess halving your income was a big part of your problem, but still not clear what your total "worst case" out lay is -- if you are capable of making payment (in the view of the lender) they will try and get their dough...

Drover · 02-23-2010, 09:23 PM

And this has what, exactly, to do with Chicago?

chet everett · 02-23-2010, 09:40 PM

Technically they'll get the same advice in the mortgage forum. The laws in Illinois DO allow lenders to pursue a deficiency.

meatpuff · 02-23-2010, 09:52 PM

The NYTimes had at least a couple of interesting articles this year about people facing a decision whether to walk away. You are far from being alone.

As Values Slide, More Weigh Walking Away From Mortgages - NYTimes.com
The Way We Live Now - Walk Away From Your Mortgage! - NYTimes.com

DoneWithDC · 02-24-2010, 06:16 AM

I would definitely look into doing a short sale and avoid foreclosure, if possible. I lost my job in Virginia about 5 months ago and we were considering just walking away from our house there, but the real thought of doing that gave my wife and I a terribly guilty feeling, since we've always been extremely responsible people. A short sale will hurt your credit significantly less and it will likely get more money for the bank than they would get if they had to pay for upkeep and pay to get it sold for a lower amount than you would probably get for it as a short sale.

I would definitely check in with a real estate attorney and a realtor. We consulted with a real estate attorney just to find out what, if anything, the bank could come after us for. A realtor can walk you through the entire process and tell you just what needs to be done.

If the house doesn't sell in a short sale, it can still fall into foreclosure, since you would not be making mortgage payments any longer. If it does get foreclosed on in the end, at least you can go out saying you tried to go the responsible route to get out of your house and it just didn't work.

If you do decide to pursue a short sale, just remember, you will not want to start making more payments on your mortgage again or they will think that you are able to afford the house and they likely will not accept any offers you get on the house.

If you haven't already talked to the bank, you should also call them and see if they might be able to help you out with a loan modification. You might be able to get smaller payments for a year or so.

Good luck. Losing your house, no matter how you cut it, sucks, but it could turn out to be a blessing in disguise.

knitgirl · 02-24-2010, 07:45 AM

Quote:

Originally Posted by DoneWithDC

I would definitely look into doing a short sale and avoid foreclosure, if possible. I lost my job in Virginia about 5 months ago and we were considering just walking away from our house there, but the real thought of doing that gave my wife and I a terribly guilty feeling, since we've always been extremely responsible people. A short sale will hurt your credit significantly less and it will likely get more money for the bank than they would get if they had to pay for upkeep and pay to get it sold for a lower amount than you would probably get for it as a short sale.

Thank you for doing the right thing!

Los Guys · 02-24-2010, 07:52 AM

Another option is the government's making home affordable program. I believe that it involves your lender modifying your loan or payments if you meet certain criteria. I've heard mixed results about the responsive of it, but the feds are trying to push lenders to use it more.

Making Home Affordable - Home

Pebbs78 · 02-24-2010, 08:55 AM

I'm in a similar situation. I lost $110,000 on a property I aquired in 2004, height of the market. Citibank advised me to go through the short sale process. This, unfortunately, was my only option. They would not refinance my loan, as the rate was adjusting and the property was not appraising at my original loan amount. What a nightmare. We tried everything to keep our loan at our original 2005 payment, (we took out a 5-year ARM).

I had to wait 6 months for Citibank to approve the 2009 appraised value of the property, and my credit was torn up within the 6 months. They actually started the forclosure process, which showed up on my credit report. Score went down -150 points. The good news is that I close today, and it is off my back. Citibank sends the credit agencies a short-sale notice, so the forclosure will be removed.

Contact your lender and find out what options you have. I know every situation is different, there may be a better option.

Personally, we tried everything to pay for our home. We are both very responsible people. Never again will I get into an ARM - was 'young and dumb,' but never again.