Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
The OP has never said he can't afford his payments if the rate adjusts. Unless this is the case, why shouldn't he just continue to make payments? People who bought houses in the 1980's paid as much as 14% interest. It didn't keep them from buying houses.
The OP has never said he can't afford his payments if the rate adjusts. Unless this is the case, why shouldn't he just continue to make payments? People who bought houses in the 1980's paid as much as 14% interest. It didn't keep them from buying houses.
Because the OP has done the analysis. Do you keep on throwing bad money down the drain. Look the OP has at least tried to refinance the mortgage into a fixed rate.
Right now, ARM resets are low but the government isn't going to hold Libor or Treasury rates low for very long.
In the near future, the mortgage payments will sink the OP. It will be a huge money pit.
Look at the banks. They were left with all of these toxic assets (some more valuable than others but who knows). Most of the big banks have the cash to cover the toxic losses but don't want to waste their assets.
Look at Goldman Sachs. They would have stool to lose at least 13 billion if not for the AIG bailout. Goldman didn't need a bailout. They had 13 billion in cash to cover their losses.
Look the OP has at least made a valid effort to try to get the loan refinance into more favorable terms (that's more than most of people who just walk away).
So the OP probably has done their calculations and needs advice. The OP is not in financial trouble now but has the foresight to think far in advance. That's always the best course of action. So many people were caught off guard with rate resets, they didn't know what to do. At least the OP has their head on straight.
Go consult some attorneys on what the next logical step to do.
"A few months back I submitted the necessary paperwork, etc, and last week my request was denied. Here is the reasoning: "all payments are current and you do not have enough debt" (my income to debt ratio was too low; they want 40%)." you do not have to be late to have your loan modified.
Are you the only one on the mortgage?
What is your gross monthly income?
What is your mortgage payment including, taxes & insurance?
"Now, I am faced with what to do." Fight back. Lenders are not easy to deal with, but you have to be persistent.
Because the OP has done the analysis. Do you keep on throwing bad money down the drain. Look the OP has at least tried to refinance the mortgage into a fixed rate.
Right now, ARM resets are low but the government isn't going to hold Libor or Treasury rates low for very long.
In the near future, the mortgage payments will sink the OP. It will be a huge money pit.
Look at the banks. They were left with all of these toxic assets (some more valuable than others but who knows). Most of the big banks have the cash to cover the toxic losses but don't want to waste their assets.
Look at Goldman Sachs. They would have stool to lose at least 13 billion if not for the AIG bailout. Goldman didn't need a bailout. They had 13 billion in cash to cover their losses.
Look the OP has at least made a valid effort to try to get the loan refinance into more favorable terms (that's more than most of people who just walk away).
So the OP probably has done their calculations and needs advice. The OP is not in financial trouble now but has the foresight to think far in advance. That's always the best course of action. So many people were caught off guard with rate resets, they didn't know what to do. At least the OP has their head on straight.
Go consult some attorneys on what the next logical step to do.
So he walks away from his house and reneges on his loan agreement. His credit will be ruined for the next few years. Where is he going to live? Isn't he going to have to throw his money away on rent? Is that included in your calculation? And what about other lenders - credit cards, car loans. What kind of rates will he have to pay, assuming he can even get credit?
So he walks away from his house and reneges on his loan agreement. His credit will be ruined for the next few years. Where is he going to live? Isn't he going to have to throw his money away on rent? Is that included in your calculation? And what about other lenders - credit cards, car loans. What kind of rates will he have to pay, assuming he can even get credit?
Well there's plenty of people already in that boat. If the banks want business in the future they will have to lower their standards.
Seeing foreclosures and bankruptcies on credit reports will not be a big deal in the future since so many are currently doing it today.
I totally agree. Further the OP being hundreds of thousands of dollars upside down isnt going to put him in a good financial place. I refuse to engage in judging people who have made a decision when large organizations do the same and worse with no accountabiilty. I remember after 9/11 - the failure to fly for a few days ruined the airline industry. Guess what - If I cant work for a few months - my problem - I dont get a bailout. OP do what is best for you - ignore the rest of the noise.
Well there's plenty of people already in that boat. If the banks want business in the future they will have to lower their standards.
Seeing foreclosures and bankruptcies on credit reports will not be a big deal in the future since so many are currently doing it today.
No one can predict the future, but from my perspective this is what got this economy in trouble in the first place - the lowering of standards. Allowing people to buy quarter of a million (or more) dollar houses with incomes of $30,000 (and that not even having to be documented), interest-only loans, ARM's with no caps, etc., because the banks figured they'd sell the mortgage before the buyer got in trouble, and the buyer assumed that the property would appreciate and they could flip the house before they actually had to pay the piper. Meanwhile the real estate professionals - agents and loan officers and appraisers, etc. - making out like bandits on commissions and fees by selling naive people on the idea that they could afford houses way beyond their means. In a nutshell - greed - all the way around.
I certainly hope banks don't lower their standards...I'm tired of having to pay for everyone else's irresponsibility.
I want to thank ALL of you for your views and insight. I assure you, a decision will be made with complete due diligence and after vetting out all issues. This is difficult because I have never walked away from anything and I have always been financially responsible. My credit score, which I ran last month, was above 790. That is not obtained by being financially irresponsible. I pay my bills, credit cards, car notes, and college loans (95k+) on time.
It is a delicate balance between a moral high ground, ethics and a business decision; there is a symbiotic relationship between them all. As I stated in my post, this is a "COLD HARD" business decision...not an easy one to be taken on a whim. I am clear on the future financial impact from a credit standpoint and how difficult even renting may be after a foreclosure or short sale, etc. But like any bad relationship (business or personal), you do not always stay in it just because it is the moral thing to do. You have to asses the issue from every angle then make a decision.
It was interesting how 2 camps were created on this issue...moral versus business. My intention when purchasing this house was to raise my babies here and not for a short term investment windfall or for speculation. However, even with that said, I cannot look away from what may lie ahead in the future. That is the difficult decision. 250k is a lot of money to make up, wholly dependent on market forces. I am trying to look at my options now, while I have some control, as opposed to continuing to pay $58,200 a year (mortgage, property taxes, mello roos, property ins, HOA) to only have the house taken away once the mortgage is subject to rate changes.
Wells Fargo's position does not make sense at this point. I thought I was doing the right thing by contacting them first before any problems exist. To make a denial based on not enough debt and the fact that I currently pay seems strange it light of the current state of things. It think this may turn into a game of chicken. Who will flinch first? Do I stop paying them and all of a sudden they will work with me? Who knows. I contacted them first to avoid games like that.
Either way, this could be an expensive proposition looking at not only monetary considerations, but also credit, future housing (renting and later purchasing) and other purchasing needs. Even a game of chicken is going to lower the credit score I worked hard to obtain. However, creditors seem to have a short memory and if I continue to pay everything else on time, maybe the hit will only last a short period.
One more final thought. Someone mentioned renting as if it is the same. In Southern California, it is not the same, at least monetarily. You saw above what my annual obligation is for the house including everything (note, taxes, etc.). A comparable house (1900 sq ft, 4 bed, 3 bath) in the same area can currently be rented for $2,200 a month or $26,400 a year. It is not apples to apples from a "throwing money away" standpoint (even after factoring in tax break, etc.). Just my opinion.
To those that posted without judgment and with judgment, I thank you. I intend to check back daily, so please continue to post (or new folks please post) if something you think about may help. Thanks again.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Some Questions
