Foreclosing in CA, Moving to OR-help (Portland, Salem: foreclosure, leasing, mortgage)

[Venusian_Artist]

Originally Posted by rickers

Walking away may not get you off the hook on your loan. With the home values lower now because of the credit crunch, the bank may auction off the house and apply the money gleaned from the auction to your loan, but they may come after you for the balance owed. You may be better off renting out the house. I may be mistaken about this but that's what they do on car loans when folks can't make the payments.

Possibly. The situation is complicated by the presence of two loans. If they only had one: a purchase money loan, and have not refinanced or taken out a home equity line of credit, then they are protected by Cali's non-recourse laws. The additional loan makes it more of a case-by-case conundrum. They can get out of loan number one easily, the number two will take some phone time with the lender.

Bankruptcy is probably not necessary, though, because these lenders have a backlog of foreclosures, can barely return phone messages, and don't have the resources to pursue judgments in court. They are, after all, in the business of lending, not debt collection. It would cost them more to pursue, than to just write off the loss.

Regardless, it's very rare for money purchase loans not to have a power of sale clause written into them. And if this is the case, their lender(s) can't get squat from them, all other things being equal. Add to that the Bush Administration's Debt Relief Act, passed in December 2007, and they don't even have to pay taxes on the deficiency, although they will still have to file a 1099 with the IRS for record-keeping purposes.

For me, the only downside of walking was Fannie Mae's new five-year moratorium/seasoning requirement on underwriting a loan for anyone with a voluntary foreclosure, not related to a medical issue or job relocation. I believe Freddie Mac still has a three-year deal, but a lot of lenders won't touch you if they can't bundle your loan as a backed security and sell it off to someone, which usually requires government-sponsored underwriting.

There are still other non-GSE lenders and FHA loan possibilities, though. I have a feeling some of that stuff is going to dry up as the market continues to sink, but it's alive and kicking now.

[bellaluna57]

Something like that happened to us and we had to put a little bit more down toward the security deposit to rent an apartment, that was all.
Good Luck! I am planning to move to Oregon too. Hopefully, as soon as I can find a job.

[jojonow]

Hi Folks,
Here are some answers:
Scone, we are fully aware of the challenges that will come from damaging our credit. We decided we would rather have cash in hand these days, and stop relying on credit to get us through.
We can live anywhere we want to. I'm a journalist and the magazine I've worked for for 14 years has always had me working by remote. My husband's biz is telephone/computer based, so shouldn't be an issue with homeowners.
I agree that Cali will recover sooner, but we still have some ways to fall. Even mirroring the last Cal RE Bubble, we've got another 5 years to go.
As for getting deficiency judgments--Cal is a non-recourse state, so we'll just be dealing with our 2nd and plan to negotiate a payoff w. them.
My only concern about the OR move--will someone rent to a decent, professional couple with cash, but a recent voluntary foreclosure? I hear the Mid-Valley is competitive rent wise, so maybe Bend? Seems to have a lot more rentals there. I mean, the credit check would show: Perfect payment history, then she stopped paying the mortgage because she wanted to move to OR. I am hoping the landlords/property companies will understand.
Thanks.

[scone]

Originally Posted by jojonow

Hi Folks,
Here are some answers:
Scone, we are fully aware of the challenges that will come from damaging our credit. We decided we would rather have cash in hand these days, and stop relying on credit to get us through. ...I mean, the credit check would show: Perfect payment history, then she stopped paying the mortgage because she wanted to move to OR. I am hoping the landlords/property companies will understand.
Thanks.

I think a lot of landlords would think twice before renting to someone who voluntarily walked away from a serious legal obligation. Not because of job loss or catastrophic medical costs, but simply to have more "cash in hand." If you walk away from your mortgage, why wouldn't you walk away from your lease? And throwing away a "perfect" credit rating doesn't make much sense to the outside observer. Some landlords, I suspect, aren't going to buy your story and may think there are more serious issues going on here.

Oregon doesn't have the same culture that Cali does. Voluntary "walking away" when there doesn't seem to be any really dire necessity for it, will not be seen as evidence of reliability and good character. Oregon is far more conservative about these things than Cali is. To be frank, many people here will view your actions as evidence of flakiness.

I'm not saying you are a flake. I'm just saying, certain actions will tend to create a certain image, which added to the preconceptions that many Oregonians already have of Cali people, will not work in your favor. That's probably not what you want to hear, but you did ask.

[Venusian_Artist]

Originally Posted by scone

I think a lot of landlords would think twice before renting to someone who voluntarily walked away from a serious legal obligation. Not because of job loss or catastrophic medical costs, but simply to have more "cash in hand." If you walk away from your mortgage, why wouldn't you walk away from your lease? And throwing away a "perfect" credit rating doesn't make much sense to the outside observer. Some landlords, I suspect, aren't going to buy your story and may think there are more serious issues going on here.

Oregon doesn't have the same culture that Cali does. Voluntary "walking away" when there doesn't seem to be any really dire necessity for it, will not be seen as evidence of reliability and good character. Oregon is far more conservative about these things than Cali is. To be frank, many people here will view your actions as evidence of flakiness.

I'm not saying you are a flake. I'm just saying, certain actions will tend to create a certain image, which added to the preconceptions that many Oregonians already have of Cali people, will not work in your favor. That's probably not what you want to hear, but you did ask.

I disagree. There are two types of landlords/leasing companies they'll encounter. 1. The by the book company. You can't do anything about these, as there is a policy with no discretionary decision making. 2. Everyone else.

This second category is who they'll play their cards with. Oregon's culture is different than California's, but not necessarily any more judgmental, which is the case you're making. And they are way more concerned with negative credit taglines generated by missed rent, than deliberately walking away from a bad business deal.

FYI: credit companies don't keep track of why someone walked away; they don't care. You are not going to see an explanation in a credit report stating that someone was 90 days late because they wanted to move to Oregon from California. Motive is irrelevant to everyone but a lender you're trying to work out a deal with.

Back to renting: In my search for an apartment, I encountered nothing but sympathy for my situation from managers and apartment staff. They all understood the walking away concept, did not verbally state they thought anything was wrong with it, and even had tenants in their buildings that were voluntary foreclosures.

Why? People are walking away from mortgages in all 50 states, not just California. There are more people in Cali, so there are more stories being written up about that region in the press, that is all. Oregonians know enough about the concept to make decisions.

Oregon is not an Eden-esque refuge from the real estate crash. Even a casual look at the MLS will tell you that. And if it hasn't been immune from upside-down properties, excessive inventory, and a high foreclosure rate, why would it be immune from voluntary foreclosure? They're all intertwined.

[Nina-in-Ashland]

Somehow I just don't believe voluntary bankruptcy is the panacea you are making it out to be. And I don't believe that voluntary bk has to do with culture, but rather has much more to do with an individual's flawed way of thinking about and handling money. You can move wherever you want, your issues with money will only move right back in with you. The OP would be better advised to seek out a credit counselor or therapist than a moving company. Good luck.

[Beena]

Yes, the credit counselor suggestion is a good one.

When I had 4 rental properties a couple of years ago, a prospective tenant with a recent foreclosure would not have been considered. Of course it may depend on supply and demand and how difficult it is to get a tenant in Oregon in the 1500 to 1800 range. But you also mention a bankruptcy on top of that to avoid deficiency judgement on the 2nd loan, which I assume was a non purchase loan used for the remodel.

We play special baseball here, and it is two strikes and you are out.

I would embrace that California weather and stay put. It is a beautiful place. Not sure why you thought anyone was going to bash you for living in SoCal. I don't think SoCal is the problem here.

[jojonow]

I am actually rather disheartened by many of your responses! You cannot know the details of who we are, our reliability, etc. and are making a lot of uncalled for presumptions.
Believe me, this is not a decision made lightly.
Consider this: I have earned a high credit rating and a $200K credit line on cards with a low 3% average interest...how? By a lifetime of good credit management. The high balances were mostly do to my husband's business start-ups, the first one where he was ripped off by his partner, which required him starting the business all over again from scratch. Successfully, yes, but we're still paying down "the business loan" from the credit cards.
The decision to buy a house was done with the intention of capturing appreciation that would pay off the debt. As we all know, our timing was woefully bad. The rest is history.
I don't feel morally wrong walking away--just examine the corrupt mismanaged banking industry that resulted in the crashed real estate market if you want to lay blame. The first mortgage company will get most of the principal back (which wasn't their's anyway), plus all the interest I've paid promptly. The 2nd mortgage company gave me a fraudelent loan--we did not lie they did--and refused to do their diligence, so shares responsibility for being bit. Yet they've also received my interest in a timely manner.
Interest by the way on money they did not actually loan, and mortgages they still do not actually own. Pity the poor investors at the other end.
I don't mean to digress, but the issue is far more complicated than just a Cali couple merrily skipping out on their obligations and ignoring both the consequences and seriousness of their actions.
We have learned a great deal from this experience. And this forum has shown me an example of some of the attitudes we will be facing as we return to my husband's native land to care for his ailing family.
Venusian, thanks for being one of the few voices of clarity. I trust we'll find SOMEONE out there who will value the fact that we've had a good track record up until now.

[Cat_Person]

Why don't you contact a few property management companies (smaller ones) and ask what they think about your situation. Tell them you're on a fact finding mission to learn how to best approach the Oregon rental market. Given the complexity of your situation I'd stick with experts rather than dealing here. As you can see, it's difficult to get an objective answer..

[scone]

Venusian artist is in the same situation you are, and claims to have encountered "nothing but sympathy" from rental managers, etc. I find it hard to square this notion with the actual ads I see for rentals, which usually require first, last, security, a credit check, and often a background check. Look, landlords are in the business to make money, not to sympathize with you. And they hear a lot of sob stories. The successful ones are a suspicious and cynical lot, in my experience, no matter what they say to your face.

And many of them are not going to like your voluntary foreclosure, especially if they themselves are struggling to pay their mortgages! Like I said, it's not as if you had job loss or catastrophic medical expenses-- you took a voluntary, unforced risk, the situation went against you, and now you want to avoid the consequences. Why should a businessperson, who is taking his own risks in owning and managing rental property, take a risk on you?

The only answer I can imagine is: because the landlord is having trouble renting the property at all, or because the pool of tenants includes people who are just as risky as you, e.g., people with a criminal record, drug abuse, previous "skip outs," etc. So you may find that the only places you can rent are either nasty or full of nasty people, or both. In that case, it makes even less sense to move away from your presumably comfortable home into something that might be far worse.

You know, come to think of it, none of this makes sense. There are just too many statements here that don't add up. If you could "live anywhere" why would you choose to take on an extremely expensive mortgage at all? Why not buy in a cheaper area, rake in your stated six figure income, and get rich that way? It makes more sense than taking out a huge debt, gambling on appreciation, and hoping to use that to fund a business. And why so many credit cards? If your credit is "perfect" why can't you get a legitimate business loan? Are you just moving your balances from card to card, paying the minimum, staying one step ahead of the late payments?

And why do you have to move to Oregon to take care of an ailing family member? Why not bring the family member down south, or you move up north temporarily?

These are the sorts of questions that would go through my mind if I were a landlord, interviewing you. The story you have here makes you sound like a bad risk, not just because of your poor business decisions, but because you want to get out from under your responsibilities, and blame your problems on other businesspeople. That kind of attitude will not win hearts and minds.