Should I Stay Or Should I Go?

[Leavethetable]

Oh, one more thing. My mortgage was never sold by Wells...not to Freddie, etc. They are the lender and they service the loan as well.

[homeowner112]

I just want to say that I am pretty much in your exact situation, with the only difference being I am in a neighborhood that has declined so badly that crime has become rampant and I'm probably going to "walk" as a matter of securing my family's safety, and so that I know we have a future. (see my other posts)

I can see both sides, but you seem very level headed. My 2 cents is that this is YOUR life to live....heck, we only get one of them last time I checked. When you weigh out the pro's and con's, you'll know in your heart which is right for you and your family's future.

Oh and always look at worst case scenarios when weighing everything....although it's not like you're doing anything illegal - credit ruined, yes. Possible recourse - maybe, but maybe not too.

[homeowner35]

Originally Posted by Leavethetable

Hello all, and I thank you in advance for any replies. Here is the situation. I have a mortgage of 700k, the house is now worth 450k (based on recent tax assessor appraisal). I wanted to re-fi, but I am too underwater. My lender (Wells Fargo) suggested I contact their loan modification folks since "they can help". 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%).

Mathmatically, it will take an enormous amount of time and a significant rate of return for the market to bounce back so I can re-fi before my loan (ARM) changes to variable payments.

Now, I am faced with what to do. Ride it out and hope that the market comes back, or cut my losses, which are 250k at this point and walk away? I have been going back and forth, pros and cons, etc. I have a money purchase mortgage for the first and second mortgage (HELOC). I have never refied nor have I taken out any money.

I reside in California which provides protection on a non-recourse basis. I assume that since the HELOC was used to purchase the home, that loan falls under the non-recourse side of things. What would you do?? Thanks.

I am sorry that you are going through this. You are being penalized for being responsible. That really gets under my skin. I would try to do a short sell and work out something with the bank. It is not likely you will ever be able to recoup your costs. Fancy financing artifically inflated the market. It was never worth $700,000 in the first place. I'm afraid that we have not hit the bottom. Prime loan mortgage holders are starting to default on their mortgages. Get out!

[homeowner35]

Originally Posted by Rakin

Wouldn't it be great if after maybe 2-3 years of people walking away from their homes and short sales where the banks are eating the loans, the market rebounded where the price of CA real estate went up 50% over a short time period.

I wonder how many people would want to sue the banks for "forcing" them to sell.

Interesting point but I believe this person is a victim. He did not take out any money from his home and his debt to loan ratio is low. It is not fair that people are being penalized for doing the right thing. I can not believe a property can depreciate by so much. I guess no one said anything when it appreciated by $250,000. What a mess!

[MotleyCrew]

Originally Posted by Rakin

Wouldn't it be great if after maybe 2-3 years of people walking away from their homes and short sales where the banks are eating the loans, the market rebounded where the price of CA real estate went up 50% over a short time period.

I wonder how many people would want to sue the banks for "forcing" them to sell.

We have been on this planet to see this happen. CA will come back and I personally hope that people who could have made the payments but chose to walk will drive by their former McMansion and burst into tears. CA will come back.

[Modification Specialist]

Originally Posted by homeowner35

I am sorry that you are going through this. You are being penalized for being responsible. That really gets under my skin. I would try to do a short sell and work out something with the bank. It is not likely you will ever be able to recoup your costs. Fancy financing artifically inflated the market. It was never worth $700,000 in the first place. I'm afraid that we have not hit the bottom. Prime loan mortgage holders are starting to default on their mortgages. Get out!

Me toning in - Homeowner 35 hit it right on the nutshell, one of the things that created the mess the country is now in. Nationally, I wrote mortgage loans for several years. States where value didn't go up as fast over the last five years, are not experiencing the value issues as states where it value increased in the same time.

Leaveit - you do have options - first you got to ask yourself, do you really want to keep your home? There is a way to work it out with you lender. On the other hand - if you want to let it go, contact your lender and file a deed in lieu. Your lender will try to sell it for 90 days, before you turn in your keys.

I commend you on your high credit score, even better it's a good feeling to say I'm a member of the 800 club. But realistically, your credit score is not your first priority. What you do today, will determine what your credit score will be tomorrow. So you want to make to correct decisions now, that will leave your credit score intact.

1 You can tuff it out, I believe the value will turn around as soon as our economy gets better. Look at history, the first year of every president, we are faced with some sort of recession, look back the 1st year of Bush, Clinton, Bush, Reagan, Carter. Already we are seeing signs of recovery. Look at the stock AIG, a few months ago it was $0.95 a share, (noting a stock split) it is now worth $34 a share. New housing is up, the cash for clunkers really simulated the economy. We will recover.

2 You can negotiate with your lender a modified payment. That will be an ARM, with you will have to refinance again with approx 5 years. Not being late on your mortgage, by law no-one can tell you to miss a payment. Although you all ready know the answer, you mortgage company will not work with you because you are not late. You will need to resubmit your paperwork and apply for another program with them. What, when , how, and the significance of what you write on the application, will determine if your application is approved, also will determine your new payment.

3 You could file a principle reduction (ultimately it is up to the lender), there are two appraisals. A high value, and a low value, and you negotiate the difference to become the new principle. This is for people $100k upside down, I think you fit into the category. It is very helpful to have a mortgage attorney negotiate for you.

4 You can let your home go by a deed in lieu, It takes some time, but it doesn't have an impact as the last option. Your credit drops 125 to 175 points.

5 The last option would just stop paying on your mortgage. Honestly it will be a while before they evict you because you are so upside down. If they force you out and your empty house just sits there. It will cost them more money in maintenance, so in must cases they allow you to live there. This option your credit score drops 200 to 400 points. A foreclosure goes on your credit report for up to 10 years, and it is public information, meaning it will be really hard to get any type of future financing. Frankly don't do this option, you will pay for this from many years to come.

I don't visit this website every day to to working constants, if you have any further questions PM me. Good Luck