Q&A: Walking Away From Mortgage?
Question by happy breeding!: Walking Away From Mortgage?
I live in California and bought my home 2.5 years ago for 0,000. The terms were 0,000 at 6.75% interest only, set to adjust at 5 years. The second was 0,000 at 9.25 interest only and 15 year balloon payment. Total payment is ,072. The home is worth approximately 0,000 right now. I have made every payment thus far and have a great credit score of 790. I have asked for help from my lenders since times are getting tough and my wife received a notice of a possible layoff. So, I did the responsible thing and told my lenders that we need help and would like to adjust the rates and terms into more affordable and long term fixed rates that would allow us to stay in the home for a long time. They wanted proof of income and prior tax statements, so we provided it to both of them. One said they received it the second said they didn’t receive it. So, the first said “you clear too much after all your bills are said and paid for” we can not help you. Second never responded. Talked to them by phone and said they couldn’t do anything unless the first made an adjustment. That was 6 months ago. Clearly times are not getting easier and I have recontacted them several times over the phone since then. I was getting paid overtime and no longer make any overtime money. Now they say send in the documents again, so I did. The numbers I presented to them showed I made less than the amount that was going out to pay for all expeses. This time the response was “financialy unable to afford monthy payments.” (no shit, thats why I’m contacting you)
This whole mortgage thing is a mess. There is a foreclosed property on my street which has sit vacant for 8 months now. They are unwilling to work with me (clearly), so why continue to make payments to them. I can’t refinance (“under water”) and by the time my rate adjust I will still be “under water.” I can stay in this home for 3 months save money and then rent somewhere else at a lower rate. Save my money for the next 2-3 years then buy again at a much more affordable rate. Tell me why this choice isn’t smarter than continuing to pay my mortgage only to end up losing the house once the rates adjust. They have already received 0,000 at this point why give them 0,000 more?
Best answer:
Answer by ek 5
If you are that far “under water” than you could just walk away. The thing is you are going to have to find a place to rent, and sign the lease before you walk away, because walking away from your mortgage will have a negative effect on your credit score.
What do you think? Answer below!
Filed under California Refinance by on Jul 22nd, 2010. Comment. 
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Comments on Q&A: Walking Away From Mortgage?
Talk to lenders other than yours. Current morgage rate is 5.00% or lower.
Don’t tell them about the layoff. Just tell them you deserve a lower rate. Take your papers to the bank/lender in person.
I live in florida and have 2 homes and there is no sign of help from either bank. Same thing…. Neither bank can find the paperwork so I send it again and again. One bank said nope we can’t help you because you make less than owed. Well if I didn’t then there wouldn’t be a problem. DUH!!!!!!! Every door shuts in my face and around every corner is ignorance and no logic. Nothing makes sense and I am ready to walk away from everything. I am so tired of everything. Let me know if you find any answers. thx
Get roommates to share the expense. People who over-financed were begging for trouble and your prayers were answered.
If you are certain you are going to lose the house then it is probably better to stop paying the note now. The lenders will hold you liable for any lost that occurs when the house is sold in foreclosure. You would probably have to file bankruptcy to protect yourself from the lenders legal action against you.
The rate is supposed to adjust in 5 years. It maybe that we have new laws whereby the rate will not adjust or that it can adjust downward. With the new Obama administration and new Senate I would expect they will provide homeowners some relief. If I were you I would not foreclose yet, I would wait at least 3 to 6 months to see what relief the Obama administration can provide.
First off, you don’t know what interest rates are going to do, so assuming that 2 – 3 years from now that you will be able to buy at a much more affordable rate is VERY presumptious.
Another reason to not walk away, once the foreclosure happens, you are going to pay more for everything based on credit score (i.e. insurance), this will affect your ability to rent or get a job. Landlords and employers check yoru credit report.
You signed up for the 80/20, congratulations. I hate it that homeowners want to try to place blame on whatever factors for signing up for a terrible loan program. The foreclosure on your street has nothing to do with you, take that out of equation.
So, the way I see it is that you can trash your credit for 7 – 10 years and walk away, persist on trying to get your lenders on board with loan modifications or try a short sale.
And I have to say, you signed on for this terrible loan, your victim routine is not working for me.
I love it when people talk about things they know nothing about!
HELLO! California has an “anti-deficiency” state law! Meaning that if they foreclose, they cannot go after you for the difference! Many states have deficiency laws where they could go after you for the difference.
If they are unwilling to help, quit sending payments and wait for the foreclosure. This process typically takes 4-6 months, and they are so busy now, it may take longer.
Unfortunately you will be hit with it on your credit report, but there’s no alternative.
As far as reducing your monthly payments, they can only adjust the interest rate, never the principal. You should ask for a loan modification and if they think there’s a chance for you to continue making payments, sometimes they will agree to the lowering rate. If they see that even with the lowering of interest there’s not enough income, then there’s no reason for them to adjust and they will foreclose.
Any communications with either lender should be certified letter so they can’t say they never received it.
“As far as reducing your monthly payments, they can only adjust the interest rate, never the principal.”
I know someone that just had their 2nd mortgage ($85k) wiped off the books, and had their interest rate dropped on the first.
Another thought. If you’re not buying anything anytime soon, you won’t need “stellar” credit. Credit is only important when you need it. Yes, you will pay more for certain services, but I’m sure if you save the $3k/month and have no payments for a few months, you’ll be just fine.
This is a reality on every street in America. The bank had no qualms about taking all that interest from you when they offered you the loan. Now that it makes no sense to stay there, all you’re sacrificing is your credit for a few years. By the way, you can get an FHA loan within a few years of foreclosure.
With so many foreclosures happening, what makes you think if/when the economy turns around that the banks won’t be a little lenient to well-qualified borrowers with a foreclosure during this era of financial crisis? Will they just eliminate thousands and thousands of people from the market?
Make the decision that’s right for you. Don’t let neighbors etc. make you feel like you have a moral obligation to stay and ruin your life. All they’re interested in is their bottom line. They had no problem with you getting that 100% loan when their values were going up, but now they seem to question you about it while their values are going down.