Financing in San Francisco>Question Details

Silent J, Other/Just Looking in San Francisco, CA

What are my financing options if my condo is underwater but I'm not experiencing a specific hardship?

Asked by Silent J, San Francisco, CA Tue Mar 31, 2009

My partner and I own a condo in San Francisco (financed with a jumbo and second loans). Based on local comparable sales, our place is probably worth 15% less than the equity we hold. Our strategy was to hold on to our place for 5 years. Given the equity we hold (i.e., less than nothing), however, we'd be lucky to break even -- in the most positive of market conditions! -- if we held on to our place until then.

That said, what are our options? I've read that some banks are offering loan modifications, but only if the customers can prove hardship. Does any of the bail-out legislation affect people who are underwater with jumbo and/or multiple loans?

Assuming there's no money for us to make, what's to lose by telling the bank that we think it's their problem, not ours? Does that force a short sale? If so, how would a short sale affect us, the consumers, and how does a short sale work? Who is responsible for the difference between the amount left on our loan vs. the sales price?

Help the community by answering this question:


Hi Silent J,

You are vulnerable in the following areas, credit, tax deficiency judgement wise. If you would like to short sale because your property is upside down. A short sale means that both lenders in your case will take a short pay off and release their liens on the property. They will accept less money than what they are owed.
You will need to prove to your lender that you are unable to make the current payment. You will need a hardship letter and they will want to see your financial statements that you have no money to pay them. The lender will also want you to participate in the loss, your credit will be hit, you will loose 80 points and you will have a negative item listed on your credit report "settled for less than agreed/shortsale" sometimes "shortsale/foreclosure".
Many people are upside down with the mortgages and the banks are insolvent this makes the situation complicated.
I suggested my video website because the answer you are asking is a detailed answer and the video provides all these options for homeowners who have property upside down.
Next, what type of loans do you have? You have a first and a second you said. Where they purchase loans or refinanced loans? Depending on what types of loans they were will determine your next set of options. You will need both lenders to take a "hair cut" in a short sale. Lender is second position is going to get so much less and most likely if that loan was a refinanced equity withdrawal loan they will demand their money back. What did you do with the money you pulled out, we want it back! The may even want you to sign a promisory note to get you to promise to pay off the balance over the next 10 years or so. They might place a deficiency judgement against you. You might answer as many do in my workshops. "Well I have no assests anymore". Then you may want to look at the statute of limitations in the state of California for deficiency judgements because you might have assest in 4 years and if you have a deficiency judgement against your name, the lender may garnish wages, etc. Next, you have a tax hit. You will be issued a 1099A if you Foreclose/Deed in Lieu or a 1099C if you Short Sale. If this is your primary home in 2009 there is the foreclosure foregiveness act and you may want to check with your accountant or cpa about what this means to you. If the property is an investment property then it would be a different tax strategy because the foreclosure foregiveness act would not apply. In my Free on line video I have the following experts who discuss the various strategies to these options and legal strategies.

Real Estate Attorney
Bankruptcy Attorney
Tax Attorney
Loan Modification
Short Sale Specialist
FHA Mortgage Broker
Credit Restoration Expert

Finally, their are two types of loan modifications which may work for you. The first type is where lender in second position takes a principle write down and moves the balance into a 30 year fixed loan. Lender in first position rarely takes a principle write down for this type. This is the first type.

The second type is where you begin a "forensic loan audit" and review your loan documents and make sure that in the originial loan docs there were no violations of TILA, Respa or Security Law violations. You will then get a report. At that time you'll need a real estate attorney, who will place a demand on the lender for a loan modification with a principle write down both first and second. There are a few attorney's I know of in the country that are getting these pushed through the courts in favor of the homeowners. The lenders are settling these cases they do not want new case law. I know the forensic loan audits run about $700.00 and the real estate attorneys cost about $3k. So it's not exactly cheap.

I can put you in touch with all these experts, tax attorney, real estate attorney, etc. Feel free to call me if you have any questions.


Good luck I hope this is detailed enough for you. For way more details please see the link.
1 vote Thank Flag Link Thu Apr 9, 2009
Silent J, just because your home is worth less than what you paid doesn't qualify you and your partner for a short sale.

The two best reasons to quality for short sale is loss of job, and divorce. Not loss of value. You may qualify for a loan modification. I would call Ruel Cordero 650-303-8500. He is very good and ethical. Be very careful about who you work with, I'm hearing horror stories about loan motification guys, including stealing your identity.

It's not just the banks problem, it's your's too. It's your credit integrity that's on the line. I'm sorry, but that kind of thinking is part of the bigger problem that our Country and Economy is faced with. People are willing to walk away just because we are in a down cycle. This isn't just hurting yourself (credit) but what about your neighbors, and everyone else. I keep hearing about what crooks the mortgage bankers are, that they put me in this situation, but let's get real. If you were making $50,000 a year, you could not afford a $3,000 a month payment. Too many people kept refinancing their homes and spent the money, and now that the market has gone down, they have decided take off. That's real integrity. I hope they never buy a home again. For the people who bought homes and lost their job, that's who I feel sorry for. The ones who haven't lost their job, just their equity, and say they can no longer afford their home, why? Rates have come down. The adjustable rates have gone down, not up. I'm just being honest silent J! (Thanks for letting me vent.):)

Lastly, a short sale is when you sell your property for less than what you owe. Please give this a lot of thought before you decide to walk away.

Good luck,

Dave Tap Tapper
Cashin Company
Web Reference:
3 votes Thank Flag Link Tue Mar 31, 2009
Dear Silent J,

Sorry about your situation. You have several options. Perhaps a loan modification with a principle write down. You have about 9 options. Here is a link to a website with a FREE Video, filmed here in Marin actually. We go over all the options as well as some legal strategies. good luck!
1 vote Thank Flag Link Wed Apr 8, 2009
I was just looking through old post and I noticed yours. If you were not able to refinance at the time of the post, I can certainly help you out now. You can call me at 408-352-5147 or email me at You can check us out at I will look at your situation and present you with some options.

Alex Greer
NMLS #1056079
0 votes Thank Flag Link Thu Aug 15, 2013
Harp 2.0 has a program specifially for folks like you with loan-to-values up to 125%. The catch is it has to be a Freddie Mac or Fannie Mae loan. We are one of few lenders in the country that are going up to 125%. You can check on the links below, if you have a Fannie Mae or Freddie Mac loan:

Hope this helps!
0 votes Thank Flag Link Tue Apr 10, 2012
Hi Silent J,
Your questions on Short Sale has been answered by many of the contributors below. However one thing I want to mentioned is that the difference between the amount left on the loan vs. the sales price can be forgiven by the bank with a successful short sale transaction.

Also, you can actually refinance your condo even though you are underwater, but only if your loan is owned by Fannie Mae and Freddy Mac.

There is also a possibility of doing short sale without financial hardship, but needs to have certain conditions to make that happens. Please contact me offline if you are interested to know more because each home owner has unique situation and condition.
0 votes Thank Flag Link Sat Apr 7, 2012
Yours is the all too common story of nearly six million American families, and a reason for the government to try to fix this huge problem with upside down properties, over-extended borrowers and "troubled assets". The problem, as you've outlined, is that there are no programs that address your particular circumstance, e.g., an upside down equity position. Remember, as an investor you already figure that any venture could go either way, and you probably calculated these sorts of scenarios prior to investing, and fell prey to what had been, up to the point of the melt-down, a phenomenal investment vehicle -- where else could you be making 20-25% return PER MONTH on your money??? (fanciful at best, and as we're seeing now, unsustainable).

This aside, depending on the types of loans you have on the property and whether it is a rental, or on how you value your future potential versus the present circumstances, any option to negotiate some form of payment adjustment, (modification), or other such remedies (see "HARP,"…), you may have to take a "hit" on your credit to get out from under a questionable investment, unless you want to ride out the present market conditions for an uncertain amount of time.

Sort sale or deed in lieu leave you with no better long-term solution, but may take you out of the oven but put you into the proverbial frying pan -- sure you may solve the issue of what to do about an upside down investment, but you'll then have to deal with what to do with the debt relief situation you've created. As some of the responders and I point out, it isn't a simple mess to unravel, but, there are numerous resources at your disposal. I would suggest you speak with lenders who offer the HARP program; agencies that can explain the HAMP (or other "modification") programs, and analyze all aspects of your immediate decision, and if these leave some glimmer of hope for both short and long term solutions, act on those.

Effects of all such options where you don't necessarily live up to your part of the bargain, are that your otherwise good credit will have a blemish, hey, but that's normal (these days), and creditors are, likewise, learning to deal with it. Oh, and if the lender(s) agree to a short sale, by so doing, they also agree to forgive the outstanding debt -- thus "SHORT SALE". You, on the other hand, if you declare the property an investment, will have to deal with the tax liability for the debt relief.
0 votes Thank Flag Link Fri Apr 6, 2012
Is a program where you can keep your property, keep your good credit and also regain some equity in your property.
I represent a group of investors that purchase high-­‐end residential loans at a discount. In today’s lending climate, a lot of banks are willing to sell their higher-­‐end home loans that are upside down at a discount. They
view these loans as high-­risk for default and would rather just sell them then risk foreclosure. Assuming I am able
to buy your loan at a discount, I would become your new lender and since I am able to buy it at a discount, I will
basically do a new loan with you at a much lower amount, saving you thousands.
In order to qualify I need to review our guidelines to make sure you’re a fit for us.
This program only work is you underwater, if it was a jumbo loan at time of loan originate, if you have decent or good credit. We can take it from there.
here is my info Georgina Salgado 773-805-2248
0 votes Thank Flag Link Thu Apr 5, 2012
Thanks, both, for your answers. Just to clarify, we're not looking for a short sale, specifically, nor are we in danger of foreclosure. We were looking for information about how either option would affect our credit scores, whether we would owe money on any remaining balance after a short sale, etc. (I still don't have answers to those questions, actually.)

We've since called our lender, and learned that most banks are still working to respond to the recent legislation, and won't work with those who haven't fallen behind on their payments. So, really, it seems that our options are to wait or to wait.
0 votes Thank Flag Link Wed Apr 8, 2009
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