Wow, great tutorial on how to escape from a mortgage without going bankrupt.

You didn't provide enough info for anyone here to provide you an intelligent answer. One purpose of the short sale is to avoid a deficiency, which depends on the type of loans you have.

Are they both purchase money? If yes, then foreclosure results in a credit hit, but no deficiency. If the second is purchase money and the 1st foreclosues, the cut off junior can seek a deficiency by getting a judgment in court and coming after you - wages, assets, etc, or they can sell the debt to a debt collector law firm and they can and will chase you. Only way out once that happens is to file bankruptcy.

If the 2nd is not purchase money, then in order to avoid the deficiency you need to either get the 2nd to foreclose on the first, or get the 2nd to agree to take a few bucks on a short sale and agree to not seek a deficiency.

Whatever you do, talk to an attorney who is well versed in foreclosure law first. If you are in San Diego, try John McConnin at http://www.upsidedownrealestate.com to get an idea of your options and their respective consequences.

last posted Tue Sep 18 2007, 16:46......?

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Your home is worth 425,000 TODAY. Tomorrow it may be worth 325,000, so if you hang onto, you'll be that much more in the hole.

Only two things will save you from this declining home value problem you're in. The first is that rapid inflation that drives down the value of a dollar, thereby undermining the purchasing power value of the loan. In this scenario you earn more dollars, so does everyone else, but the loan's principal is fixed so in effect it goes down. While it might appear that this is happening now, with costs going up as they have, but it isn't since by and large people aren't actually earning more money.

The second scenario is that there's some kind of comeback in the San Diego market. Ask yourself, how likely is this? San Diego doesn't have a very deep well of industry behind it, and wages there aren't much different than the rest of the country. Current real estate prices, however, are two to three times what they were five years ago. It took a historically loose credit bubble to drive the prices up to where you bought, and that bubble has now burst. It won't be back again soon.

So, having said all that, it's probably in your interest to let the property go and reduce your cost base immediately. I don't know what industry you work in, but if it's affected by the coming recession you might be looking at layoffs, and it would be better to have money in the bank for poor credit then, than to be saddled with a huge debt and no job.

HooRay and Hurrrah for Nathan !! The anecdote you passed along is much more illuminating than the false hype and false hope that the media, the banks, the short sale listing agents have been promoting for months.
Statistically, fewer than one in ten short sale listings are ever approved. With a failure rate that high, I can only say that the whole short sale mania is a massive hoodwink.

I would not put anymore money into the house. You said you have an adjustable rate mortgage, depending on your terms, it's either adjusting to the market (right now you should have a fairly low interest rate) or it's RESETING yearly. The latter is the worst. It's most likely the same type of mortgage that EVERYONE else is defaulting on. I recommend a short sale. But of course more information is necessary to be approach your situation the best way possible. I buy homes that are in these types of situations. Call me and we can discuss different options you may have.

Best Wishes,
Will Robles

888.605.9190 ext. 1
will@firstcasasolutions.com

A friend of mine sent this to me who has sisters' working for Washington Mutual - Please be careful these companies are ruthless.........

Another anecdote for the soup:

My sisters' are service managers for WaMu's debt collections joint out in Santa Clarita and they both tell me that WaMU is still in the process of a huge ramp-up in response to the avalanche of people unable to pay their mortgages on-time.

BUT they are hiring more debt collectors in order to help facilitate the lengthening of the average foreclosure process.

When troubled borrowers are tapped out and their late mortgage payments start turning into no mortage payments, collectors hit them will all the possible options, of course, - refis, loan mods, post-dated checks - anything to get that promise to pay. But when borrowers say they STILL can't pay, agents transfer them immediately to the "loss mitigation" department that pushes them towards the short-sales option.

Nothing worng with that, per se, but it's interesting to note that once a short sale process is started, that same department, understaffed and usually unwilling to accept real losses on the property, can offer little real help to the borrower, though all together it can add months to the foreclosure process. At this point, my sisters' say, the loss mitigation department it's just another internal mechanism to forestalling and prolonging the inevitable foreclosure process as WaMu is incapable and unwilling to process large numbers of foreclosure.

And so they do what their bosses want them to do. And they stem the tide.

I can't find the link to the forum for these guys, but I was browsing through it and seeing quite a few people succeeding in getting their loans modified. Some were just rate reductions at 30 year fixed, but some of them lowered the principal and the rate. It's a non profit no cost, so I'd suggest seeing if anyone there can help you. and no, you don't have to be behind on your payments to get a modification.
http://loanworkout.org/

You need to get advice from a tax accountant and a lawyer to best help you with your situation.
It may not be as easy to buy another home still your wife's name.

THis is a new one I just heard being tried with the second. Call them an offer a cash buyout of $10,000 or you are going to foreclose. Some of the seconds will take the money and wash the debt if they know you are going to stop paying. I have not heard of it until today but anything is worth at try in this market.

Good luck!

“Lenders took back the homes of struggling San Diego County homeowners in record numbers during the first quarter. Real estate agent Linda Ring, who specializes in foreclosure sales, said she has seen many homeowners simply walk away from their properties even if they can make the payments, because they no longer want to pour money into homes now worth so much less than what they had paid.”

“In eastern Chula Vista, where foreclosures have soared, Ring estimates that 70 percent of the homes for sale are distressed properties. ‘They’re selling for practically 50 percent of what they were in 2004 and 2005,’ she said.”

“Agent Kristian Pete said he (secured) a buyer for a foreclosed home in Otay Ranch, which is in the 91913 ZIP code. It originally sold new in 2005 for $970,000 and was listed for six weeks at $589,000. Peter declined to reveal the buyer’s offering price but said buyers currently offer 5 percent to 10 percent, sometimes as much as 20 percent, below the asking figure.”

“‘It affects us all equally,’ said Peter, who also lives in the 91913 ZIP code. ‘Obviously, it’s in my best interest to try to get the situation under control and hopefully sell off the excess so the market can correct itself and go back to a stable if not appreciating market.’”

My suggestion...start talking with your bank now. Call them get a short sale package..tell them you are looking at all of your options. Call them every week...logging who you speak to and when ...repeat the same dialogue of "we are doing the best we can." You are being recorded so remember stay calm. They may try to get you to say what your plans are...just repeat we are looking at all our options..ask them what your options are. BELIEVE ME THE BANK DOES NOT WANT YOUR HOUSE BACK. If you decide to get adversarial with the bank and don't keep lines open then they will not work it out with you.
ON A SIDE NOTE: right now in this market my biggest pet peeve is that everyone is soooo willing to just walk away and add to the problem. Many people are doling bad advice and saying...just walk away. Here is the thing....tough times are felt all around this county. If you have kids what is this teaching them? To WALK AWAY on their responsibilities!
Talk with the bank...see what your options are...call "HOPE NOW" a non profit. If in your particular situation if you have no other options..then short sale. However...on a personal note...walking away is a short term answer with long term consequences. Whether it means doing work on the side, getting a weekend job..or rent your house out ...if you show the bank that you are not someone who gives up...they will not give up on you!! Some have even begun to loosen up their grip recoiling interest rates..and yes I have ran into a friend whose bank reduced her principal!!
FYI...if I am not mistaken on a state tax level you will still be responsible for the loss as income tax once the bank sells it!
I wish you much luck and hang in there you are not alone! Get as much information on your situation and options before you make your move.

Why don't you do a short sale and get your home sold and save it going to foreclosure and ruining your credit for up to 10 years? When you go to apply for any credit now they ask if you have EVER been foreclosed on. A short sale may work with the criteria that you gave.The agent can list the property at $375k and offer the second a thousand bucks so they will agree to it instead of ZERO when they get WIPED OUT AT THE TRUSTEE'S SALE.

Your credit will be BRUISED instead of RUINED with a short sale and you should be able to get a home A LOT quicker when the time comes VS.Foreclosure!!

The wife name switch won't work as several have written. I would try to sell and use the $50,000 ot get out of the house. Then just rent for a year or two.

Eddie,

I specialize in Short Refinances. Please check out our website and let me know if you are interested.

I wish you the best of luch my friend. I deal with it everytday. If you just have to financial backing whatsoever there is a way aout. Check out this cool video.

Simple. What's worth more to you? Tens of thousands of dollars and your peace of mind or your credit? What do you need good credit for? To buy a house, rent for a few years bank, all the money you save ad it to the 50k you will get...wow just like magic you have 20%+ down for your next house at the bottom of the cycle. It's a no brainer, plus you have the satisfaction of adding to the downturn you will eventually profit from.

Eddie, since you are a lender yourself, how would you feel if your borrower (the family member) decided to stiff you on the debt and let you have the security they pledged to you instead of the $50,000 ? - No security? - Well how about the piece of paper they signed or the handshake.

You made 2 promises to pay the first and the second as a borrower. You should feel no guilt if it is truly impossible to pay it back. - However, if you have the choice of paying or not, you may want to ask yourself where your personal ethical code guides you, as well as considering the financial aspects.

As far as life after foreclosure... There may not be as many sub-prime lenders milling about willing to lend to people who are coming right out of foreclosure. A lot of those kind of lenders have gone or are going BK themselves. Think about the strong possibility you might be a renter for the next few years. As a renter you might miss out on real estate appreciation when the pendulum of housing prices swing back up over the next few years.

If you are able to get a post foreclosure loan, think about double digit interest rates. That is what (hard money) lenders charge for very high risk borrowers. ( Which is what you will become) 11 -12% or more.
Why do you think they call it hard money?

Hi Eddie Chase Home Loans does work with all credit types. Please let me know if you would like to discuss your situation further. I can recommend some programs available for your situation with high debt to income issues.

Eddie, So sorry about your situation! I would suggest that if you can, avoid the foreclosure. I don't think your wife will be able to get a loan if you do. Why not bank the $50 K and use it to help pay the bills. I think the price of the property is likely to go up soon. Those who waited through our "tough times" here is SD in the past ALWAYS made it up when the market picked up.

I am in your area. If you'd like to talk about your specific property/area give me a call, I'll be happy to discuss things in more detail with you!

Patti Phillips
800-680-9133

Let it foreclose. Values in Southern California are just going down. Buy another under your wife or someone you trust, or just rent for now. Market will get much worse before it gets better.

Eddie,
Sorry to hear about your situation. Please see the information from the Office of Housing and Urban Development (HUD) regarding foreclosure. They give useful information including counselor numbers and alternatives. A note modification or forebearance from your lender might work. Call me if you need to for some additional guidance if you need to. http://www.hud.gov/foreclosure/index.cfm

BTW - your wife is still tied to you - the credit reports will still have you two together... Try to hold on and see what the political engine is going to come up with. Theres alot of talk - but if they get their act together, you might have some relief on the way.... stay focused, and good luck to you!

And PLEASE keep us posted, we will be rooting for you... you represent so many people out there today - you can be a beacon for others to follow...

Eddie:
Its stressful - but the winds of change WILL turn. If you give in now - you will regret it later. Do what you must - call your credit card companies - find out what you can do to reduce your overall monthly payment. I wouldn't suggest bankruptcy until you get the credit cards taken care of... it that is whom you are "robbing to pay Paul" for.

Go to a credit counseling agency - see if they can be your intermediary. I personally would do it myself - if you've been good up to now - you might be surprised. Even a reduction in the interest rate could assist.

Get a really good working budget together. Carpool. Take lunch - eat more top ramen... what ever! A little sacrifice today will pay off tomorrow.

If at all possible Eddie, you should buckle up and keep making the payments because what may happen if your lender does forclose. The difference between what you owe now and how much the lender will get when the Trustee sells the home on the Courthouse steps, called the deficiency, is actually still owed by you to the lender(s) after the sale. If your wife bought a home after that sale it means she must have some money of her own, I'm guessing that it's the $50K. The stickler is in California you still own one half of that equity since it is a community property state. As soon as the lender gets wind that your wife has this equity they can file a lien and demand payment for your deficiency. That could be a heavy strain on a relationship. I think you should put the $50K into an interest bearing account that is liquid and use it to help with the payments when you can't make ends meet any other way. Once things turn around, and they will, you will still have most of this nest egg and you can refinance to more closely match your income.

Eddie...

If at all possible try to keep the payments current and avoid foreclosure. Is there any way you could renegotiate the terms on the adjustable first loan....maybe extend the loan or have them convert it to a fixed loan.

Based on the current market I am sure you lender would rather work with you than have you fall behind and have a foreclosure or worse yet a short sale.

Eddie, You are not alone. This is the great question of our day posed by many, many homeowners. You seem to have some assets so a "short-sale" hardship package might eliminate you from this remedy. That you are still current is also a factor against a "short-sale". I would call both lenders and pleade your case to them. You might be able to get a restructuring of the loan rates, payments, etc. You didn't go into much detail as to HOW you got to this point. Is the second a "cash-out"? Was it there at the time of the purchase? Is it with the same institution who gave you the first? The reality of the situation is you cannot keep making these payments. I had a Seller come to me with a similiar plight such as yours. He said he could stay in the same neighborhood and rent a home for $1400/month or keep paying his mortgages at $3500/month. He asked me what to do. I asked him if he had done the math? This idea of holding onto a home until you've exhausted all savings, retirement, wages is middle class guilt. We have a local legend of a builder/developer who went BK 7 times! He is worth Millions. These avenues exist for your protection. The lenders and the boys on Wall Street have resources you'll never experience! Remedies exist for your protection. Speak to a good BK attorney and do the math. The reality is: you quit making payments on both 1st and 2nd. The lenders call, threaten, then eventually file NOD (notice of default).The whole foreclosure process takes 122 days. The lenders foreclose, you all the time pocket the money you've been robbing peter to pay Paul. Give peter a break! They'll probably come to you and even give you "cash for keys" after they've taken the property back. Be kind to your neighbors and keep the place up! That's a brutal answer but I would rather see your family NOT homeless AND BROKE! Good luck!

I'm going to try to offer a glimmer of hope, check out this link and investigate it to it's fullest, I begged you to investigate it to it's fullest, don't take no as an answer until you've exhausted all avenues. This is a new program so a lot of lenders/banks/brokers aren't familiar with it, you may have to do the research.
It sounds like you may possibly qualify:
http://www.fha.gov/press/2007-08-31release.cfm
I don't know what the income to debt ratios are but it's worth a try before you file bankruptcy or take a foreclosure.
Hang in there. Many millionaires have gone through worse.
-Susan

Eddie,

I am sorry that you are in a bad situation, It looks like you stand to lose at least 60K.
Eddie losing 60K ain't that bad. I do speak from experience.

In the Middle of August Jim Cramer on CNBC " Melt down" was telling the whole country "If you are upside down on your house walk away" Give it back to the bank, start over. The guy is worth 100 million, he owns part of thestreet.com He is a wall street insider.
I don't agree with him.

Of course what everyone is telling you is correct.
Don`t give up. No one wants to give up.
I think taking a foreclosure should be last on your list.

I think you need to find a good Bankruptcy attorney, Lets look at chapter 7.
A chapter 7 is the least evil.
Chapter 13 is the bad one.
I have seen people have a bankruptcy for less than a year and still be able to get a mortgage, and car.
However that Foreclosure is a good 7 years
Chapter 7
It will give you a chance to reorganize. I think it is your best bet. Shop the attorney around, look to the state bar to help you find a good one.
Always remember things could be worse.
Good Luck

Eddie,
I am sorry that you are in a bad situation, It looks like you stand to lose at least 60K.
Eddie losing 60K ain't that bad. I do speak from experience.

In the Middle of August Jim Cramer on CNBC " Melt down" was telling the whole country "If you are upside down on your house walk away" Give it back to the bank, start over. The guy is worth 100 million, he owns part of thestreet.com He is a wall street insider.
I dont agree with him.

Of course what everyone is telling you is correct. Don`t give up. No one wants to give up. I think taking a foreclosure should be last on your list.

I think you need to find a good Bankruptcy attorney, Lets look at chapter 7. A chapter 7 is the least evil.
It will give you a chance to reorganize. I think it is your best bet. Shop the attorney around, look to the state bar to help you find a good one.
Always remember things could be worse.
Good Luck
Chapter 13 is the bad one.

I have seen people have a bankruptcy for less than a year and still be able to get a mortgage, and car
However that Foreclosure is a good 7 years.

Hi Eddie. I agree with the other answers. A foreclosure on your record will have long lasting adverse effects (10 years if not more). The good news is that your are still current. Get in contact with a loan agent a.s.a.p. You may also want to try to negotiate a short sale. However, I would not ge my hopes up. It's just one avenue to explore. Check with a local real estate agent who has experience in negotiating short sales. The real estate agent will put together a short sale package and submit it to the bank for you. Let us know if you need any referrals. There a lot of very experienced real estate professionals on this forum and they can point you in the right direction. The main thing is to stay calm and get help. You are not alone in this. Best of luck to you.

Avoid the foreclosure at all costs....go talk to you lender. Try and get a 40 yr mortgage.

I'd try and contact your current lender, see if you can ask to speak to someone in their Loss Mitigation" aka loss mit. dept. and explain your situation. These banks know that homeowners are in trouble and they may try and work out new terms of your existing loan with you, they do not want to take your property back and its better to work with them if at all possible. Best of luck!

Hi Eddie, Sorry about your troubles. You might want to either speak to the bank(s) or find a good Realtor to do it for you to see if you would be eligable for a short sale. You would lose anything you put into the property but at least you wouldn't have a foreclosure on your record. You also might want to speak with a Real Estate attorney and/or your lender to see if purchasing a new home in just your wife's name is a possibility, I'm not sure it is. Could you lease out the property to cover your expenses? Even if you use the $50K to pay off some of the loan, will your first mortgage keep adjusting? Can you use that $50K to re-fi and pay points to get a good fixed rate you can afford? I think if I were in your shoes, I would first speak with a lender about all your possibilities. Let me know if you need a good referal.

Don't foreclose and use the $50K to make payments. It's a solution that can build long term...

There are still a few companies that make ligh LTV loans, even with marginal credit.

You may or may not lower your monthly payments, depending on your credit. The lower your credit score, the higher the interest rate which equates to higher payments.

Don't foreclose. It will effect you for years. Using your wifes name might not work. Call the mortgage companies and ask them for help.
Ruth