Foreclosure in Warren>Question Details

Scumdog81, Home Owner in Warren, MI

Should I walk from my upside down mortgage since I have a reasonable place to go?

Asked by Scumdog81, Warren, MI Fri Sep 2, 2011

I originally bought my house for $146K. Now I am stuck in my 7.0% mortgage on this house which recently appraised for only $99K (I still owe $139K). I've been trying for the past several years to renegotiate my mortgage through different avenues. Because I owe more than 125% of what the house is worth and can't demonstrate enough of a financial hardship, no one will do anything for me. I can make my payments, but I am treading water with my other debts and have very little savings. Next year my father will be moving out of his house to another property. I am considering stopping paying my current mortgage payments and moving into my dad's place. This would help my dad, and allow me to pay down debts. Ethics aside, is this a good idea? I am worried about a deficiency judgment, though it sounds like lenders rarely pursue them when they realistically have very little chance to collect. My car lease is up soon. How would this move affect getting a new lease?

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I think you hit the nail on the head when you said...'ethics aside'. No one forced you into getting into the mortgage you committed to, and at the time you obviously thought it the right (ethical) think to do. The only thing changing is the value of the home...you can probably walk away, take the hit on your credit, and wait a number of years for it to restore......but is it the ethical thing to do?
1 vote Thank Flag Link Thu Nov 10, 2011
Scumdog81,

Your last response is very disturbing to me. There could be a lo t of problems. First I would start the short sale process & get it listed & filling out all the papers for a short sale. You could stop paymenhts after you receive an offer to purchase your home & not before. Do not put your money in someone else's account..That's asking for trouble. You do not need to contact the bank to start the short sale, I have a short sale negotiator that handles all of that. They do not charge the client for their services, they charge your bank at closing.

I hope this helps you to make a good decision,

Sigrid Garrick
1 vote Thank Flag Link Sat Sep 3, 2011
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Eric Jones
0 votes Thank Flag Link Thu May 9, 2013
Scumdog81. I posted an answer to your question before and I want to expand on that. You first have to determine if the person you are paying to is the right person. 99% of all mortgages done aftyer 2005, were securitized in the secondary market. In order for the banks to do that, the mortgage and the note were separated. What happened is tha a number of banks now have part of your note, but NOBODY owns your note. In order to foreclose on you the bank have to prove in court that they OWN the note. They CAN'T. In essence you don't know if you are paying to the right institution. Down the road and after you think you are paid out, another institution, of the many that have part of your note, can come up and request for you to pay them. That is why I told you in my first message that you can figt the bank and have them running from you ,not after you. I can do the paperwork to free you from the nightmare. Please contact me at :munozmelbourne@yahoo.com for more details
Luis S
0 votes Thank Flag Link Sun Nov 27, 2011
why not call me?...perhaps i can help....
best regards
bob mcclure
percentPlus
Web Reference: http://www.percentPlus.com
0 votes Thank Flag Link Sun Nov 27, 2011
Scumdog, I am not a realtor, and ignore those who tell you to consider "ethics". Ethics should be considered when you do a transaction with an ethical person. When you purchased your house, if done during the boom, you did not do it with "ethical" people. So thinking you must act ethically now when others, the banks, did any thing but ethical with you is ridiculous. As for walking away, as a NON real estate agent I will tell you to get your ducks in a row first, example, get a car loan, etc. A short sale will not save your credit. As my real estate attorney tells me it is nothing more than doing the banks work at the real estate agents gain. Your credit will be destroyed regardless, simply consult FICO for that. I think you listen to Ms. Bava's advice below as well and consult an attorney for the ramifications. They likely will not spend money pursuing you for the foreclosure if you have nothing to pursue, but you better get all the legal advice first that you can. Then do the strategic default if it is in your best interest and realize you can still have a prosperous life fiscally regardless of the foreclosure. Don't think "ethically" you did any thing to any one. If the banks had acted ethically when they wrote these ridiculous mortgages then one could argue the ethics card, but when they were handing loans out to any one with a heart beat they set ethics aside. Consult the attorney, get your ducks in a row, and do what is best for you. Good luck
0 votes Thank Flag Link Fri Nov 18, 2011
Have you considered a short sale? That may be the best bet for you. Check out -
0 votes Thank Flag Link Fri Nov 18, 2011
I don't fault Scumdog for asking the question. And for being open about his plans. And I understand his frustration. But . . .

"Ethics aside"? Doesn't that bother anyone here (except perhaps Mike)? Tell me: When is it right to put ethics aside? What are your ethics worth? $5? $40,000 (in Scumdog's case)? And there are plenty of headline news stories today--from a Freddie Mac consultant who only provided historical analysis to coaches who witnessed something in the showers--where it appears that ethics may have been put aside. Point is: Ethics can't be put aside.

And even after Scumdog posted with some additional details of his plans--and I'll acknowledge there's a lot of that going on--only Sigrid even appears to have addressed the issue of stashing money in the girlfriend's account.

Granted: Telling a person that ethics are an integral part of any decision may not sway that person's decision. But isn't it important to at least recognize the importance of ethics in the decisionmaking process?
0 votes Thank Flag Link Thu Nov 17, 2011
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
Why not go after the bank? Over 90% of all loans made after 2005 or around there have a big problem with the way they were secritized. If you send me a synopsis of your loan case I can tell you if you can go after the bank to remove or cut your loan. Call me at 321-549-1052 or email me at : munozmelbourne@yahoo.com and I will counsel you on how to get this problem out of the way.
Luis S
0 votes Thank Flag Link Sun Nov 13, 2011
Scumdog,
You really need to contact an attorney, they can give you the best advise. As realtors we are not qualified to give you legal advise.
With that being said, when you do a Short Sale you will have to be deliquent, once you go deliquent, the bank can forclose on you. Once they foreclose on you your credit is effected. Get all your questions answered by an attorney before you do anything.
You sound like a nice person who has a concious and only wants to do the best thing in this situation.
You might even consider renting your home, there are alot of people looking for rental properties. This could help with your payments.

Good luck, if you need further assistance feel free to contact any of us.


Pam Bava, Realtor
realteellc@hotmail.com
586-675-4653
0 votes Thank Flag Link Sat Nov 12, 2011
Hi!

Have you tried doing a modification for your loan instead of a refinance? What is your debt to income ratio? You really need to talk one on one with a Realtor that can explain the different avenues to you. If you have legal questions you'll need to speak with a Real Estate attorney since Realtors cannot give legal advice.

If I can be of any assistance do not hesitate to contact me.

Have a Great Day!!

Karen Paytas, GRI, CMS
Realtor
Real Living Kee Realty
586-709-8465
kpaytas@mirealsource.com
0 votes Thank Flag Link Thu Nov 10, 2011
Since Michigan is a Non-Recourse State,

Would it be unethical for the Lender to sue you for the difference?

You think this would be a good gamble?

By the way, last month HARP was extended and the 125% limit was lifted.

Good luck and may God bless
0 votes Thank Flag Link Thu Nov 10, 2011
The first step should be to talk with an attorney on your options. Realtors can't give legal advice so it get it from a trusted professional. Keeping a home that you are so upside down on doesn't make logical sense. We have a calculator on our wesite that estimates how long you could be upside down on your home based on appreciation. With the scenerio you gave above this is what it says:

You will still be 7,694.14 underwater on your property in 10 years compared to short selling the home now, buying again in 2 years, you would have 32,459.42 in equity in the same valued home with the same amount of appreciation.

Best of luck and find out what the laws in your state before making a decision.
0 votes Thank Flag Link Thu Nov 10, 2011
Good morning!

I'm a Warren based Realtor! I too would recommend a short sale. Have you talked to anyone about the HAFA program. Sometimes once you attempt a shortsale a lender will be more apt to consider a modification. If you need assistance feel free to contact me.

Good Luck,

Karen Paytas,Realtor
Real Living Kee Realty
586-709-8465
Kpaytas@mirealsource.com
0 votes Thank Flag Link Sat Sep 3, 2011
Thank you everyone for your advice. I had kind of assumed a short sale wouldn't be an option for me based on the whole demonstrating a hardship thing and how I had gotten nowhere trying to modify. The whole process of trying to modify was so frustrating. It just doesn't make sense that they were unwilling to work with me when I was up to date on payments and had been a good customer, and I was only asking for a decrease in my interest rate. Though I do see it from their side too; if there was little risk of me defaulting and they were getting that money from me, why get less? But now that I have this option of another place to go maybe I have a little more leverage for them to work with me. I had been advised by someone with experience in mortgage negotiation to stop payment now, but wanted to get more opinions before I took that step, because it's a little scary. If I'm gonna pursue a short sale, that's probably my first step though, right? Or should I contact the bank and tell them what I'm considering and sorta give them an ultimatum: modify or I stop paying you? If they would offer me something tempting enough I would stay. In any case once I stop paying, that money is going in a savings account under my girlfriend's name so I can earn a little interest, still have that money accessible, and keep my other debts on my record while things sort out. Just have to make sure I don't do anything stupid to piss her off :)
0 votes Thank Flag Link Fri Sep 2, 2011
Recommend to make all attempts to short sale property than a foreclosure looks better on credit report

Lynn911 Dallas Realtor & Consultant, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
972-699-9111
http://www.lynn911.com
0 votes Thank Flag Link Fri Sep 2, 2011
Scum,
I appreciate where you are;
The Lenders just haven't been doing Modifications.
It would seem that the determining factor for you is time:
If you are anxious to resolve this and move-on, you might negotiate a Deed-in-Lieu: This is where you hand them the deed and walk away. If you do this, get them to give you a letter stating that the debt is paid in full; you may want to involve an Attorney in that, the wording could be crucial and it would be worth spending the money on him.
The reson for this, is that Michigan is a RECOURSE State; meaning that the Bank can and will come after you for the deficiency.

If you can wait, you should try to do a Short Sale: Please contact a Realtor and have them handle this for you.

In either case, be aware of your Home Insurance and your Property Taxes; both of which you are probably paying with your Impounds. Delinquent Property Taxes probably will not disappear; they will follow you.

Good luck and may God bles
0 votes Thank Flag Link Fri Sep 2, 2011
Scumdog81,

I'm sure you're not a scum dog. The absolute worse thing you can do for your credit is to forclosure on your mortgage. You can still do a short sale. Most short sales are done to have the debt difference forgiven & no deficiency judgements will be pursued. Yes, they can come after you years later after they think you're restablised. In doing a short sale you will need togive them alot of information including all your debts & hardship letter. If they determine that you are not a hardship case then you can still do a short sale & either pay the difference or they could give you a personal loan for the difference. You have nothing to loose by trying. If the difference between what the home nets & what you owe is forgiven, then your score will still go down but only about half as much as if you had forclosed.
Your credit score effects every aspect of buying, including getting a lease for a car & even car insurance. Yes I do know of someone personnal who is being persure for the deficiency after he foreclosed on his house.

I am a SFR (short sale forclosure resource)certified Realtor. Let me know if you need more explaination. I would be happy to assist you.

Have a wonderful weekend,

Sigrid Garrick
E-Pro & SFR Certified Realtor
Keller Williams
0 votes Thank Flag Link Fri Sep 2, 2011
In all fairness here you should try to Short Sell the home or anything before "letting it go" so to speak. Short Sale much less impact than a Foreclosure
0 votes Thank Flag Link Fri Sep 2, 2011
I think that your financial situation will qualify you for short sale. Unfortunately, the mortgage companies are impossible in negotiating with homeowners to modify their loans. I cannot understand why they seem not to care about helping homeowners. I think that if the property is sold and they take a loss it is more beneficial for them for some reason. Sad but true.
0 votes Thank Flag Link Fri Sep 2, 2011
Mr. Tepper,
My dad does have some equity in the house (I'm not sure exactly how much), but still owes about $59K on his mortgage. I would be helping him by effectively taking over the mortgage payments (I would not be living there for free), and helping him avoid the hassle of dealing with renters. Plus he has lived there over 25 years and I kinda grew up there so there's some nostalgic value to keeping it in the family, too.
As far as the "enough of a financial hardship" statement, when I had tried to renegotiate my mortgage previously, my balance sheet indicated about a $500 a month deficit yet I was still denied. And I was only asking for them to lower my interest rate. Realistically my deficit isn't quite that bad once I figure in my yearly tax refund. However, I have cut out some expenses and am now working weekend overnight shifts for extra salary.
Anyway, basically I feel like I am in a situation currently where I can survive relatively comfortably, but I'm never going to get ahead and won't be able to even start to put aside more than a meager amount of savings until my student loans and mortgage are paid off when I'm 57. I'm trying to decide if this move will help to improve my long term outlook, or just screw me worse.
P.S. Asking ethics aside doesn't mean I'm not weighing the ethics into my decision, but just that I want objective advice on these issues.
0 votes Thank Flag Link Fri Sep 2, 2011
I would try to list your house as a short sale at the appraised price. If the sale goes through your credit will be affected, but not as badly as with foreclosure. If you are planning to use your credit for anything I would do it before the short sale closes.
Short sale process starts with listing your house at the appraised or current market value. in the meantime whoever handles this process for you will require your financial information like taxes, bank statements, pay stubs and proof of hardship and financial statements and so on. The underwater mortgage might be enough to show hardship, especially that you have other bills to pay and those count. It is best to work with company that is experienced in the process, usually attorney firm that is experienced in dealing with banks. DO NOT PAY ANYONE UP FRONT FOR SHOR SALE! Once you receive an offer they will submit it for review. This process take some time even 3-4 month, depending on the mortgage company your home loan is with. If the transaction closes you have to make sure that your lender gives you letter forgiving the difference between the amount you owned on your loan and the proceeds they got from the short sale. Otherwise they can go after you for the difference and they usually do.
If you are interested in pursuing short sale as your option I can give you contact info to a professional company I have dealt with on the short sales I had listed. Also, please feel free to contact me for more detailed info about short sales, I have handled several. You can email me at rmastersinc@aol.com
My office is in Shelby Township and I am very familiar with Warren area.
0 votes Thank Flag Link Fri Sep 2, 2011
Ethics aside? Yes, maybe your user name IS appropriate.

You don't explain how moving into your dad's property will help your dad. If he owns it and there's positive equity in it, he could sell it. That cash might do him more good than renting it out to you or allowing you to live there.

A deficiency judgment is a legitimate concern. You say you think they rarely pursue them "when they realistically have very little chance to collect." But your case might be different. You acknowledge you already have sufficient income to pay your current mortgage. You'll have even more disposable income if you cut your housing costs. And you admit you've been unable to "demonstrate enough of a financial hardship." Sounds as if, in this case, the lender might have a chance to collect.

Further, a foreclosure is going to negatively affect your credit. And, yes, that would show up when you applied for a new car lease. I don't know whether we're talking about a higher monthly payment, or about whether a lease would be out of the question. But a recent foreclosure certainly is going to make it more difficult.
0 votes Thank Flag Link Fri Sep 2, 2011
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
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