http://www.trulia.com/voices/Foreclosure/How_can_i_buy_and_bail_Can_anyone_guide_me_-142336I'm 180k upside down on town home purchased in May 2007. Want a bigger home to start a family, 805 credit score and dont mind taking a hit if i can get into a larger home. I've heard i can buy and short sale, deed in lieu, etc. What are my options, if any????en-ushttp://www.trulia.com/voices/profile/Home_Buyer-Manteca_CA-849811/http://www.trulia.com/voices/profile/Home_Buyer-Manteca_CA-849811/First there are some real ignorant people on this post, but there are also people who have valid points. I bought my home in 2003 for 400k and have a 30 year fix. my home is now worth 175k. When i bought my home I could afford it, but I am now on permanent disability, and my husband works for NUMMI in Fremont (the Toyota manufacturing plant). My husbands hours have been cut and we have been trying to modify our loan for months now but the bank will not help us because we are current. We have struggled to save our credit and pay our bills but our savings is decreasing and its getting hard. Anyways up until today we planned on "buying and bailing." We have the help of my father to buy a second home and we are approved. We placed an offer on a short sale 3.5 months ago and we have been waiting for a final signature. The house is twice the size of our home and is 225k, but today we decided to back out of the deal and to keep our home because after 3.5 months of waiting the bank counter offered (because the market changes) 258k, and we do not qualify. We need to listen to all these little voices that is asking us if this is right and just stay in our current loan. We have decided to stop paying on our current mortgage in hopes that the bank helps us since I have had my loan modification paperwork in their hands for 5 months now. In California a bank cannot foreclose on you unless they prove that they have tried to modify your loan so we hope this helps us. The bottom line is - if part of you questions if what you are doing is wrong then don't do it. Listen to the little voices and advise from others.Tue, 18 Aug 2009 19:41:14 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-Port_Orange_FL-330900/http://www.trulia.com/voices/profile/Real_Estate_Pro-Port_Orange_FL-330900/I can only speak for the things that i have been though ! I have been in and around business all of my life and morals is something that's taught and fortunately i was able to learn at an early age it is better to give than receive. So to reply to your statement ! Sorry no sour Grapes here !! I own 3 businesses one for over 30 years and we make a point not to hurt anyone even if we have to walk away from a potential deal..Tue, 11 Aug 2009 10:13:45 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-New_York_NY-82052/http://www.trulia.com/voices/profile/Real_Estate_Pro-New_York_NY-82052/" Can you honestly say that every one of those deals, when you made the most money in your life, was "ethical" ~~~ And now we come to the crux of the buscuit, (to quote the late, great Frank Zappa): “when you made the MOST MONEY OF YOUR LIFE”. That’s what rankles you, isn’t it? The money we earned. When did you make the most money of your life? Were you embarrassed because you “made the most money of your life”? A little sour grapes here?Tue, 11 Aug 2009 09:56:43 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-Port_Orange_FL-330900/http://www.trulia.com/voices/profile/Real_Estate_Pro-Port_Orange_FL-330900/Unfortunately there are stories in every state regarding lenders not willing to help their clients. In many cases this is the reason many property owners walk away. I live in an area to where there are homes that sold for 1.2 million 2 years ago and now these homes are on the market for $600,000.00 ! I am sure maybe not all , but some of these people tried to work with their lender and received no help.. Carol made several great points good luck to you..Tue, 11 Aug 2009 05:21:56 -0700http://www.trulia.com/voices/profile/Other-Berkeley_CA-746287/http://www.trulia.com/voices/profile/Other-Berkeley_CA-746287/Upsidedown11 please "do you". I tried for 1.5 years to get my bank to modify my mortgage and they refused because I am current. I really had a legitimate hardship! I got over pretty well and was able to make my payments, but I never forgot. Then I learned a modification would just tack on the difference to the back of the loan to ensure my great gra I live in Emeryville Ca and purchased my home in 2006 for $550K. Living in my home today, I barely see that money. I care for my aging mother, who rents in a better area. My home is work about half that now. I found a foreclosed home around the corner for $125 asking. Thank goodness my family was willing to support me. I borrowed half from them and took a hard money loan to purchase the new place. Why keep paying on a ridiculous mortgage! I am closing this week on the new . I bought it as investor owned. Yes it needs some work and yes it's a lot of risk, but I have the steady job and get paid about 90K a year. I plan to hold title for 6months then do a cash out refinance. I'm still in my late 20s so I've got some time. No kids, no hubby. I just got real tired of hearing those NPR stories about people getting kicked out of their homes and other investors with cash swooping in. I wouldn't dare use my family's money just to "sustain" check to check in my currrent home. Wish me luck.... I wish you the best. I I felt cornered in this positionMon, 10 Aug 2009 18:21:49 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-93536-820997/http://www.trulia.com/voices/profile/Real_Estate_Pro-93536-820997/You can buy another home if you can qualify for the loan. You will most likely need to show your current townhome as a rental to offset costs. After which, you can certainly bail, if you dare...But you have a great credit score and do you want to ruin it? Truth be told, your credit will dive, whether you do a short sale, deed in lieu or straight foreclosure...your credit WILL suffer. Talk to your tax consultant for those types of financial consequences...Also, be careful as most lenders these days look at these situations very, very carefully. Many people have thought of this before, and many buyers are finding it difficult to obtain loans for these reasons. The market is changing....in many areas of Los Angeles, it's become a seller's market again. Yes, prices are still down about 30% (roughly) in many areas compared to last year. However, things are changing. We don't know for how long. What I offer is this....yes, you can ruin your credit to get your newer bigger home now...but you sound as if you've worked very hard to obtain your good credit history. Why ruin it IF you don't absolutely have to? Yes, my job is to help people buy and sell, but I do better if I'm straight with customers. Good luck in your decision.Sat, 18 Jul 2009 23:39:14 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-Temecula_CA-331413/http://www.trulia.com/voices/profile/Real_Estate_Pro-Temecula_CA-331413/Upsidedown11, The best advice was to see an attorney for the legal ramifications involved. The Curtis Law Group will look at all sides of your situation. They can give you the best advice and a free consultation regarding what to do in your particular situation. Here is their site. http://www.curtislawgroup.com/bankruptcyBill.html I understand all sides of this argument. No one person, entity or government agency is to blame for all of the housing problems that we are currently facing. One thing that you may think about is purchasing a newer home in an area like Menifee, CA., where there is still building going on and homes are very reasonable and values will definately go up. You can purchase a near new 2000 (or more), sq. ft. home for $200.000, Rent it out for enough to cover the expenses so you are in a situation to have all of the expenses paid for by the tenant. In a few years when the market turns around sell both homes and then you will have $150,000 or more for a down payment on the larger home you want. I wish you the best in finding a successful way to deal with your situation.Wed, 15 Jul 2009 11:31:27 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-70461-250734/http://www.trulia.com/voices/profile/Real_Estate_Pro-70461-250734/Thumbs up,Carol! i wish I could give you about 10 for that great answer.Wed, 15 Jul 2009 05:58:11 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro--405749/http://www.trulia.com/voices/profile/Real_Estate_Pro--405749/BTW it's illegal. If the lender finds out, there will be trouble.Wed, 15 Jul 2009 03:57:34 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-Lancaster_CA-561730/http://www.trulia.com/voices/profile/Real_Estate_Pro-Lancaster_CA-561730/I have to say that I am really amazed that this post is still going on. Feels like we are "beating (the proverbial) dead horse" with all the responses at this point. This too is my last post on the matter, and I will leave this particular Q & A with these points: 1) It was actually Bill Clinton that started the ball rolling with his loosening of credit standards and encouragement of home ownership. 2) The Lender (Loan Officer and Underwriter) are generally responsible for the loan for a period of time that varies with each Lender. As a former Underwriter, we always had the "what if's" in the back of your mind when approving a loan. 3) "How many of you sold homes to people who got into 3 yr arm, interest only, no down payment, stated income, etc. loans. I would bet the farm that 99.99% of you were involved in transactions like these. Where were your ethics then? " To be clear, the loan is a separate product and process from the actual sale of the home. You could pay for a home with bushels of corn and it wouldn't affect a Realtor if the Seller accepted it. Apples and oranges, my friend. 4) Your clear motive is to defraud someone. You don't buy another home just so you can get rid of another. That is not the idea behind Home Ownership. 5) "The client must buy within their pay scale, If you can only afford a $150,000.00 home,,, You don't purchase a $350,000.00 home.. Let's take a look at the builders ! They knew better than to build homes at $150.00 a square ft ! " They Knew " They could have built beautiful affordable houses in many different styles, instead of making the affordable houses look a grade above a trailer ! Everybody want a Cadillac, even though they can only afford a Volkswagon !!!!! " Home Building is a business just like manufacturing designer shoes. If you can't afford Manolo Blahnik's, don't by them. If enough people DON'T buy them, the prices will come down, or that company will start producing shoes that are more affordable, or go out of business. Simple supply and demand. They didn' t take advantage of Buyers any more than Sellers who wanted top dollar for their houses. 6) In response to this statement: " Can you honestly say that every one of those deals, when you made the most money in your life, was "ethical" as you have stated. Where was your guidance to your valued customers then? Why didn't you say, NO, I cant sell you this property because you'll likely not be able to afford it in 3 yrs. Please, who are you kidding with your ethics. " Why didn't YOU just say NO to the home that you now want to bail on?? You could have, you know... And finalIy I will leave you all with this thought... The reason we are in this mess is because collectively - WE COULD.Tue, 14 Jul 2009 22:18:12 -0700http://www.trulia.com/voices/profile/Other-USA_Mobile_AL-340485/http://www.trulia.com/voices/profile/Other-USA_Mobile_AL-340485/Good posts Thomas Hill. Very interesting to read about this. Some of these responses are laughable.Tue, 14 Jul 2009 19:53:11 -0700http://www.trulia.com/voices/profile/Other-Auburn_CA-806147/http://www.trulia.com/voices/profile/Other-Auburn_CA-806147/I read through some of the final comments, and before final departure did want to add one thing - mainly because people here did one have extremely good point. I think the question was really the problem. The question really has nothing to do with buy and bail. There really is no concept of "buy and bail" - it's a term some have chosen to adopt for behavior some home owners have chosen in response to declining home values. In reality, Upsidedown11 has used a slang term, when his only intention is to purchase a new home with intent to occupy. Since he apparently has adequate credit and finances to accomplish this task, there is nothing illegal about it. As to his current home, he is simply exploring all possible options, understanding market conditions are tough. Again, let me point out - I do not think there is such a thing as "buy and bail" - if consumers have the buying power to purchase another home in this manner, then they should be commended for not buying more than they could afford in the first place, and having the ability to afford another home in addition to their current one - despite tougher lender standards.I would think any home owners first intent would be to try and sell or rent their current home first - who would want to damage their credit if it could be avoided? However, if market conditions do not allow, this may not be possible and walking away may be the only option. Now, should they consider this before buying another home? Sure....but failure to plan doesn't constitute fraudulent intent...just ignorance. The same "ignorance" the banks displayed when handing out loans to consumers unable to pay, which is what caused this disaster :) What prompts people to do this? Yep, banks. If your in this situation, you are truly a victim with no advocate. You did not over extend yourself - clearly, your finances are in order. But you are stuck - as in this posters case, 180k in the hole, and a need for more space - a life changing circumstance. Why is he stuck? Because the banks acted irresponsibly, wrote loans to consumers who couldn't afford it, caused an influx of mass defaults, which led to the mass deflation we have now. And the solution? Socialism at it's best. Those same people are entitled to mass principal reductions, while the people who are "unfortunate" enough to afford their payments, are "S-t-u-c-k". So, for those of us "stuck", all we can do is use whatever means we have to get "unstuck". There are no TARP funds or Socialists policies from government to save us. I have even suggested that if you are 100K + in the hole, and you CAN afford your home but unfortunately don't have the 20% to put down or cannot afford two simultaneous house payments just walk away and rent for a few years... If your making payments and your 100k in the hole, your basically renting either way! Save the $1000 / month you would be wasting on a mortgage. Pay off any credit cards - use the 3 - 4 years as a rehab period. Put that 1000 / month in a mandatory savings account - earn a few percentage points of interest. And after four years, when the housing market is still in the toilet, put your 20 - 30% down, and have something worth making a payment on! And...as I have said - foreclosure can be cleaned off of a credit report - quite easily in some cases (and legally, leveraging the fair credit reporting act to your advantage and counting on the fact that banks are unorganized, slow, and overwhelmed). Again...if your making payments and your down 100k....you are renting....and throwing money away. And on a 30 yr mortgage, the first several years, your paying mostly interest. Now the interest does help your taxes...check out some calculators, but in most cases, if your mortgage is several hundreds dollars higher than rent, and your way in the hole (100k+), your better off renting. I won't get back into the whole morals and ethics discussion... but just wanted to clarify the "intent" of the discussion, and what has prompted people to make such choices. I would direct the ethics / moral discussions to the banks and our government - after all, AIG is ready to deploy another 200+ million in bonuses - courtesy the tax payers... I'm sure if upsidedown 11 can get just a small percentage of that, he might be willing to forego his plans to walk away from his current home :)... In today's world, we can't have a discussion about morals and ethics - it's just not practical or ethical.Sun, 12 Jul 2009 09:56:53 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-Temecula_CA-331413/http://www.trulia.com/voices/profile/Real_Estate_Pro-Temecula_CA-331413/The Loan Underwriting individuals and departments review and analyze a borrowers credit worthiness and most importantly the risk involved with a borrower. (How likely is the borrower to default on the loan). They must know all of the underwriting guidelines set by the individual mortgage holder, Federal, State, FNMA, FHLMC, FHA, & VA. The main responsibility of loan underwriting departments is to make as certain as possible that the borrower will not default. So to answer your question...as to why should an underwriter care.....If a borrower is planning on defaulting on their current lender it sets a precedence that the borrower could default again. In the simplest of terms: "Once a cheater always a cheater"Sat, 11 Jul 2009 07:47:08 -0700http://www.trulia.com/voices/profile/Other-Rohnert_Park_CA-333281/http://www.trulia.com/voices/profile/Other-Rohnert_Park_CA-333281/Honest question: What does a loan underwriter care about a perspective buyer's intent to default on a pre-existing mortgage? (Obviously, unless the same entity is underwriting both the new and old) They'll generate their fees for the new loan regardless of the prior mortgage's outcome.Fri, 10 Jul 2009 16:49:24 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-Temecula_CA-331413/http://www.trulia.com/voices/profile/Real_Estate_Pro-Temecula_CA-331413/Thomas: Loan Underwriters are absolutely on the lookout for buy and bail consumers. I had a lender ask me the other day if that is why my client was making a "lateral move". I have also had new home sales agents ask me if they suspected that one of my clients was going to ditch their current lender. Most people who want to do a buy and bail will not be able to qualify for both homes anyway, because thier credit is bad, and especially with the lending requirements becoming more stringent and with interest rates on the rise. The legitimate buyers of multiple homes have no problem getting qualified because many of them buy their investment homes with cash. Then they put a loan on the home and go buy another one with the cash from that loan. Personally, I can afford to be very selective about my clients and who I represent and if I suspect that someone is going to bail I run the other direction.Fri, 10 Jul 2009 16:26:10 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-New_York_NY-82052/http://www.trulia.com/voices/profile/Real_Estate_Pro-New_York_NY-82052/I will agree that the forum in which this question was asked could not have elicited anything but an "on the record" response. I would not expect any licensed professional to openly advocate a question that elicits anything but a perfectly "politically correct response". I would do the same thing" However, keep in mind the context in which the question was solicited. ~~~~~~~~~~~~~ Hold on. Are you saying that if he asked us PRIVATELY, we would explain to him how he can buy and bail? LOL!Fri, 10 Jul 2009 16:23:34 -0700http://www.trulia.com/voices/profile/Other-Auburn_CA-806147/http://www.trulia.com/voices/profile/Other-Auburn_CA-806147/I, too shall depart. I appreciate everyone's comments. I will agree that the forum in which this question was asked could not have elicited anything but an "on the record" response. I would not expect any licensed professional to openly advocate a question that elicits anything but a perfectly "politically correct response". I would do the same thing" However, keep in mind the context in which the question was solicited. I doubt Upsidedown11, when he is ready to move forward, will approach a Realtor with "Hello Mr. Realtor - I need help with buying a new home so I can bail on my existing one. Can you assist?". I imagine he will simply go to a lender and get pre-qualified for a loan. He will then secure a buyers agent with the intent to purchase a new home - any Realtor will oblige. As for the intent of his current home, that is his business - many options - perhaps he will sell it or tent it - I doubt a Realtor will interrogate him and demand to know the intent of his current home before assisting as a buyers agent - nor will the lender - I guarantee it. After purchasing a new home, hopefully he can sell or rent his current home - if not, he may have to walk away. Nothing illegal or fraudulent about facing the harsh realities of a tough market and having to foreclose on a home. As for the whole ethics discussion... again, I blame the banks and the regulators. Yes, consumers were greedy, but when you have a meltdown of this extent, it no longer falls on the people. The banks wrote loans they never should have originated. The regulators, led by an Administration (Bush) who was pro-business, turned a blind eye. This is the end result. The housing crisis led the way to the economy we have now. Unemployment approaching 10% - in reality, it's higher. People living in tents, not able to feed their families. And guess what...in today's headline: "USAToday: Aig bonues: $235 million to go". The banks have benefited from bailouts. The irresponsible banks and executives have profited, while the rest of use have suffered. Are you supposed to sit in your home and "wait this out"? Things aren't going to recover in two years...or four years...this is going to be a decade before things improve. Sorry - this reminds me of the analogy of being in a classroom with 30 people - 29 are cheating and walk out with an A. You hold on to your "ethics and morals" and get the D. In the end - you won't be remembered for your ethics - your just the "D" student. In this case, you will end up being the guy with no equity in your home and broke. Take action while you can. Right now, the government is actually helping us - no tax on forgiven debt.... some states have anti-deficiency laws... use them to your advantage, because they may go away! Wake up...this isn't church or disneyland - it's reality. Our government and the leading companies in this world have no ethics and morals - you either play the game or be played. Don't blame the player...blame the game. Peace follks.Fri, 10 Jul 2009 10:38:08 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-Port_Orange_FL-330900/http://www.trulia.com/voices/profile/Real_Estate_Pro-Port_Orange_FL-330900/From the lenders side ! I made a point to tell my clients not to purchase big ticket items, because i knew the credit card and auto companies were coming after them with all types of deals. Needless to say i saw several of them in new cars ( SUV'S ) and i am certain many of them purchased new furniture fro their new home. Now the government will not look into what they purchased after the fact. They will only look at the mortgage side of the story.. There is not wrong with the arm loans !!!!!!!! The client must buy within their pay scale, If you can only afford a $150,000.00 home,,, You don't purchase a $350,000.00 home.. Let's take a look at the builders ! They knew better than to build homes at $150.00 a square ft ! " They Knew " They could have built beautiful affordable houses in many different styles, instead of making the affordable houses look a grade above a trailer ! Everybody want a Cadillac, even though they can only afford a Volkswagon !!!!! Many of these guys were riding around in $50 -$60,0000.00 pickup trucks and having parties !!! They had the nerves to go to Washington and ask for bailout money ! while people that brought their homes are being kicked out on the streets.... Now everybody wants to blame everybody else ! Follow the numbers: By law mortgage brokers are only allowed to charge 5%, real estates brokers 6% plus, the bank gets 6% x 360 months on a $150,000.00 home. Numbers don't lie !!! Well the builders are going to say ! The supplys were high !!!!! You didn't have to buy and you could have built smaller homes.. People still would have brought, because they would have had a new home that they could have afforded...Fri, 10 Jul 2009 08:11:47 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-Temecula_CA-331413/http://www.trulia.com/voices/profile/Real_Estate_Pro-Temecula_CA-331413/Upsidedown11: I took this quote from your last comment. "There is nothing illegal about purchasing a second home, if your financial situation allows you to do so, and you are not falsifying any documents in the deal. If you have a down payment, the required reserves, and can afford the payments, there is absolutely nothing illegal about it." This is contradictory to your question. Did you actually forget your initial question? You asked for Guidance to Buy and Bail. No one will help you and you have sour grapes! Also, in your last comment you are attempting to blame agents...just as I stated in my last comment....everyone blames the agent. Do you actually think that if an agent told a client that a loan they were getting was a bad one they would listen. No, they don't listen because they want the big house that they cannot afford.. You act as if we agents make them sign the documents at gun point......WISE UP!Fri, 10 Jul 2009 06:33:48 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-Cupertino_CA-306403/http://www.trulia.com/voices/profile/Real_Estate_Pro-Cupertino_CA-306403/Hello Upsidedown and thanks for your post and questions. I just wanted to say that I have NEVER sold a home to anyone who used an ARM to purchase the home. Having been an accountant, I could not and would not recommend such risky mortgage vehicles to my clients. So, that would make the statement about the 99.9% of us who did be completely false since there are only really 15 respondants to this thread. Second, I found it interesting that today the Federal Bureau of Investigation (FBI) noted that mortgage fraud had increased from 68% to 84 percent in the past year, and that they (the FBI) would be cracking down on these cases, specifically of , buy and bail schemes intended to defraud the government--and remember that Fannie and Freddie are, in fact, GSEs (government sponsored enterprises). The question, of course, that must be answered by individuals far more learned than I would be at what point do your actions or failures to disclose vital facts constitute fraud. I'd suggest strongly that if you are still planning to do this, you contact an attorney because it sounds to me as if the government does plan to take some action against those who are trying to do what you suggest. Just a word of caution.Wed, 08 Jul 2009 17:24:46 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-Port_Orange_FL-330900/http://www.trulia.com/voices/profile/Real_Estate_Pro-Port_Orange_FL-330900/Many of the statements made here are true, however there is nothing wrong with selling your home if it was your primary resident when you completed the application. Unless this was a certain type of government loan that states you must remain in the home for a certain amount of time you are not in violation of any laws. Presently there are many honesty people out there that got caught in the real estate mess that have not loss their jobs and their income remains the same that would be happy to lease from you for 2 yrs while they regroup. This is the best option for you and the lest costly way to help everyone.. JCJ Consulting Group LLCWed, 08 Jul 2009 11:15:54 -0700http://www.trulia.com/voices/profile/Both_Buyer_And_Seller-Los_Angeles_CA-804548/http://www.trulia.com/voices/profile/Both_Buyer_And_Seller-Los_Angeles_CA-804548/A few points to all you agents claiming to be ethical and gods gift to real estate. How many of you sold homes to people who got into 3 yr arm, interest only, no down payment, stated income, etc. loans. I would bet the farm that 99.99% of you were involved in transactions like these. Where were your ethics then? Can you honestly say that every one of those deals, when you made the most money in your life, was "ethical" as you have stated. Where was your guidance to your valued customers then? Why didn't you say, NO, I cant sell you this property because you'll likely not be able to afford it in 3 yrs. Please, who are you kidding with your ethics. And ill say it again. There is nothing illegal about purchasing a second home, if your financial situation allows you to do so, and you are not falsifying any documents in the deal. If you have a down payment, the required reserves, and can afford the payments, there is absolutely nothing illegal about it. Mario, You are absolutely correct. One should consult an attorney and do extensive research before any financial decision. Again, this is a business decision. Before I ruffle any more feathers, per your request, this is my last post. I appreciate everyones thoughts and opinions and wish you all the best.Tue, 07 Jul 2009 17:03:43 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-Temecula_CA-331413/http://www.trulia.com/voices/profile/Real_Estate_Pro-Temecula_CA-331413/Mario, Great answer and Dana Thank you for reading my blog. Interesting, that we have not heard from anyone who has done this successfully. My lender tells me that underwriters are heavily investigating buy and bail opportunists. Why? Because it is fraud. I can only imagine that if an agent did help Mr. Upsidedown the first thing that went wrong would cause the agent to be sued. All of the blame would go to the agent. Real Estate Agents are put through rigorous background checks, fingerprinted and held accountable for the actions, advice and service we provide. Why would we want to jeopardize our integrity?Tue, 07 Jul 2009 11:28:30 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-San_Fernando_CA-782433/http://www.trulia.com/voices/profile/Real_Estate_Pro-San_Fernando_CA-782433/If you can't afford your home just short sale the home, it's much better then foreclosure. To buy another home while short selling this one, I'm not sure if its the right thing to do to your self and to the system. Think about it really well befor doing anything.Tue, 07 Jul 2009 11:11:47 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-Burbank_CA-306576/http://www.trulia.com/voices/profile/Real_Estate_Pro-Burbank_CA-306576/Let's remember the question that was asked on this forum before we start flinging mud at each other. The question really asked for guidance to do something unethical on a site where most of your responses come from very ethical and licensed real estate agents. In California we are licensed to represent you through our brokerage in a real estate transaction and we are not licensed to give legal opinion. We can all play the blame game but it comes down to personal responsibility. Yes you're probably right and there isn't enough resources to go after everyone but that's not the call that we make. Our job is to guide clients and keep them out of trouble to the best of our abilities. We are not supposed to participate in transactions that to our knowledge are intentionally defrauding another party. We are also not allowed to give legal opinion. I don't think there's one attorney that has given their 2 cents about this matter and that's probably because they all want to charge you at least $150 per hour. So ultimately the only people that can really answer and guide you is an attorney or someone who is not a licensed agent. Upsidedown11, as I've said before, if you really decide to take this route than go out and pay for a legal opinion it's really going to be worth it. Seek out all your options and then make a calculated decision. It's ultimately up to you. ThomasHill, you seem to be a very educated consumer but I think you're wrong in attacking the agents that try to keep their noses clean and offer the best advice they can to thousands of consumers on this site. Remember mistakes are made by everyone and some of us more than others. The market really blinded many and this includes banks, agents, and consumers. The best we can do is learn from the past and make our voices known to our lawmakers as to what we think is the best solution. In my opinion it's to allow the market to run its course.Tue, 07 Jul 2009 10:31:33 -0700http://www.trulia.com/voices/profile/Other-Rohnert_Park_CA-333281/http://www.trulia.com/voices/profile/Other-Rohnert_Park_CA-333281/Seems to me the greatest benefactors of a five-year Ponzi scheme (agents, mortgage brokers, banks) are crying foul now that the bottom tier looking for an out.Tue, 07 Jul 2009 09:40:54 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-New_York_NY-82052/http://www.trulia.com/voices/profile/Real_Estate_Pro-New_York_NY-82052/Thomas, Thank you so much for the advice. I have talked to dozens of real estate agents, and as you stated, most don't seem to know much. They pull answers out of thin air. ~~~~~~~~ Hey upsidedown, why don’t you and Thomas take it to email, or just get a room? Hopefully it will be a room in a jail, or hell, neither of you seem to have any morals.Tue, 07 Jul 2009 06:21:58 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-New_York_NY-82052/http://www.trulia.com/voices/profile/Real_Estate_Pro-New_York_NY-82052/It's still not the banks fault. Years ago when I bought my 1st house the bank offered me an 3 year interest only loan with 0 down payment and approved me for WAY over what I knew I could afford. I was the one that used my brain and thought "Hey this isn't a good idea. I should get a fixed rate loan and only buy what I can afford." I WAS THE ONE THAT MADE THE DECISION. I knew what I could afford and went with that. I USED MY BRAIN!!!!! I THOUGHT FOR MYSELF!!! If someone offers you Cocaine on the street to you say "Sure, it's offered to me so I guess that means this guy knows I can handle it." NO!! You would think "That would be a bad decision since it could kill me". People just need to take responsibility for their decisions. ~~~~~~~~~~~~~~~~~~~~~~ Yes, they do, and I had a similar thing happen to me when I bought my home and also when I went for a home equity line of credit and was called every six months by the bank asking me to increase the line of credit in case I wanted to buy a car or go on vacation. But I still blame the banks, too. Maybe it’s before your time, but did you ever hear the commercial about leaving your car running while you run into the store for a few items? The tagline was “don’t help a good kid go bad” as the “hood” jumped into the running car and stole it. You also give the example of a cocaine dealer. Yes, we all bear personal responsibility but banks should NEVER have been allowed to “tempt” people who either had criminal intent like the OP here, or who were just too stupid to know what they were doing (like the OP here, maybe too?) or who just got caught holding the bag when everything crashed.Tue, 07 Jul 2009 06:19:59 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-Walnut_Creek_CA-236193/http://www.trulia.com/voices/profile/Real_Estate_Pro-Walnut_Creek_CA-236193/Jeff, From a criminal standpoint I agree with you, but how about a civil matter? Lets assume fraud is proven, then I'll come back to that point. Then the civil plaintiff is alleging fraud the bar is lower. I do not know that that standard is. Once it is proven then not only is ther actual damage (180k) then there is punitive (the full amount of the defandants net worth). I think I am correct on this point. It is not about the criminality anyhow its about the money. Lawyers use the law to bully people into settlements all the time. Collections lawyers make worthless filings all the time with the goal to settle. This is just the way the system runs now. Every day millions of dollars of collectable funds are accumulating. Someone is going to figure out a way to get to this money. You don't need to be a lawyer to figure this out, you just need to be a business man. The bailout was 700 billion dollars. If you collect 10 cents on the dollar that is a 7 billion dollar market. (ok 350 billion went to the banks 3.5 billion dollars, the poin is its BIG money) What this is really a discussion of, is risk. This guy is getting ready to buy a 180k lottery ticket. If he wins, his upside is 180k plus the savings on the mortgage interest and future equity. If he loses he is bankrupt, he owes a boat load of money to someone including the government. Bank executives and congressman get the free passes, little people don't. We have to pay our bills and taxes.Mon, 06 Jul 2009 16:58:35 -0700http://www.trulia.com/voices/profile/Other-Denver_CO-807494/http://www.trulia.com/voices/profile/Other-Denver_CO-807494/Interesting conversation, but just a note. I am not going to get involved in the whole bank / who is responsible debate, but I do have extensive experience in the legal arena and will add that whether or not this is fraud comes down to one simple question: intent. I will say that intent is extremely difficult to prove. Even in cases where the person makes verbal (or written informal statements - "bragging"), they are usually considered hearsay and usually not admissible as evidence. Someone buying a new home, then ceasing to make payments on their current home could have many plausible explanations. Without clear documentation - formal, signed documents outlining such intent - this would likely never even warrant an investigation. When this type of fraud originally surfaced, false rental agreements were used (which due to new lender guidelines have become less utilized or useful). This at least provided the lender with a formal document from the borrower constituting a rental agreement, that if never executed, may have been submitted with intent to commit fraud (at least a formal trail to pursue). Even in these cases, VERY few cases were ever pursued or investigated - not just because of lender time and resource constraints, but because of difficulty in proving intent and making a valid case. I would never advise someone to commit fraud, and would not knowingly assist them in the process. However, I can tell you with absolute certainty that if someone is able to qualify and purchase a new home (while making payments on a current home), has adequate $$$ for down payment, etc., and later decides to no longer make payments on their original home, assuming they did not sign any formal documents as part of their loan package promising to rent or sell their current home (which would not be part of any package I am aware of), and did not submit any false rental agreements, etc., there would be no reasonable evidence that would even warrant or authorize a formal investigation - remember, the FBI can't just pull names out of a hat and start investigating people - the process is a little more involved than that - it helps protect our citizens. And even if such an investigation somehow did occur, this person could secure a lawyer, and the investigation would be thrown out before an agent would ever have the opportunity of asking the borrower a single question - it doesn't work like the movies. Again, I'm not advocating fraud, or even advocating the practice - I am just stating the facts.Mon, 06 Jul 2009 16:28:41 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-Lancaster_CA-561730/http://www.trulia.com/voices/profile/Real_Estate_Pro-Lancaster_CA-561730/Upsidedown11 and Thomas Hill, Since we are so "clueless", you shouldn't be on this forum? Maybe you two should email each other privately and share your ideas.Mon, 06 Jul 2009 12:48:49 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-Walnut_Creek_CA-236193/http://www.trulia.com/voices/profile/Real_Estate_Pro-Walnut_Creek_CA-236193/Upsidedown, Philosophically, I privately think as Thomas Hill but a licensed agent has to walk a think line. I disagree with Mr. Hill in that it is not ONLY the banks fault, as a matter of opinion the everyone is to blame. The politicians were messing around with the banking system for the campaign contribitions and to "help the poor." The banks were making big money on these loand bought WITH OUR TAX MONEY. We the people were buying homes without care or concern, so long as prices were going up if we got in trouble we just sell sell sell and count our profit. Mortgage brokers and Realtors were facilitating everyones hopes dreams and to some extent greed. I return to Mr. Hill believing that the Banks are the gate keepers and they were the ones ultimately funneling money to the politicians. To return to your point, it is fraud. You should consult an attorney NOW to explain why it is fraud. Quietly I will cheer as people like yourself lie cheat and steal their way to an improved economic situation like the bankers and the polticians who game the system to further their own means. Play by their rules until someone listens. At some point the system will collapse (as it is in the process of doing) and the consequenses will fully play out and hurt everyone. Democracy in action, vote with your checkbooks! Power to the people! Yes, I am kidding. But lets say we are all wrong. Do you really believe that the banks will just allow you and everyone to walk away from 180k times millions? Do you think that they are not going to use their profits and not buy themselves more legislation? Do you think they are just going to let this happen? When this is all said and done there is going to be a pool of BILLIONS of collectable and TAXABLE dollars out there for someone to to go and try to collect. If i had a crystal ball I would suggest that the debt collection business will become a booming business for some entrepreneurial attorneys. Now the banks do not have the resources to go after the fraud and collectable recourse debt. This will change as the bank become profitable again. Then what of these lowly politicians who are so flush with cash that they are willing to just let all these taxable dollars dissappear. They would never change the laws so they can collect that money into perpetuity. Governments work for the people. They are not going to help the banks collect these taxable dollars. HA HA HA, your deluding yourself. Let me tell you something about collections. You will be told that any debt is uncollectable from 3-5 years. Let me share something about the fraud statues. Its prosecutable from 3 years of discovery (in California). I wonder how the banks will get around the debt collection statues....hmmmmmMon, 06 Jul 2009 12:24:51 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-70461-250734/http://www.trulia.com/voices/profile/Real_Estate_Pro-70461-250734/Read your blog on Activrain,jane! Great job!Mon, 06 Jul 2009 12:08:17 -0700http://www.trulia.com/voices/profile/Both_Buyer_And_Seller-Modesto_CA-67758/http://www.trulia.com/voices/profile/Both_Buyer_And_Seller-Modesto_CA-67758/It's still not the banks fault. Years ago when I bought my 1st house the bank offered me an 3 year interest only loan with 0 down payment and approved me for WAY over what I knew I could afford. I was the one that used my brain and thought "Hey this isn't a good idea. I should get a fixed rate loan and only buy what I can afford." I WAS THE ONE THAT MADE THE DECISION. I knew what I could afford and went with that. I USED MY BRAIN!!!!! I THOUGHT FOR MYSELF!!! If someone offers you Cocaine on the street to you say "Sure, it's offered to me so I guess that means this guy knows I can handle it." NO!! You would think "That would be a bad decision since it could kill me". People just need to take responsibility for their decisions.Mon, 06 Jul 2009 11:53:17 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-Temecula_CA-331413/http://www.trulia.com/voices/profile/Real_Estate_Pro-Temecula_CA-331413/Please read my blog about "Intentional Foreclosure". There are many long term implications that you may not have thought about and have not been mentioned here: http://activerain.com/blogsview/997502/intentional-foreclosure-an-ethical-opinionMon, 06 Jul 2009 09:58:06 -0700http://www.trulia.com/voices/profile/Other-Auburn_CA-806147/http://www.trulia.com/voices/profile/Other-Auburn_CA-806147/Upsidedown11, I'm glad you did all of your homework - nice to see an educated consumer out there. I'm sure the thought of bailing on an existing mortgage is never a pleasant consideration, and is not taken lightly. But difficult times require difficult choices. In an era of irresponsibility, led by our government and the very banks that now hold our notes, we have to make tough choices. Even now as the government reacts, the bailouts remain focused and geared towards helping the most irresponsible and least deserving - the banks that got us in this mess, and the irresponsible home owners who over extended their finances, leaving the hard working middle class folks to fend for themselves and, as these agents would suggest, continue to do "the right thing" and carry the everyone else through this mess. For us responsible hard working middle class folk paying our mortgages who are also victims, there is no out - we have to tough it out so the irresponsible scum bags that caused this mess can prosper...sorry, doesn't fly. Nelson Mandela, one of the most notable civil rights leaders of our times spent years in jail for standing up for what he believe in - and while in jail, he had to make tough choices to survive - sometimes, choices that crossed the line of ethics and morals that he fought for his whole life. Sometimes, survival depends on adaptability. In this case, when the banks, our government, the wealthy, and the irresponsible are taking the high road, you have few options... you can be the good little boy who makes his payment on time and does as the bank commands (while it graciously takes your tax dollars in return), and watch your wealth disappear, or you can take action before its too late. People like Sarah simply don't get it and never will...she doesn't understand how the banks are responsible for this mess - however, most financial experts would disagree with her. Clearly, the financial mess this country is in today started with the housing debacle, which was created by the banks originating loans that should have never been originated - and THEY NEW BETTER...and of course, complete lack of regulation on the part of our government. And why didn't the banks care? Because they took those loans, packaged them up, and sold them.... A complete break down in the system.Mon, 06 Jul 2009 09:50:03 -0700http://www.trulia.com/voices/profile/Both_Buyer_And_Seller-Los_Angeles_CA-804548/http://www.trulia.com/voices/profile/Both_Buyer_And_Seller-Los_Angeles_CA-804548/Thomas, Thank you so much for the advice. I have talked to dozens of real estate agents, and as you stated, most don't seem to know much. They pull answers out of thin air. Your debunking of their mythical answers is priceless. I have obviously done my homework on this and have consulted with numerous attorneys. I posted my original question out of curiosity for the answers i would receive. One thing is clear, most Realtors are clueless. Do your homework, consult a few attorneys, know what you are getting into, plan for worst case scenario, and if u can accept worst case, go for it. This is strictly a business decision. Sarah, Wake up and smell the coffee honey. The banks have miles of people lined up, bent over, and giving it to them. Of course they didn't force me to buy my house. They did however look the other way when giving loans to people that wouldn't be able to afford them a few years later. Stated income, No doc loan, zero down, 3 yr arm, interest only, you can certainly afford the house of your dreams Mr Smith. What a joke! They were probably thinking, lets make a quick buck now, and let the government and responsible people bail us out later. I thank you for your thoughts and opinions.Sun, 05 Jul 2009 23:54:46 -0700http://www.trulia.com/voices/profile/Other-Auburn_CA-806147/http://www.trulia.com/voices/profile/Other-Auburn_CA-806147/I suggest you consult a lawyer.....clearly, real estate agents are not your best resource for this answer :) Let's clarify a few more misguided points: * Myth: If you move into a new house, this is no longer your primary residence, and you no longer qualify for the Mortgage Forgiveness Debt Relief Act of 2007. Reality: California originally did not adopt this as a state guideline - you will need to validate that you are exempt from state tax in CA. As for Federal, the rule for "principal residence", as outlined under the Act, the same rule as defined under Internal Revenue Code 121 applies for defining principal residence - you basically need to have lived there for an aggregated 2 out of the last 5 years (from the date the debt is forgiven) for that to be considered forgiven debt. So, basically if you occupied your home at least two years, your in the clear...again, you will need to validate CA law - you could get hit with state income taxes...not sure if CA ever adopted that rule. * Myth: Your loan may no longer be non-recourse, since your home is no longer your primary residence. Reality: Consider the original purpose of why the debt was secured. It was for your primary residence. Again, reference the same internal revenue code in defining primary residence. The loan is non-recourse. As a final note.... one thing you don't want to do - don't buy the new home as a second home - for two reasons. One, they will nail you on interest - second / investment homes come with a huge rate hike. Second, this could be considered fraud, since your intent is to occupy this home as your primary... you would be misrepresenting yourself to the lender, when your intent is to occupy the home as your primary residence. Lastly, when you move out of your current home and stop making payments, I would suggest keeping your homeowners policy active and changing to accommodate the fact your home is now vacant. The reason is that even under non-recourse rules, the bank can still hold you liable for damage to the home. For example, if the home is vandalized, the bank can come after you for that.... vacant homes are exposed to this risk. Just an FYI...Otherwise, your right on track and making good choices.Sun, 05 Jul 2009 09:56:40 -0700http://www.trulia.com/voices/profile/Both_Buyer_And_Seller-Modesto_CA-67758/http://www.trulia.com/voices/profile/Both_Buyer_And_Seller-Modesto_CA-67758/I still don't understand why it's the banks fault you are upside down? Where they the ones that forced you the buy the home? Held your hand down until you signed the paperwork? YOU were the one that did that. YOU are the one responsible. Don't blame the bank for your decision. Why let them take the hit?Sun, 05 Jul 2009 08:32:49 -0700http://www.trulia.com/voices/profile/Other-Auburn_CA-806147/http://www.trulia.com/voices/profile/Other-Auburn_CA-806147/I see another "knowledgeable" agent has responded, see below by Don: "P.S. One other point. To accomplish a short sale or deed in lieu, you need the lender's agreement. As a practical matter, the lender on your current home will require financial statements, tax returns, documentation, etc., from you showing your financial condition and justifying a short sale. Once they see that you have sufficient income, that you've just bought a new home, etc., it's . . . umm . . . unlikely that they'll approve either a short sale or deed in lieu. So, to get rid of the property, you might then be facing bankruptcy, which is not part of your plan. That's the real-world side of your plan." Yes, lenders do typically want to see financial documents before they will agree to a Deed in Lieu or a short sale - of course, you have to prove irresponsibility before you are entitled to such ammenities... However, bankruptcy is not necessary. It's called "Foreclosure". If your loan is non-recourse, and the lender won't agree to short sale or deed in lieu, then they simply foreclose. Once the payments go late and it's quite obvious you are not going to make payments, the lender would be foolish (in a non-rcourse deal) to at least not agreeing to a deed in lieu of foreclosure.... and in some cases, you can negotiate at that point in time a short sale, assuming your willing to add some skin back in the game. Of course their not going to negotiate if you just randomly call them with no finanical hardship, current on payments, and want a short sale - but fall several payments behind, prove intent, and then offer them something....perhaps continued payments, maintain the property until it's sold, etc... they may consider.. Selling the property with weeds overgrowing, a green pool, etc., is much more difficult after a long drawn out foreclosure process than a cooperative short sale partner. I've even seen short sales negotiated with a spotless credit report. Deed in lieu of is almost a no brainer.... why would the bank draw out a long and painful foreclosure process when they can end it with a few signatures - you just have to wait until a few payments are missed. Again, either way - worse case, it goes into foreclosure...you don't need bankruptcy....misinformed agents - probably the same ones that told us back in 2006 and 2007 that it was a great time to buy and there "is no housing bubble". As for morals and ethics...as I have said... you can be he good guy and have tire marks on your back, or you can go into survival mode and take necessary steps for you and your family. The banks and politicans that failed to mandate regulations certainly haven't been held accountabie... and never will be. As for robbing a bank, I wouldn't suggest it - but it seems the reverse is working just fine - the banks have been robbing us (the tax payers) out of billions and succeeding.... These same banks are now dictating to us that we must pay back these mortgages and absorb the losses that they caused? Sorry, when they robbed me and caused this mess, and avoided accountability they lost that right.Sun, 05 Jul 2009 07:59:05 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-New_York_NY-82052/http://www.trulia.com/voices/profile/Real_Estate_Pro-New_York_NY-82052/I want a bigger home too, and a newer car, is it OK if I rob a bank or should I rob someone’s house instead? Can anyone guide me? @@ Your option is do your best to suck it up, get another job, ask yourself what someone who had ethics would do, and do that.Sun, 05 Jul 2009 06:15:22 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-Fairfax_VA-115570/http://www.trulia.com/voices/profile/Real_Estate_Pro-Fairfax_VA-115570/It's unethical and immoral. I'm not a lawyer, so I can't address the legal aspect--whether it's fraud. The fact that others are doing it doesn't make it right. And the fact that some lenders screwed some buyers doesn't make it right. Here it is in a nutshell. When you bought in 2007, you promised the lender you'd make the payments as required in the mortgage. You said you had not only the ability, but also the intent to make those payments. That was a promise. You signed your name. You committed to do so. Now, two years later, you've decided that you no longer wish to live up to that obligation. You're still able to, financially. But you'd rather not. Sorry, but that's not your option morally or ethically. Again, legally, it may be a different matter. ~~~~~~~~~~~~~~ P.S. One other point. To accomplish a short sale or deed in lieu, you need the lender's agreement. As a practical matter, the lender on your current home will require financial statements, tax returns, documentation, etc., from you showing your financial condition and justifying a short sale. Once they see that you have sufficient income, that you've just bought a new home, etc., it's . . . umm . . . unlikely that they'll approve either a short sale or deed in lieu. So, to get rid of the property, you might then be facing bankruptcy, which is not part of your plan. That's the real-world side of your plan.Sun, 05 Jul 2009 06:11:37 -0700http://www.trulia.com/voices/profile/Other-Auburn_CA-806147/http://www.trulia.com/voices/profile/Other-Auburn_CA-806147/Also, I read back through some of these posts...Grace Morioka specifically states: "What is more likely happening is that many are "trying" to do this, and while they may be successful for a few months, if your new lender can find out about the short sale or foreclosure of the first home, you will have committed lender fraud, which may subject you to : 1) recall of the note; 2) acceleration of payments; 3) foreclosure of your new home. " Of course, she is applauded by her fellow agents for these comments. It would be nice if she could elaborate as to what grounds the lender would have to execute either option 1, 2, or 3. Your original note is a non-recourse. You have purchased a new home. Your intent of the first home is a simple business decision - perhaps your intent was to rent or sell - it's not your fault the market can't accommodate a sales price - or rental price - that allows you to offset your current loan value or mortgage price (put it up for sale - or list it for rent - as skewed as the market is right now with short sales, etc., determining true market value is next to impossible). For this to be fraud, deliberate intent would have to be proven - this would be quite difficult to do - if not impossible - and even then would likely not be a crime, since generally misrepresentation has to be libel or written. For example, if you provided a falsified rental agreement that you never intended to execute (a "buddy" supposedly agreed to rent your home without ever intending to do so" and you providing falsified lease documents to the lender, or provided any other type of written agreements such as falsified wages or earnings statements - this is fraud, and would be rather easy to trace and prove). This certainly would not change the fact that the lender has no recourse on your original note, and the new mortgage was obtained completely legally - the new lender would have absolutely no grounds to do anything. This is also the whole intent as to the non-recourse laws - the banks share the risk...in this case, the banks, who are receiving TARP money and tax payer bailouts caused this mess - they certainly deserve to absorb their share of the loss. The fixes in place simply do not go far enough to address the housing crisis. Irresponsibility continues to be rewarded. If you overextended yourself, you are rewarded with interest and principal reductions. Responsible homeowners are stuck absorbing the losses, and according to agents on this site, should sit back and eat it. Irresponsible banks get their bail outs - courtesy of the same tax payers that are eating the losses - the executives of these banks are taking home bonuses for their fine work. Everything feeds on itself - and yes, the more people that walk away, the worse things get....but being the nice guy only makes you a victim, while the wealthy banks and most irresponsible home owners get the benefit. Somehow, we need a more comprehensive plan that goes further - right now, people that can afford their mortgages are staying for one reason - their probably afraid to look at the market and face reality....or perhaps that glimmer of hope that the market will turn around, which simply isn't going to happen any time soon. Reality will sink in - and I can assure you that financially capable home owners will start walking, realizing that they are putting more good money after bad.... If I invest in a company and lose my shirt because of a bad decision, I'll happily eat it - but in this case, irresponsible banks, and lack of regulation caused this mess - it was out of my control....my tax dollars are bailing these dirt bags out, adding insult to injury - I intend to do what it takes to survive and look out for the financial future of my family. Save the moral and ethical speech for the Sunday sermon - this is reality.Sun, 05 Jul 2009 01:54:10 -0700http://www.trulia.com/voices/profile/Other-Auburn_CA-806001/http://www.trulia.com/voices/profile/Other-Auburn_CA-806001/So, last post was pretty long... to elaborate: 1) Ensure you loan is 100% purchase money - is so, this would be non-recourse, meaning the lender can't go after you for a deficiency judgement. 2) You will need to be able to qualify for your current payment and the payment of your new home and have adequate reserves, probably for at least 6 months. Rental income will not even be considered in your scenario. 3) You will need to have a down payment for the new home. With perfect credit, you may beable to get by with less than 20% if this will be your primary home. 4) You can simply plan on listing or renting your other home - you don't need to mention any intent as to this home - you are qualifying for both... 5) while this won't be your primary anymore, you will still qualify for the Mortgage debt forgiveness act of 2007 as long as you lived in the house as your primary 2 of the last 5 years... this way, you won't be liable to claim taxes for the forigiven debt. This privledge extends through mortgage debt forgiven through 2012. If you can rent it, this is obviously a good option.... Depends on how much your mortgage is. You could list it for sale - who knows - prices are a little variable these days, espeically with short sales, etc... You can list by owner. At least give it a shot. Remember, once your house forecloses, you won't be able to buy a new one. Also, negotating a short sale once this process starts may be an option...unfortunately, unless you are currently in financial hardship, the bank won't even talk to you....unless you are in hardship or are an "irresponsible" borrower, there is no help for you.... But again, once you get the ball rolling, purchase a new house, and fall behind, the bank might start to listen. Especially if you agree to keep the place clean and upkept during the process, etc... If you can keep your payments current during the short sale, you can negotiate keeping your credit clean as well - this gives the bank incentive... you will be making two payments, but keeping your credit clean is a nice bonus. Deed lin Lieu of foreclosure is also an option - slighlty better than foreclosure - but still hurts credit. If you negotiate short sale or Deed in Lieu of foreclosure, review the terms with an attorney - the banks notoriosuly include language that permits them the right to pursue a deficiency judgement, basically making the loan recourse!!!! Tell them upfront you won't agree to this - if they try doing this, negotiate - if they are unwilling, you are better to just let it foreclose, in which case, it is by default a non-recourse and the bank can't touch you. After the fact, there are actually a few reputable credit cleaners, such as lexington law.... No guarantees, but leveraging benefits of the FCRA and persistence, they have been successful at cleaning your credit report. I have seen them remove Bankruptcies, foreclosures, etc... No guarantees, but a fairly solid success rate - it's all legal, and nothing magic to it...actually, you can do it yourself as well and save the money with just a little self education and time - not that difficult. But again, plan on worse case that your credit will be pretty bad for at least 3 -4 years. Don't use the term buy and bail....your simply buying a new home, and attempting to sell or rent your existing home....if you don't had adequate equity to do so, or are unable to rent for an adequate amount, you may be forced to seek assistance from the bank, or be forced into foreclosure...this is simply a business decision and not fraud. Drafting false rental agreements, etc., however is fraud - I don't think this is your intent, and as stated, would not benefit you in any way, since rental income would never be considered unless the home you intend to rent has at least 30% equity...which in your case, does not. Good luck, and spend the extra $$$ to have an attorney at least review things...never hurts to be safe!Sat, 04 Jul 2009 20:08:28 -0700http://www.trulia.com/voices/profile/Other-Auburn_CA-806001/http://www.trulia.com/voices/profile/Other-Auburn_CA-806001/You will hear so many different answers... I love many from the industry touting the typical industry answer of ethics and morality - "Do the right thing...stay upside down - put more good money after bad..". The reality is that the housing market is not going to recover in the near or long term. Houses in some cases have lost 50% more in value - and people are upside down on their mortgages. You are stuck in the home - unable to move, and essentially renting. The myth - "stick it out...things will rebound"... that is a joke - things are not going to rebound. Unless you plan to be stuck there 10 or 15 more years, you will be luck to have the value of your home match your actual loan value to a break even point - much less have equity. Now let's talk about ethics and morality. Let's consider the "stick it out and do the right thing approach". The banks, who are trying to dictate what we do, are simultaneously taking OUR tax money.... bailouts.... and why do they need bailouts? Because THEY acted in a wrong and immoral manner - granting loans that never should have been written! If only we had access to TARP, perhaps we wouldn't need to consider options such as "buy and bail". Unfortunately, we don't have that luxury. What about Federal regulators? Where were their ethics and morals in regulating banks and keeping this from happening in the first place? How many bank executives or politicans are in jail for their behavior? Instead, the bank executives are taking home bonsues, while consumers are struggling just to put food on the table! So, don't preach to me about morals and ethics....the very banks and politicians that created this mess are the only ones coming out on top - and the rest of us are supposed to sit back and be ethical and moral??? Save it for your Sunday sermon. We have to use whatever means are available to us to secure out future...just lke the banks and politicans, who could care less about the people they hurt. As for the plans the government is putting in place.....it only targets the most irresponsible of the home owners - if you truly bought something you couldn't afford, you will be fortunate enough to qualify for a loan adjustment - so, because your neighbor overextended his finances, he gets an instant equity boost, while you get to tough it out, keep making your payments, and remain 50% in the hole on you LTV ratio...is that fair? moral? ethical? Again, save it for Sunday.... As for the legality - give me a break. Yes. back in the original days, when people would falsify rental agreements, yes, this is submitting false documents, and you as the borrower, along with the "fake renter" are committing fraud. This is easily proved - there is a fake document trail, and it is quite obvious that the renter never intended to rent the house (in most cases). However, this doesn't work anymore either way - to have rental income considered, you have to have at least 30% equity in your home...so, to make this work, you have to have enough for a down payment on the new home, and adequate income to cover the monthly mortgage of your current home and the new home you intend topurchage - along with adequate reserves. You can list your current house for sale - or for rent - for whatever price you want.....the fact it may not sell or rent, and you end up having to foreclose is irrelevant.... Let the FBI - or anyone for that matter - prove intent - there are no falsified documents, and proving intent would be impossible.... (unless of course you went to a reporter or blabbed to the world). This is simply a business decision. And in the case of non-recourse loans, the bank is powerless. In this case, you may even be able to negotiate a "short sale", and save your credit. Additionally, resources like Lexington law have proven effective in removing negative credit items through persistence and using the FCRA to your advantage - no guarantees, but I have personally seen success stories of them removing negative items - including public records such as bankruptcies..... Either way, you should plan on your credit being impacted. Of course, other than buying a home, a foreclosure becomes less and less meaningful to your credit scores as time passes - withing 3 -4 years, you can buy a car, get credit cards, etc... it's not the end of the word - but you need to consider all apsects of your actions. I wish alternatives existed.... but the reality is that this has been a complete disaster and era of irresponsibility - starting with the banks, and an Administration (Bush) that literally ran his election on a standard of non-regulation...Our new Administration, through innapropirate tax payer bailouts, and consumer bailouts targeted only at the most irresponsible of homeowners continues to foster a reward system targeted to benefit irresponsibility.... so, you have two choices - listen to some of the posters here and be a wonderful person and be beaten by the system, and make a sound business decision.Sat, 04 Jul 2009 18:38:29 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-70461-250734/http://www.trulia.com/voices/profile/Real_Estate_Pro-70461-250734/Another thumbs up from me.Grace! you are the best!Sat, 04 Jul 2009 15:07:28 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-Cupertino_CA-306403/http://www.trulia.com/voices/profile/Real_Estate_Pro-Cupertino_CA-306403/Hello Upsidedown and thanks for your post. So, if I'm understanding you correctly, you can afford to pay for your current home and are not behind in your mortgage. I applaud you for this. And, you can afford to purchase another home without selling your first? If that is the case, then as Hannah noted, the better, legal, most ethical and less repercussive manner to resolve your dilemna would be to rent your first home, and buy the second one. Although, as you claim, many people are "buying and bailing" on their current homes, I think that this is a highly inflated statement. What is more likely happening is that many are "trying" to do this, and while they may be successful for a few months, if your new lender can find out about the short sale or foreclosure of the first home, you will have committed lender fraud, which may subject you to : 1) recall of the note; 2) acceleration of payments; 3) foreclosure of your new home. At present, there are many homeowners who are "underwater" in the current market value of their home and their balance on the mortgage. While this is an uncomfortable situation, it is not permanent, and values will creep up again. Choosing to "cut and run" is likely to impact your finances and, if you are correct that many people are doing this, then the proliferation of problems is likely not to engender forgiveness, but, on the contrary, quite a sizeable backlash involving fines, prison and loss of homes. You have a couple of options that you may wish to explore other than buying and then bailing on your current home. One of them would be rental of the first home, and the second would be to consider modifying your first home to add more space to the property. Either are legal and advisable to the atlernative you have planned. Good luck! Sincerely, Grace Morioka, SRES, e-Pro Area Pro RealtySat, 04 Jul 2009 15:00:40 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-Corte_Madera_CA-682702/http://www.trulia.com/voices/profile/Real_Estate_Pro-Corte_Madera_CA-682702/Hey Upsidedown$$ If you are in a recourse loan and you buy and bail you are asking for trouble. If you are in a purchase loan and only one loan on your property you might be able to pull it off, good luck with that! Are you in a position to rent out your current home to cover the piti and then move up like the jeffersons? This might be a more ethical approach for you. Good luck!Sat, 04 Jul 2009 14:45:32 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-Studio_City_CA-81156/http://www.trulia.com/voices/profile/Real_Estate_Pro-Studio_City_CA-81156/You are in great company with being upside down in your mortgage. I don't know of any Realtor who would knowingly help you add to the current problem.Fri, 03 Jul 2009 13:18:43 -0700http://www.trulia.com/voices/profile/Real_Estate_Pro-30310-259160/http://www.trulia.com/voices/profile/Real_Estate_Pro-30310-259160/Greetings, Sounds like you already know what you have to do regardless of what ANYONE has to say or thinks about it. Looks like you wanted someone in the industry to tell you it's justified. What is Best for You? Do THAT! Good Luck, Good Luck,Fri, 03 Jul 2009 02:50:42 -0700