Death Rattles

[BleedingOut]

I have a serious question that I would like to ask the professionals on this forum.

I am in the middle of this crisis and have a mortgage lender that has no desire to help. I've tried to get them to refi, restructure, let me roll a payment on the backside, etc. to no avail. My credit rating has plumetted to the mid 600s (last year it was in the mid/upper 700s). DTI is 65%+

My ARM has doubled in the past year and I am barely able to pay it and my other debts. I have appraised my property recently and it has dropped 38% over last summer's appraisal and the home value is way below what I owe. I am not able to put anything into retirement now do to all of this.

My question. In this market, it is nearly impossible to liquidate a property and cover your notes (in my situation). I've thought about trying to do a short sale or foreclosure....The dreaded F word. I know that it would destroy my credit for a significant amount of time. BUT, if I did that, my thought would be this. I can always rent at a fraction of my PITI. I would be able to put nearly 50K a year into my 401 and investments. (remember I can't do anything at the present). In 10 years (latter 50s) I would have over 500K (hopefully) towards my retirement and I may be able to get back into a home.

I grew up being taught right from wrong....paying your bills, etc. and I'm truly ashamed. But stating that, I am more worried about my future/retirement when I'm on a fixed income than currently "owning" a money pit.

Please provide me honest advice and not lectures of opinion....I've read enough of those.

Thanks ahead of time.

 

[spinDrAtl]

A couple questions: Is this your primary residence? (it sounds like it is) Do you have any large debt you could get rid of - say a $500-$600 suv payment? Is your ARM capped yet? Is a 2nd job an option? Is your home in a good marketable area where if things did turn around in 2 years or so, you could get out reasonably ok?

With 65 DTI, you have no chance to refi with any other lender.

My first thought would be that if you do not want to walk from it, cut debt to the bone - everything goes that is not necessary (or at least analyze doing that to see if it would help). Then get a 2nd job if you don't have one already.

You could try to sell the property at market price to stop the bleeding and then maybe work out something with your lender to pay back any shortfall and save your credit but someone with more knowledge about that type of thing than I have would need to tell you if that is an option.

If it was me, I would do everything I could to keep from going into foreclosure and to keep my credit where it is.

 

[BleedingOut]

This is my primary residence. ARM not capped. Next adjustment in May(lower hopefully) Currently we are at 11.5%. A couple of additional pieces. We have basically liquidated all that we can. Both spouses work as professionals and put in 60+ hours weekly. The best we could do is a second job of 10-16hrs a week. (maybe net $500/month) that would do little to the overall. We also have a second property (previous primary) that we haven't been able to sell. It is rented, in a depressed market and we are losing about a $1000/month on it. UGH..

Selling at the current market price would put us about $175K short of our current note on the primary. BTW...this is in SoWal on 30A.

This is all possible, but again.....how does this fix the future retirement?

 

[Pirate]

Have you told your lender they need to work something out with you or they would get the property back in FC? I would be stunned if they wouldn't work a better rate if they were informed how dire the situation was. 11.5 is just greedy. Also, FYI you will need to claim bankruptcy to dispose of the debt and with 2 houses that most likely will not happen. If you just let it foreclose they will come after the shortfall and fees will be packed on. Your 50k a year will still go to this house, you just won't own it anymore and your credit score will be in the low 5's. A non-profit credit counselor might be the answer. At least the lender might listen to them.

 

[JUL]

You can deed the house to the bank in lieu of foreclosure and walk away

 

[wrobert]

You can deed the house to the bank in lieu of foreclosure and walk away

The bank has to approve that though. I have a client that tried it and the bank opted to foreclose instead.

 

[JUL]

How about an auction...

 

[Bobby J]

Short sale seems to be the only option. Many folks are doing this.

 

[Rambunkscious]

I'd try everything I could to make it work, I would not pay 11.5% though,
I think this is one of those times when walking away and your subsequent credit markdowns might be the lesser evils if you cant work it out with that bank.

 

[Mango]

Here's a link with some information from HUD about alternatives.
There's a telephone # in there for certified housing counselors that may be able to offer some advice. Perhaps they can help you negotiate something with the Lender in the form of a modification of the current mortgage. With a 6 figure loss, the lender might be more amiable to do such vs. foreclose and with that sizeable decrease in equity, I can't see them accepting a short sale.