(Moved from BPO/REO Forum, this is the appropriate are for the topic.)

I am looking for some good advice on what to do in my situation. I purchased a home in 2007 at the top of the real estate market for $125,000. I still owe $120,000 and the house is currently worth $65,000. I am still paying the same monthly payment I was in 2007 even though the house is worth half as much. I've tried getting a refinance through the bank since I am currently paying 7% interest, and they will not refinance. I tried getting a loan modification through hardship and they denied it.

So I've been struggling to pay my mortgage and be responsible, sold everything I owned to make my payments. Now I am beginning to wonder if I should just walk away from it. I don't mind the credit hit, as my wife has perfect credit and if we need to buy something we can just use hers (her name isn't on the house so the foreclosure won't affect her). I also need to move closure to work since I have a new job that's 50 miles from my house. I can't sell the house, or I could but I'd still owe the bank $60,000 and be left with no property at all.

If I walk away from the home, the bank will try and come after me through a lawsuit (I own nothing) or try and garnish my wages, so I would have to file bankruptcy. My father said I can't file bankruptcy unless I HAVE to. For instance, if I can't afford the house. But I can afford it, though I don't want to keep paying such an isanely high mortgage on a house that's worth nothing, and I want to get out of it as soon as possible and move closer to work.

I thought about perhaps renting the house, I could maybe get $750 to $800 a month, and I am paying $1100. So I'd be losing a couple hundered a month, and have to pay to rent someone else's house closer to where I work. For example, if I rent a house that costs $1000 and I am losing $300 a month on my house being rented out, I'm paying $1300 a month, up from the $1100 I was paying to live at my house, but at an advantage of not having to foreclose or file bankruptcy.

Only problem with that, is I have to keep my house up to standards, pay for my huge oak trees to be trimmed (going to cost a couple thousand), pay for a new central AC when it goes (should probably last another year or two) and a couple other touch-up jobs. So foreclosing will definitly get me out of this situation cheaper (with a hit to my credit of course).

What advice would you guys offer me? Thanks

An attorney told an interesting story at an Atlanta conference last week. THe owner was upside down in value, had lost their job but got back on their feet. Re-employed, intelligent, had a few assets, etc. Sounds a little like your situation up to that point. However, the dude was 22 months behind in payments. The lender grants a loan mod. The buyer advised the attorney. If I accept this I'll have to start making payments. It will take you 14 months to foreclose. I've been saving for 22 months, plus another 14 free months. Why not just foreclose on me and I'll pay cash for my next house. Cold, maybe less then honorable, but becoming more common. It's known as a strategic default. Let's suppose the above mentioned dude rented it for the 14 months and just pocketed the rent. I have a ton of foreclosures in my area where the landlord has been collecting rent for over a year, never paid a dime on the mortgage and just lets it go to FC.
I'm not recommending you do that, I'm not saying it's the right thing to do, but I will say it's happening more often and certainly not unique.
You've tried to do the right thing and negotiate. The lender wants to play hardball. They may have overlooked the first rule of playing hardball....make sure YOU'RE the one holding the bat.

Let's look at it a different way: If you sold the house for $150K and it was now worth $50K... and the buyer came to you and said, "Gee Wiz, you know... it's only worth $50K now... can I have that $100K back?" would you do it?

I don't know.

I *will* agree that the bank is being difficult in so far as, if you are at 7% and the rest of the world is at 4% and you can't refi because of the value... they should reduce the rate. However, I could play devil's advocate there too... you made a deal at 7% and that's that. However, what if the rate went up 20%. Would you mind if the bank asked you to raise the rate to 20% or would expect them to live up to the deal they made?

Slippery slope if you ask me.

Pete

What advice would you guys offer me? Thanks


advice...don't be so gullible in the future. don't take the bait that is dangled in front of you. what was shown as a profit on the financial statements of the big banks, wall street commissions and big investment funds, turned into YOUR misfortune, not by accident but by design. Do you think the big corporate interests care about your misfortune? Isn't it time we start using some common sense and stop falling prey to the financial manipulators?

The banks say they're gonna crack down on strategic defaults - heck they can't even get their own house in order and they want to add an additional wing to it? I certainly would if I found out the owner had buckets of money in the bank.

I'm amazed NeedsHelpInNJ has such a good reply!

Real estate is no different than stocks. The values go up and down continously. I'd LOVE corporations to give me back what I lost - it wasn't my fault.