Anybody walked away from their mortgage?

[buildingsofdetroit]

Sad, but it's looking like I have little choice: $60,000 underwater; employer wants a 12% pay cut; houses for sale that are nicer than mine for half the price; bank won't reduce my principal.
Has anyone here walked? Was your house stripped? How long did it take for the bank to seize it? Looking for some guidance in a really tough decision in tough times.

[fryar]

Wow. I'm sorry to hear that. I haven't experienced that myself, I'm pretty lucky I guess, but I have to imagine there are others on this board who can help. I can only offer that my understanding is that you're still, at least in theory, on the hook for the loan, that you don't get to trade the house for the balance of the loan. What is happening in these times in practice?

Oh, and this is within Detroit, right [[in case there are jurisdictional issues)?

Thank you for your very interesting and informative website, it's always a good read. I hope your book is still on track.

[guito13]

Question: What type of loan do you have?

[gazhekwe]

You aren't thinking of defaulting, right? Just signing over the house to the bank?

[bailey]

Sad, but it's looking like I have little choice: $60,000 underwater; employer wants a 12% pay cut; houses for sale that are nicer than mine for half the price; bank won't reduce my principal.
Has anyone here walked? Was your house stripped? How long did it take for the bank to seize it? Looking for some guidance in a really tough decision in tough times.

if you walk, in Michigan, the lender can come after you and seek a deficiency judgment. the deficiency judgment amount is the difference between what they eventually get for it [[after it sits and rots on the market for a few years) and what you owe. as would be expected, banks are getting more and more aggressive at this. as would also be expected, walking away [[strategic default) is a larger black mark on your credit than a bankruptcy. good luck ever getting a loan again.

Before you walk talk to a bankruptcy guy. IIRC there were some new 'cram down' rules passed or trying to be passed to help reduce/redo mortgages for those in BK.

[Goose]

if you stop making your payments you can expect to be able to live "rent" free in your house for at least 6 months.... possible up to a year or longer before you get the sticker on the front door that says the sherriff is coming to clear you out.....

i've known people to stop making their payments, but put the money aside, because the bank is more likely to negotiate with you if you are 4-5 months behind in payments than if you are current....

if not, then you still have the money put aside to pay the back payments.... stopping making payments will hurt your credit, but then so will walking away from the home....

[kryptonite]

I am also giving some thought to walking away from my house, for very similar reasons. I have put $20,000 into it, I'm about $40,000 underwater and larger houses in the area are to be found for great prices. My house still needs some expensive work and I have to ask myself why invest in it, my salary is not great and it is frozen. Plus anything I put into the house is just for my own enjoyment, I'm not going to get a return on it.

I love my house, my neighborhood, and my yard. I have always had excellent credit and I worry about doing such a thing. I am a person that goes by the rules almost always. This is a dilemma.

[Johnnny5]

Before you do anything contact a lawyer. If they can't assist they should be able to point you in the direction of someone who can. Don't accept any offers from the bank or agree to any loan modifications without doing so. Also be careful of the fly by night debt/loan consolidation companies that are popping up just about everywhere .

[5thSFGP]

BUILDINGSOFDETROIT: Sorry for your situation but there are possibililities - several of which have already been suggested. Look first for a modification of your loan - the bank probably does not want any more OREO's in their portfolio. Is the lender local? If so, they may be more aware of the R/E situation in Detroit and surrounding communities, and perhaps more willing to work with you. The R/E situation today is the worse in twenty years so I suspect that there may be some type of federal assistance being considered. I would caution you against trying to deal with the companies that have begun to surface promising to good to be true solutions - they aren't. If push comes to shove, you'll be able to stay in ther house through the redemption period without having to make payments. Redemptions are often extended at the homeowners request in hopes that the situation will change for the better. I think the first thing is to make your lender aware that you are having problems - keep the lines of communications open. I work with defaulted federal loans and we are seeing a significant increase in defaults - I doubt that the situation will be ignored by the Obama administration especially after having bailed out so many companies - hang on and good luck!

[pffft]

People need to stop looking at their houses as cash machines. You buy it because you want to live there.

Does anybody look at their car and say, hey, it's depreciated so much, but I'm still paying $300 a month...I can get a new car, much nicer, and be paying the same note. Why don't I just stop paying and dump it?

[fryar]

I doubt that the situation will be ignored by the Obama administration especially after having bailed out so many companies - hang on and good luck!

As a quick thought, that's probably only after the election. The Democrats seem pretty rattled by the Tea Party. It sounds like you may be able to hold out long enough for that to pass, based on the above.

I am following this thread with great interest.

[Johnlodge]

People need to stop looking at their houses as cash machines. You buy it because you want to live there.

Does anybody look at their car and say, hey, it's depreciated so much, but I'm still paying $300 a month...I can get a new car, much nicer, and be paying the same note. Why don't I just stop paying and dump it?

The OP sounds like he won't be able to afford his payment.

Kryponite kinda sounds like he just wants a bigger house for less money, even though he can afford what he has and likes it. If everybody did that, we'd all be screwed. Plus, I'm not sure who'd give him a loan for that larger house after he defaults on his current one.

[1KielsonDrive]

People need to stop looking at their houses as cash machines. You buy it because you want to live there.

Does anybody look at their car and say, hey, it's depreciated so much, but I'm still paying $300 a month...I can get a new car, much nicer, and be paying the same note. Why don't I just stop paying and dump it?

Are you judging or are you commenting?

[Goose]

yeah, everyone should just hold tight until after the elections, there will be more obama money to go round....

[fryar]

People need to stop looking at their houses as cash machines. You buy it because you want to live there.

I think that lesson has been learned. But thank you for your wise counsel.

[Blueidone]

BOD...we had to walk away from our home in Roseville, but this was several years ago, before the worst of the real estate crash. It went into foreclosure, but we had already listed the house for sale, so my realtor worked with the bank [[he was VERY diligent because they kept putting him off for months and months). But eventually, he was able to short sale the house for a little over half of what we owed on the mortgage.

We kept the house up. We did not live there, but we fixed it up, put a fresh coat of paint on the interior walls, kept the grass cut and paid the utilities. We had good neighbors who kept an eye on the house, but we were also there for at least a few minutes every day. We kept window covers on and such. The family who bought it got a beautiful 5BR house with 3 baths and a 2 car garage and enclosed patio for $75K. We paid $169K for it. :-[[

We did get some 1099 thing for the difference, but the government has waived any tax ramifications as long as your income and some other things meet their guidelines.

Yes, our credit is shot...but that was all we could do.

My brother in law is staying in his home in Troy, and has not made a payment for at least a year. He filed bankruptcy due to an ugly divorce and mounting debt. He has not received any notification to move. The home is listed for sale and he gets a bite every now and then, but his realtor is not working hard to do a short sale, because it means less money for them, and it take a lot of legwork to get the mortgage company to agree.

I would talk to a good realtor and an attorney if you can. I wish you all the luck in the world. I know how depressing it is to lose a home that you love through no fault of your own. I still miss my house.

[n7hn]

there are a lot of varying reasons why people end up defaulting. As far as deciding if you should default, you shouldnt have to ask the question. Defaulting shouldnt be a strategy or a way to "reboot" your standing. Its unpleasant , stressful and comes with lasting consequences. Default if you have to, make sure to have enough cash to pay the "high risk" security deposit and special rate rent you will qualify for. Make sure you have the job you want for awhile [[or a job) as running your credit is more often done to qualify you as a good employee. Also make sure your car is in good shape, it'll be your last new or even used one for awhile,,,,barring cash purchases that is.

[Zimm]

as someone who removes derogatory items from people's credit reports for a living, i can vouch that all the statements of doom and gloom about your future credit are overblown-unless you are willing to have these items on your report uncontested.

a good, reputable [[and there are few that are both) credit repair service has about a 50-50 shot of getting a public record removed from your report if it has been there at least 2 years. less than that, the odds are worse, longer than that and they improve.

your chances if you try to contest it on your own depend on how savvy, knowledgeable and diligent you are. for most people, not so good.

[lincoln8740]

if you walk, in Michigan, the lender can come after you and seek a deficiency judgment. the deficiency judgment amount is the difference between what they eventually get for it [[after it sits and rots on the market for a few years) and what you owe. as would be expected, banks are getting more and more aggressive at this. as would also be expected, walking away [[strategic default) is a larger black mark on your credit than a bankruptcy. good luck ever getting a loan again.

Before you walk talk to a bankruptcy guy. IIRC there were some new 'cram down' rules passed or trying to be passed to help reduce/redo mortgages for those in BK.

speaking of deficiency judgment in Michigan---
is there not some whacky rule about the SOL being 30 years from the date of default?

Can they go after you for the amount in Michigan-Yes

Will they?

If there is something to go after

Have they?

I have not run into anybody that has been gone after by the bank but at the same time, I only know a few people that have walked away.

Life would be a lot easier if you lived in California or Arizona!!!

[Detwa]

We kept the house up. We did not live there, but we fixed it up, put a fresh coat of paint on the interior walls, kept the grass cut and paid the utilities. We had good neighbors who kept an eye on the house, but we were also there for at least a few minutes every day. We kept window covers on and such. The family who bought it got a beautiful 5BR house with 3 baths and a 2 car garage and enclosed patio for $75K. We paid $169K for it. :-[[

This is what I don't understand, why didn't the bank just sell it to YOU for the 75k?

We had to walk away from our house years ago, right at the beginning of this crisis. Unfortunately we didn't get the sympathy that others get because we were at the forefront. But we paid 267k for the house, tried to work with the bank [[Countrywide, of course) and they insisted they could not help in any shape form or fashion. Then they turned around and sold the house for about 80k. They could have just refinanced US for the 80k.

BTW, it was all written off in the bankruptcy

[Blueidone]

I totally agree, Detwa. And when they have a short sale offer, why not take it after the house has been empty for say 6 months instead of fighting over and over? We had a higher short sale offer, which they turned down several times. It made no sense to me. We couldn't afford to keep the house one way or the other, but the whole process just dragged on and on and on. I am sure that if my realtor had not been the diligent person he was, it would never have happened. Thankfully, we were able to stay out of bankruptcy.

[wazootyman]

Sad, but it's looking like I have little choice: $60,000 underwater; employer wants a 12% pay cut; houses for sale that are nicer than mine for half the price; bank won't reduce my principal.
Has anyone here walked? Was your house stripped? How long did it take for the bank to seize it? Looking for some guidance in a really tough decision in tough times.

I guess I'm going to be the voice of very little sympathy here. $60k underwater? Oh boo-hoo. That's a lot of people, especially if you bought about five years ago [[like me) at the peak. I'm in a similar situation. I endured a pay cut and my wife lost her job. Fortunately, things have since turned around for us, but we were never at the brink of collapse. You're telling me that a 12% pay cut is the difference between being able to pay your mortgage and complete insolvency? Why were you buying a house that you could so barely afford? Your taxes have likely declined by 20-40% in the same period. Drop the digital cable, the coffee or shopping. There are ways to get by.

The bank won't reduce our principal either - and my wife worked for years in the mortgage business...if anyone has connections, it's her, but we're getting nowhere. Instead we're finding ways to adapt our house to our needs: new siding on the garage [[less maintenance in the coming years), more storage in the basement, and making [[small, inexpensive) improvements that make the house more livable. I didn't intend on living in this little starter home for 10+ years, but it's looking like it'll be the case. I took a risk, and I'm accepting the consequences. Like a responsible member of society.

Look, there were countless wrongs done by the banks, people who had no business getting loans, etc. But at this point, you're just furthering the problem. If you "walk away" you'll just end up knocking down the value of your neighbors' houses further, likely influencing the entire future of your neighborhood and community.

Nobody says a damn thing when their house appreciates, but when it depreciates, everyone panics and goes into me-me-me mode. I've seen houses in my neighborhood go vacant and renters [[who don't give a shit about maintaining their property) move in. But I also look at my house, and many of my neighbors, and realize that somebody needs to stick around to provide some stability for the future.

[wazootyman]

I should qualify my previous statement by saying that I understand that there are people that have legitimate, very unfortunate reasons for going into foreclosure. This does not strike me as one of those cases. I do not intend it to be a personal attack - I don't know buildingsofdetroit, nor his exact circumstances. But in my opinion, too many people now see it as socially acceptable to just walk away and ignore their responsibilities. As someone who makes sacrifices to meet my responsibilities, these selfish acts end up further damaging my bottom line, my neighborhood and my quality of life.

[Huggybear]

The first step in addressing a problem is figuring out if there is actually a problem. The fact that you are $60K underwater is of no consequence unless you have to sell tomorrow for some reason. The fact that other, better houses are cheaper is not really of much consequence either - in fact, it actually helps to have them as comparables.

The only pressing issue is whether your income supports your mortgage and tax payments. If that's the case, you can keep on keeping on, and you can revisit the problem in a better economy. If that 12% paycut is killing you, take in a roommate. Fannie Mae, I believe, has a modification program that may be of help.

You could walk, but then you would have to rent a place [[which may not be much less money, would have you never more than 14 days from eviction, and which you would never really be able to dominate like your own house). The difference between your mortgage/taxes and rent is the issue, and that's what you have to weigh negative credit effects against.

Your options are [[in increasing order of damage to your credit):

Deed in lieu of foreclosure / Short sale
Foreclosure
Bankruptcy

Before taking anyone's word for it on credit repair, take a look at the FTC website. The fact that you might have a 50/50 chance of taking something off [[actually, that's quite a bit optimistic unless it's an entry that's flat-out inaccurate) is something that has to be weighed against the consequences of you hit the wrong side of the split. The Fair Credit Reporting Act permits the use of credit reporting for credit, insurance, employment - and pretty much anything else. Permissible uses under state law may vary, but you never know where you are going to end up.

Understand also that it's not "the banks" that own the paper on your house [[I'm going to try to simplify this...). A bank might originate the loan, but they often sell it to third parties [[in pools) or those third parties buy the income stream through the securities. So your bank may not be the party making the final call on whether to let you walk or whether to sue for a deficiency.

Sad, but it's looking like I have little choice: $60,000 underwater; employer wants a 12% pay cut; houses for sale that are nicer than mine for half the price; bank won't reduce my principal.
Has anyone here walked? Was your house stripped? How long did it take for the bank to seize it? Looking for some guidance in a really tough decision in tough times.

[East Detroit]

The first step in addressing a problem is figuring out if there is actually a problem. The fact that you are $60K underwater is of no consequence unless you have to sell tomorrow for some reason. The fact that other, better houses are cheaper is not really of much consequence either - in fact, it actually helps to have them as comparables.

The only pressing issue is whether your income supports your mortgage and tax payments. If that's the case, you can keep on keeping on, and you can revisit the problem in a better economy. If that 12% paycut is killing you, take in a roommate. Fannie Mae, I believe, has a modification program that may be of help.

Exactly.

And people who walk for reasons other than truly not being able to make the payments are basically fucking the rest of us over for their own selfish desires. The money the lender loses is not being absorbed by them. Not saying the OP is in that category, but the flip way that others speak implies that they are. We budgeted based on one of our incomes, not both [[and see friends with the same jobs have much more expensive homes etc)... and I'm sick of seeing McMansion idiots just drive away in their new car whistling from their loans because of convenience or idiocy.

For those who lost their household income and can not afford to keep the home that they intelligently budgeted, you have my utmost empathy.