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    Thread: 40k upside down. Talk to me about forclosure....

    1. 07-09-2012 08:26 PM #1
      My wife and I bought our house in the spring of 07, came into it with 20k, paid 220k plus 8k closing costs. our rate is 5.525, we pay $130 in pmi, $450 a month in taxes, plus insurance which brings our monthly payment to $1750. Our principal is currently 193k, current zillow value is 155k.....

      We've been fine paying the mortgage, we've actually never missed one or been late. Our problem is that the house needs works, lots of work. Roof is leaking, the porch needs to be redone, garage is about to fall down, ect. We can pay the payment, but after having our first child, coming up with the extra money to put into the house is tight. Actually, I'd rather pay off my student loans then put money into a house that I'm 40k upside down. we have some credit card debt, a couple medical bills from the baby, no car payment or other debt.

      I've been contemplating walking away for a year or so..... Our lender, NH FHA, won't work with us on a refinance (cause we're current and can/have been paying) or eliminating the pmi (cause we're upside down. Should I cut my loss's and start using the money I'm putting into my mortgage toward debt?

    2. Member NZTIGUAN's Avatar
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      07-09-2012 10:20 PM #2
      The fact that you're upside down has nothing to do with the situation you're in, you'd be in the same situation if the place was still valued at what you paid for it.

      So, I can't for the life of me see why you'd want to destroy your credit rating for many years to come just to lose money on a house that's exactly what you paid for.

      The fact that the place needs repairs etc simply shows you were overextended from day one OR that you've spending on other things instead of maintenance on your single biggest asset !!

      I just wish the laws were the same there as the rest of the World where there's no possibility of "walking away from it", here the debt would stay with you until you either repay it or die (and even then it would come out of your estate if you had one).

      Sorry but I have no sympathy for people who have absolutely put themselves in the position they're in and now want "somebody" to carry the can for them !!
      Last edited by NZTIGUAN; 07-09-2012 at 10:24 PM.
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    3. 07-09-2012 10:55 PM #3
      I'll agree that i was over extended in the first place, did I know that then? Not at all... I was under the impression that as time went on, I'd gain equity in the house and I could use it for repairs. Even that wasnt the greatest plan, this entire ordeal has been a huge learning experience in home buying.

      The "somebody" to "carry the can" would be the lender, the same people won't give me the time of the day when it comes to helping me in this situation. They told me they'd drop pmi in 4 years, now thats not happening. Interest rates are currently around 3.5, I could free up some cash to put into the house if they helped me refinance, but they won't do it. It's crazy, but you need to be late on payments for them to consider working with you. So either way I'd be effecting my credit score.....

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      07-10-2012 08:59 AM #4
      Zillow is about the most inaccurate thing ever and you can't tell the value of your home better than throwing numbers in the air with it. Don't go making rash decisions or putting ideas in your head based on that. Talk to your lender and see about an appraisal to get a better idea of where you stand.

    5. Member hugoaswho's Avatar
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      07-10-2012 09:14 AM #5
      just walk away you will never get that money back, and sinking more money into repairs is absurd

      just rent a nice place for 1750 which should be pretty good rental depending on where you are

      sorry to say but unless you need credit in the next ten years you might as well walk

    6. 07-10-2012 09:32 AM #6
      Whoa now. Your lender won't drop PMI because of a Zillow value? That doesn't sound right at all. I know that my PMI terms are very specific about how/when PMI will drop (80% of the original loan, earlier if we pay for an appraisal and value/pay down conditions are met.)

      Anyways, I'd never make a decision based on Zillow. I stopped even bothering with it when we purchased our home because it was just wrong on every property we looked at.

      If the means are there, you should probably pay for an appraisal out of pocket so that you have a firm value.

    7. Member hugoaswho's Avatar
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      07-10-2012 10:02 AM #7
      I do not agree with getting an appraisal it will most likely come in even lower then the zillow value

      You are screwed the way most people are at this point

      Real estate is worthless now, unless you are in demand urban area or wealthy suburbia there is a flood of properties which people are hanging on to thinking they will get their money back.

    8. Senior Member FlashRedGLS1.8T's Avatar
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      07-10-2012 10:27 AM #8
      I guess I'm lost here. What exactly is the reason that the house has so many issues all of a sudden and if that's true why do they need to be addressed so quickly?

    9. Member blue70beetle's Avatar
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      07-10-2012 11:07 AM #9
      Walking away is unethical and immoral. You signed the mortgage; regardless of lending practices and the ability of those the banks qualified to actually pay, you're an adult, and when you enter into a contract, it is your responsibility to be sure you fully understand it, and this includes ensuring that you are able to evaluate any potential negative consequences.

      I've felt the pain of leaving a check in the amount of 10% of my home's value at the closing table when I sold. That was ten years ago, when the first response when your home value dropped was not "short sale" and the second response was not
      "walk away - not my problem."

      Can you tell I don't have much sympathy for those adversely affected by the RE market? We live in a country primarily composed of children, it seems.

    10. Senior Member dunhamjr's Avatar
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      07-10-2012 11:15 AM #10
      Quote Originally Posted by hugoaswho View Post
      I do not agree with getting an appraisal it will most likely come in even lower then the zillow value
      or you could be totally wrong too.

      on a whim talked to a lender about my primary (while working on a refi on my rental)... turns out zillow thinks my primary house is worth $290k, while Chase tells me it is worth $313k.

      zillow is a place to start. but it is typically only in the ballpark, not an exact measure of value.

      OP
      before you consider a foreclosure based solely on zillow numbers. go talk to your lender. see if you can do one of the new fancy harp refi's. see if there is anything they can help you with. determine positively what terms need to be met to have PMI dropped.
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    11. Senior Member dunhamjr's Avatar
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      07-10-2012 11:18 AM #11
      Quote Originally Posted by blue70beetle View Post
      Walking away is unethical and immoral. You signed the mortgage; regardless of lending practices and the ability of those the banks qualified to actually pay, you're an adult, and when you enter into a contract, it is your responsibility to be sure you fully understand it, and this includes ensuring that you are able to evaluate any potential negative consequences.
      blah blah blah.

      i confronted this logic in the last housing post.

      as i said their, your logic works person to person... not person to bank.

      contracts are renegotiated ALL the time. stop lying to yourself that contracts are some sort of scripture of God and cannot be changed.
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    12. 07-10-2012 11:21 AM #12
      I used the zillow value purely as a number to illustrate my situation in this thread. My taxed value is higher, naturally.... But houses in my area have sold for much less then there zillow "appraisal". a house down the road from me, better condition, double lot (mine is single), larger by 300sqft, short sold last summer for 120k. That's was essentially the moment I realized I was in real trouble.

      As for why I'm all of a sudden needing I get out, or why all this work needs to get done now.... I don't NEED to get out, and I've been putting off repairs cause I cant bring myself to put money into the property considering its value. I've been holding on hoping the market would change and I could get myself out of this. 2 things are kinda putting me to a decision: I'm really feeling every payment is waste of money, delaying the inevitable. I could be using that cash better else where. And the other is that I can't put off repairs any longer if I decide to stay. The roof is leaking into my attic, stuff like that gets more and more expensive to fix if i do decide to stay.

      As for pmi, I actually have what they call MIP. I had never heard of such a thing until I called them trying to get it eliminated. I'm not sure how it's different then pmi, I have it cause my loan is state backed. They said I need no less then 20% equity to have it dropped. At this rate, that won't happen for a decade.

    13. 07-10-2012 11:29 AM #13
      I acknowledge that i'm an adult and I am responsible for the position I'm in. But I also acknowledge that I'm the only one looking out for me now. I need to do what I need to do to make the best of where I'm at. Sitting back and struggling isn't it. These lenders only look out for themselves too, they knew more then I didn't that I was entering into a loan that over extended my pocketbook. I had never been there, they look at debt/equity ratios every day. Not blaming this completely on them, I signed the papers.... But just know I'm looking out for me from here on out, cause you know they arnt.

    14. Member blue70beetle's Avatar
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      07-10-2012 12:02 PM #14
      Quote Originally Posted by dunhamjr View Post

      as i said their, your logic works person to person... not person to bank.

      contracts are renegotiated ALL the time. stop lying to yourself that contracts are some sort of scripture of God and cannot be changed.
      Contracts are renegotiated when both parties have an interest in doing so. At this point the bank doesn't have an interest in renegotiating anything because the borrower is current. That will change once the loan is not current.

      However, I say it's unethical because the only reason he's talking short sale is because the value has dropped to less than is owed.

      It would logically follow that anyone upside down on a car should be able to short sell and the bank can eat the difference. The only real difference is that everyone knows cars lose value. For a while, everyone knew that homes only went up in value - and did it quickly!

      And let's take the logic another step further...I buy a new computer with my credit card, and when it becomes worth less than I paid, I'll take it back to Best Buy, and the credit card company can absorb the difference.

      In each of these cases, the borrower has a contractual obligation, and the fact that the asset dropped in value does not morally or ethically relieve them of this obligation! How is this different than a house, apart from the fact that a house is worth more money? This just means there's more at stake for both parties.

    15. Senior Member FlashRedGLS1.8T's Avatar
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      07-10-2012 12:03 PM #15
      Quote Originally Posted by dunhamjr View Post
      as i said their, your logic works person to person... not person to bank.

      contracts are renegotiated ALL the time. stop lying to yourself that contracts are some sort of scripture of God and cannot be changed.
      This doesn't discount judgement from some sort of moral aspect.

      I understand what you are saying, but there's nothing wrong with calling people out for things like this.

    16. Senior Member dunhamjr's Avatar
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      07-10-2012 12:24 PM #16
      Quote Originally Posted by blue70beetle View Post
      Contracts are renegotiated when both parties have an interest in doing so. At this point the bank doesn't have an interest in renegotiating anything because the borrower is current. That will change once the loan is not current.

      However, I say it's unethical because the only reason he's talking short sale is because the value has dropped to less than is owed.

      It would logically follow that anyone upside down on a car should be able to short sell and the bank can eat the difference. The only real difference is that everyone knows cars lose value. For a while, everyone knew that homes only went up in value - and did it quickly!

      And let's take the logic another step further...I buy a new computer with my credit card, and when it becomes worth less than I paid, I'll take it back to Best Buy, and the credit card company can absorb the difference.

      In each of these cases, the borrower has a contractual obligation, and the fact that the asset dropped in value does not morally or ethically relieve them of this obligation! How is this different than a house, apart from the fact that a house is worth more money? This just means there's more at stake for both parties.
      cars and computers are not a market that banks helped to inflate.

      purchasing cars and computers is not hundreds of thousands of dollars, which really when improperly bought can ruin your financial situation.

      banks basically talked people into buying. they led buyers into bad loans. they handed out more money then people could realistically manage to pay back comfortably. people rely on banks/bankers to be the experts and offer then knowledge and advice. banks were unethical and unmoral in the advice they gave.

      the hurdles to selling an underwater house are VASTLY different then selling ANYTHING else you will ever buy/sell. car, computer, mongoose breeding operation... etc.

      if the OP wants to short sell his house. his credit will be wrecked for a couple years. he will be completely out of any downpayment made. he will be completely out of all payments on the mortgage to this point. he will be completely out of all moneys paid in upgrading and maintaining the property to this point. that is the punishment. that is fair.

      the punishment does not need to be 'ethically and morally you must pay the bank'... banks can sell their loans out to other lenders. why cannot individual people pass the buck as well?

      and again. banks got bailed out with my tax money. why can't i get bailed out?
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    17. Senior Member dunhamjr's Avatar
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      07-10-2012 12:26 PM #17
      Quote Originally Posted by FlashRedGLS1.8T View Post
      This doesn't discount judgement from some sort of moral aspect.

      I understand what you are saying, but there's nothing wrong with calling people out for things like this.
      calling people out.
      telling them to think twice.
      suggesting that they evaluate other options...

      that is one thing.

      bashing people. calling them immoral. unethical. and a child.
      that is something completely different.
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    18. 07-10-2012 12:35 PM #18
      you jumped in and said everything i wanted to say. comparing my situation to buying a computer is pretty insulting. i've been upside down on a car before, got into a accident that totaled it, and paid on it for over a year after it was gone. thats nothing when compared to being upside down on a house for more money then you make in a year. you expect me to have ethics and morality? the lender never had any, and still doesnt so why should i? they sold me into a load that i couldnt afford, i've been scraping by, doing the "right thing". and now they wont work with me till i miss payments and start to erode at my credit score..... thats moral and ethical.

    19. Senior Member FlashRedGLS1.8T's Avatar
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      07-10-2012 01:58 PM #19
      Quote Originally Posted by dunhamjr View Post
      calling people out.
      telling them to think twice.
      suggesting that they evaluate other options...
      Agreed,

      bashing people.
      Agreed,

      calling them immoral. unethical.
      Not using the OP as the basis for this.
      Unless there are absolutely no other options, I don't see an issue with this.
      We judge morality and ethics on our own scales, many different approaches to morality can be used here.

      and a child.
      Agreed,

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      07-10-2012 02:04 PM #20
      Quote Originally Posted by mr sarcastic View Post
      they sold me into a loa(n) that i couldnt afford...
      You signed a loan that you could not afford.

    21. 07-10-2012 02:19 PM #21
      I know that, but when you talk about ethics and morality, I have no sympathy. They gave out mortgages that they knew were sketchy, then sold them off.

      I'd never made a purchase of this scale before, lots of assumptions we're made and I trusted them as professionals that they we're doing what was best for both party's involved. Obviously they were only thinking about themselves and making the sale. I was naive in thinking that they truly had my interests in mind... Hell, I still remember the phrase the loan officer said, "we want to make sure that the payment isnt so much that you can't afford pizza and beer on a Friday night. I'm confident you'll comfortably make this payment." that was a bunch of bull****, they'd seen people like me before, they knew what they were doing.

    22. 07-10-2012 02:26 PM #22
      When it comes to this morality issue, let's all agree to disagree. Either way, morality and ethics won't change the position I'm in. I've learned a lot about money and RE, and I'm just looking for the best solution financially. The biggest lesson I've learned is that I have to do what's best for myself and my family. Sitting back and waiting for the market to come around isn't gonna get me anywhere. I guess my first move is to see what it'll take to get an appraisal.

    23. Member blue70beetle's Avatar
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      07-10-2012 02:30 PM #23
      Quote Originally Posted by dunhamjr View Post
      purchasing cars and computers is not hundreds of thousands of dollars, which really when improperly bought can ruin your financial situation.

      the hurdles to selling an underwater house are VASTLY different then selling ANYTHING else you will ever buy/sell.
      And this is why it is so important for people to consider their purchase before they agree to buy. If they can't effectively do this, or if the don't have the financial means to deal with the potential downside of the investment, there are houses and apartments for rent in every town or city in this country.

      the punishment does not need to be 'ethically and morally you must pay the bank'... banks can sell their loans out to other lenders. why cannot individual people pass the buck as well?
      You mean why can't individuals sell an investment for a profit or a loss? They can, and they do. For you to make this parallel indicates that your understanding of the mechanics of selling a loan is as follows: bank A has a loan. This loan is costing them more money (or is earning them less money) than they are comfortable with. They pass it to bank B and let bank B eat the loss, giving bank B no choice but to take the loan.

      In reality, bank B will take the loan if they choose to take the loan. It's a transaction between two willing participants who are generally not forced to enter into it.

      Banks agree to short sales because it's better than the alternative, which is foreclosing. They issued the loan to generate interest income, not to get in the business of selling distressed properties.

      banks got bailed out with my tax money. why can't i get bailed out?
      http://money.cnn.com/2011/03/30/news...gram/index.htm

      So that was free money? According to this article, no. If you want a loan (and based on the context of your comment, apparently you do), there are lenders all over the place. If you actually want a "bailout" - as in free money - well, don't we all?

    24. 07-10-2012 02:41 PM #24
      Learn how to do the repairs yourself!

    25. 07-10-2012 02:43 PM #25
      Just found info on another house that sold on the street next to mine... My house is taxed assessed at 163k, zillow at 155k. This past April a house of similar size and age, tax assessed at 165k, zillow at 157k, sold for 132k after 6 months on the market (price started at 145k). Fair to say 130-135k is a ball park market value of my property? I haven't seen a house in my area sell for more then that since we bought ours...

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