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

    1. 07-12-2012 05:53 AM #51
      I've pretty much decided to stick it out. The fact that the lender could come after me up to 20 years after is an eye opener. I refuse to get on to my roof, so I'm gonna bite the bullet and see if a family friend will look at it, even if I don't do the entire roof I need to fix the part that's leaking. As for my garage, it's insured so if it falls it falls. Just not gonna keep anything special to me in it through the winters. The rest of the stuff I'll just keep up on as cheaply as I can. As soon as I can get out I will....

    2. Member blue70beetle's Avatar
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      07-12-2012 07:55 AM #52
      Just tossing this out (because I don't know)...if the garage were to collapse and the insurer determined that it was "neglected" or otherwise in bad repair, could they refuse to pay the claim?

      Anecdotal support for this notion...my brother had a bunch of shingles that blew off and his HO insurance wouldn't cover it because they were "not correctly installed." Apparently whoever installed them had set the nails too high so the nails holding an upper row didn't go through the adjacent lower row of shingles.

      I know this isn't a direct parallel, but it stands to reason that if you want to count on them to cover a loss on something you know to be in rough condition, it would be a good idea to verify that such a claim wouldn't get rejected.

    3. 07-12-2012 08:37 AM #53
      The garage isn't gonna fall based off neglect, it will based off design. Back in the 30-50's they built things in our area a little sketchy. Locals call it "Yankee engineering". The studs are 24" on center, code is 16". And the entire structure has only 5 trusses, it should have at least 10. After years and years of nh snow, the weight has caused the roof to sag in the middle. It's only a matter of time before it goes down under the snow weight. For a few winters I got up there and shoveled it, but the last time it felt really really unsafe. It was super spongy, and my foot went through not because any of it is rotten, but but cause the trusses are so far apart and barn board couldnt handle my weight. The cost of fixing would be the same as getting one of those kit garages of the same size.

    4. Member GeoffD's Avatar
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      07-12-2012 08:41 AM #54
      Quote Originally Posted by mr sarcastic View Post
      5 years ago we were saving money, no credit card debt, ect. Now our savings is gone, CC debt gone up, all because this mortgage has our finances stretched to their limits every week. Something as small as an injury at work would be enough to disrupt our finances and make us choose what's gonna get paid.
      This is why the old school 28% housing debt / 33% total debt mortgage lending criteria numbers existed. I'd love to know what you were thinking when you took out that mortgage. Probably that you were gonna get rich because housing prices always go up?

    5. Senior Member dunhamjr's Avatar
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      07-12-2012 10:32 AM #55
      Quote Originally Posted by GeoffD View Post
      This is why the old school 28% housing debt / 33% total debt mortgage lending criteria numbers existed. I'd love to know what you were thinking when you took out that mortgage. Probably that you were gonna get rich because housing prices always go up?
      the is old. cause throughout my potential 'home buying years' i never heard numbers as low as either 28 or 33 percent.

      the number i have always here from day one about 10-12 years back was less then 40%.

      also.
      yes. the OP MIGHT have been caught up with 'housing prices will always rise'. but after watching then steadily rise for 20-30 years, why would that logic be bad?

      toss that in with all the 'american dream' hype of home ownership.

      along with everything related to RE shouting 'buy now before you cannot afford it'.

      and numerous contact points in RE (lenders, agents, inspectors) all saying,"no problem, you can handle it", "yeah its a solid house"... "buy now while you still can"...

      and its obvious that the deck is stacked against anyone who might have been caught slightly off-guard and thought that all these people had OUR best interests at heart.

      all of the above is a reason i am a landlord instead of a house flipper. my flip flopped, so i have been renting that house out for coming up on 5 yrs.

      top that off with having been convinced buying my primary house was a good idea, its been ok... but if things had gone slightly different then i would be in a world of hurt. fortunately. i bought a fixer, so my initial purchase was $100k under market at the time. i DID get a no-doc loan though... but my income has effectively more than tripled since that initial purchase thanks to raises and getting married.

      so far i have been lucky.

      i know a number of others who have not been anywhere near lucky.

      one guy lost two houses, his and his fiance's.
      another had to short sale his primary AND 4 rentals.
      and coworker got about $100k underwater and did a short sale within the last two years.
      Last edited by dunhamjr; 07-12-2012 at 10:35 AM.
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      07-12-2012 01:26 PM #56
      Quote Originally Posted by Egilbe View Post
      Home inspections are usually scams. If there was any way to make them liable, I'd go after the home inspector


      i'd love to go after the company that inspected the wife's home (prior marriage/together) - at this point i've fixed 95% of the wrongs
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    7. 07-12-2012 01:58 PM #57
      Quote Originally Posted by GeoffD View Post
      This is why the old school 28% housing debt / 33% total debt mortgage lending criteria numbers existed. I'd love to know what you were thinking when you took out that mortgage. Probably that you were gonna get rich because housing prices always go up?
      as has been said, things were different in 2007. i was also young and naive about RE. my agent was recommended by a friend, but looking back she definitely set us up without our best interests in mind. the thought back then was, buy now, your throwing your money away renting. in a couple years you'll have huge equity in your house cause the value will go up, then you can take out a loan against it for repairs. i also figured that between my wife and i we would get raises. but with the current strategy of most companies, opportunity for upward movement has dried up for both of us. we're lucky to still be working, but when ever a coworker leaves or gets fired, those responsibilities are spread out. same with management. i'm definately not in the spot i thought i was gonna be 5 years ago.

      as for the home inspector, i'd love to meet up with him again in the future. the next one i have to deal with probably isnt gonna like dealing with me. i've learned alot about home renovations and what to look for, i wouldnt have even walked into this house if i knew then what i know now.

    8. 07-12-2012 03:27 PM #58
      the above post is excaclty what I am talking about,
      real estate agents were/are so full of sh*t during the fed instigated 'real estate boom'
      this is where the dishonesty came in, the agents were living the high life, spending beyond means (some buying and selling RE) and became desparate to keep the 'life' going......
      desparation does things to people........morals and ethics are the first to get disgarded....

      bad/good news millions got sucked in..............

      and we all turn to the people that created to problem for the solutions?........how insane is that

    9. Member blue70beetle's Avatar
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      07-12-2012 03:45 PM #59
      Quote Originally Posted by mr sarcastic View Post
      my agent was recommended by a friend, but looking back she definitely set us up without our best interests in mind.
      My wife is a Realtor, and I've really had my eyes opened in the time she's been in the business. It's shocking to see how many people get their license (because getting a license really isn't all that difficult) and then get recommended simply based on the fact that they were successful in getting a deal closed for someone. Most people with bad agents don't realize what their agent should be doing, and while there are a lot of good agents, there are a lot of terrible agents that just have no business taking part in the biggest transaction most of us will ever make!

      I know of one agent who actually almost closed on the wrong house! She discovered only a few days prior to closing that the house she had shown (and they thought they had placed an offer on) was at west whatever street, and the house they were about to close on, due to her incompetence, was at east whatever street. And then she posted about it on FB!!!

      Same agent had a house listed, and my wife had buyers ready to make an offer. In the process of simply doing her job, my wife discovered that the agent was listing it for someone who didn't have the legal right to sell it, because they were not the owner of record. The seller's agent had no idea of this until my wife told her.

      And this agent has people recommending her to their friends, not because she's charming or attractive or fun to spend time with (she's actually none of these, sorry to say - we've known her since before she was in the business), but simply because the deal closed, so she must be a good agent, right?

      Regarding inspectors, they're not all scammers, but you have to hire one who has vast experience in construction and/or renovation projects or you could probably do as good a job yourself. Some are great and will accurately assess the condition of the home. Others aren't really competent to make any recommendations or judgments and will simply say "consult a structural engineer" or "consult a licensed electrician," etc. Still others will scare you to death and make you think the whole house is going to fall down before you even move in, when it's generally in great shape. There's a guy here in town like this, and my wife has had a deal blow apart because of him, and almost lost another.

      And before anyone accuses her of being greedy and just being interested in closing the deal without concern for her buyer's interests with respect to an over zealous inspector, she's more than qualified to make general determinations about the physical condition of a house - she grew up flipping homes and has been in the middle of many building and remodeling projects, not as someone who hired the contractor, but actually doing the work alongside her parents, or me.

      The point is it's hard to know whether your Realtor or your inspector have a clue what they're doing, and you often won't find out until it's too late...and then you're completely stuck!

    10. 07-12-2012 04:21 PM #60
      like i said before, if i knew then what i know now, i wouldnt have even come close to doing it the same. chances are, i probably wouldnt have even looked at this house. looking back there were so many red flags about my agent. she was so itchy to make the sale, we put together the offer on this house on a sunday morning. "by monday they'll have 2-3 offers on the table and you'll lose out." and the inspector was a close friend of hers, obviously he wasnt gonna fail the house and loose her the sale.

      on a completely different note, i'm gonna go on the extreme opposite end of the spectrum here and talk about buying a second property. for a while i thought about buying a much smaller home, and renting my current home for a fee larger then the mortgage on the new home. now that i've learned as much about renovation/construction, and learned about what my wife and i really want in a house, i know this isnt the house for us. we've realized we want half the house with twice the land. around here our perfect little 3 bedroom house in the country can be bought for 100-130k. our current house is 4 bedroom, 2 bath, 2 living rooms, full dining room, ect.... we could get at least $1300 a month for it (obviously after a few more renovations), this would more then cover the new mortgage and give us some additional income. our credit is awesome, but our debt to income ratio is scary..... how hard of a time do you think it'd be to make this happen? it would be something i'd want to do within the next couple years, so i'd have a little time to set us up.

    11. Senior Member dunhamjr's Avatar
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      07-12-2012 06:30 PM #61
      you mentioned being sucked dry with one house you couldnt afford and that needs repairs.

      do NOT buy a second house.

      having a 2nd house as a rental out is fine. i actually do it. and have done so for coming on 5 yrs in october.

      but when you are without a renter. you are without a mortgage payment that you then have to pull out yer ass somehow.

      but my income allows for this.

      your income doesnt seem sufficient to even service your current debt while allowing you to maintain a single property... much less service the mortgages on TWO houses and to maintain TWO houses.

      what would you do if in the same year your renters leave in the middle of the night in winter.
      and then the house does not rent out for 4 months... leaving you a $1200/mo mortgage to pay.
      then you need to replace the garage door opener for $350.
      service the fireplaces for $300.
      and service the septic system for $900.

      ^^^ that all happened to me in one 12 month stretch.

      basically OUT $6350 in a single year.

      could you REALLY afford that? ...all while not getting behind on a single one of your own debt obligations for your own primary residence?

      if so, then you shouldnt be considering a foreclosure or shortsale on your primary house.

      but my guess is that losing out on that $6k would HURT for a while.
      Last edited by dunhamjr; 07-12-2012 at 06:35 PM.
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    12. 07-12-2012 07:02 PM #62
      My situation isn't so much that I can't keep up with my current house, it's that every time I put money into it I feel like I'm throwing it away. I could make some moves and do the complete roof this summer, but I dont want to do that considering my negative equity and the sacrifices I'd have to do it.. But I do understand what your saying, things would go great as long as I had a renter and issues didn't come up in either houses. I was just thinking that any extra income I could get from a rental would actually help in my ability to do maintenance.

    13. Member blue70beetle's Avatar
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      07-12-2012 08:22 PM #63
      Quote Originally Posted by mr sarcastic View Post
      looking back there were so many red flags about my agent. she was so itchy to make the sale, we put together the offer on this house on a sunday morning. "by monday they'll have 2-3 offers on the table and you'll lose out." and the inspector was a close friend of hers, obviously he wasnt gonna fail the house and loose her the sale.
      My wife regularly advises buyers that if they decide they want a house, they have to move quickly. It's not because she's shady; it's because she's had a ton of buyers miss out because they dragged their feet. There really is a certain sense of urgency if the market is moving quickly, and in our town, the market has been doing just that for quite a while (she closed on almost 1MM in December, of all times, and the typical home here sells for $125-145k).

      That's not to say your agent wasn't being shady; she shouldn't only be recommending a close friend for services related to the sale. To clarify, there's nothing inherently wrong with recommending someone who happens to be a good friend, but she should give you a list of a few people she recommends and are trustworthy.

      My wife generally recommends the same three or so inspectors who are trustworthy and reputable to any of her buyers who ask. We actually used to hang out with one of them quite a bit, but he has also worked for a construction company for years (currently as a project manager) and is highly competent. It's in her best long-term interest to recommend someone good, because it's a reflection on her, particularly if they're terrible and can't find obvious problems.

      Likewise, for lenders she will recommend the same 3-4 to everyone, but she knows which lenders can complete the transaction without drama and won't recommend anyone who can't.

      I obviously have a clear bias, but there's a right way and there are wrong ways to do this stuff, and it's a real shame the "professionals" that you should have been able to trust failed you miserably on the front end.

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      07-12-2012 08:43 PM #64
      Quote Originally Posted by mr sarcastic View Post
      My situation isn't so much that I can't keep up with my current house, it's that every time I put money into it I feel like I'm throwing it away. I could make some moves and do the complete roof this summer, but I dont want to do that considering my negative equity and the sacrifices I'd have to do it. But I do understand what your saying, things would go great as long as I had a renter and issues didn't come up in either houses. I was just thinking that any extra income I could get from a rental would actually help in my ability to do maintenance.
      Holy sh!t.

    15. 07-12-2012 09:27 PM #65
      Nothing wrong with coming up with ideas on a long term plan to get myself out of this. If I can get this property in good shape in the next couple years, but the market isn't gonna give me what I owe on it...... Might as well rent it and take advantage of the low prices and buy the house i want. I'll just have to bite the bullet and not think about putting money into a house that I have this much negative equity in. At this point I'm open to any strategy that gives me something to shoot for. It ain't fun working on a house, making sacrifices, putting money into it as you watch the value drop. I don't think it's something you can understand till you do it for a few years.

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      07-12-2012 09:31 PM #66
      Quote Originally Posted by mr sarcastic View Post
      My situation isn't so much that I can't keep up with my current house, it's that every time I put money into it I feel like I'm throwing it away. I could make some moves and do the complete roof this summer, but I dont want to do that considering my negative equity and the sacrifices I'd have to do it.. But I do understand what your saying, things would go great as long as I had a renter and issues didn't come up in either houses. I was just thinking that any extra income I could get from a rental would actually help in my ability to do maintenance.
      I understand why you might say that but you are lying to yourself. You did mention above not even being able to save money or afford to maintain this house. That means you cannot afford it, even if you are current with the mortgage.

      You cannot go into this assuming rental income or amount is guaranteed. You will have unforeseen expenses. You will have times the house will not have renters.
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    17. Member blue70beetle's Avatar
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      07-12-2012 11:08 PM #67
      When we moved for a job change about ten years ago, we listed our house (120 miles from where we live now), had tons of showings, but no offers. That lasted a year, until we said we absolutely must rent it, to cover the mortgage. We did, for just enough to cover it, and the tenants were awesome. Paid on time, kept it better than we did - couldn't ask for more.

      Then they bought a house, and our next tenant wouldn't pay on time and ended up moving his GF and her kids in, in violation of the occupancy terms of the lease. We were in the process of evicting him for both of these when her ex showed up at their front door with a shotgun. I understand he only discharged it in the house once, and they fixed the damage and I found out from someone else that it had even happened.

      You never know what you're going to get when you rent it out. Might be great, might be terrible!

      That's the house that took $10k in cash from us to close (on a $100k house), and we sold it in better shape than we bought it. The market took a turn, and we got screwed.

    18. 07-13-2012 06:23 AM #68
      Quote Originally Posted by blue70beetle View Post

      That's the house that took $10k in cash from us to close (on a $100k house), and we sold it in better shape than we bought it. The market took a turn, and we got screwed.
      .
      This seems like the most likely end of this ordeal for me. That's gonna be a tough pill to swallow.... Over the past few years i've gotten into buying and selling cars, wheels, parting out cars, ect. in order to maintain my car hobby and work on the house. I'm pretty hard on myself when I take a loss, I'll be pretty depressed if I need to take one on this scale.

      As for my thinking about renting it, its not something I could even think about doing for 2 years. Essentially I'm just trying to figure out a way to get some or any of my investment back. I know it's unlikely considering how upside down I am, and the condition of the market. Simply put, if I can get myself into a position to leave this house, would it be smarter for me cut a check for the loss or try renting? Survey says, cut the check.....

    19. Member GeoffD's Avatar
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      07-13-2012 07:17 AM #69
      Quote Originally Posted by dunhamjr View Post
      the is old. cause throughout my potential 'home buying years' i never heard numbers as low as either 28 or 33 percent.
      Actually, 28% has always been the number other than when the Federal government screwed with it and caused today's economic mess.

      If you walk into a bank today and apply for a conventional loan, the numbers are 28/36%. FHA loans are 29%/41%.

      Back in the 1980's, the debt to income ratio for first time home buyers doing 5% down and PMI was 28% housing+taxes+insurance/33% total debt. You basically had to zero out any credit card debt and you couldn't have an expensive car loan.

      With those criteria, default rates have always been quite low. After a decade of total insanity, we're right back to where we started.

      If you want some links to support those numbers, here are the first two on Google:
      http://www.bankrate.com/finance/mort...ou-buy--1.aspx

      https://www.wellsfargo.com/credit_ce...nders_consider

    20. 07-13-2012 08:46 AM #70
      Quote Originally Posted by GeoffD View Post
      when the Federal government screwed with it and caused today's economic mess.
      Don't you mean "when the government stopped screwing with it", aka deregulated it.
      http://prospect.org/article/whats-be...prime-disaster

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      07-13-2012 09:39 AM #71
      Quote Originally Posted by mr sarcastic View Post
      Don't you mean "when the government stopped screwing with it", aka deregulated it.
      http://prospect.org/article/whats-be...prime-disaster
      No. I mean precisely what I said. The Federal government intervened in the mortgage markets and completely changed lending criteria. It used to be 28%/36%, history of steady employment, employment verification, income verification, and a clean credit report.

      The banks didn't care. They were just acting as mortgage brokers and all that paper was sold off as safe, government backed, mortgage backed securities to pension funds and 401-K funds investing in "safe" government backed paper. This was not deregulation. It was the government telling quasi-government organizations Fannie Mae and Freddie Mac to relax lending criteria. It's not "deregulation" when the Federal government is setting the terms and backing the securities.

      If you hadn't been allowed to borrow more than 28% of your gross income in mortgage/taxes/insurance, you wouldn't have the problem you have today, would you? There wouldn't have been a housing bubble. You would have paid far less for a house you could have afforded.

    22. Senior Member dunhamjr's Avatar
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      07-13-2012 10:53 AM #72
      Quote Originally Posted by GeoffD View Post
      Actually, 28% has always been the number other than when the Federal government screwed with it and caused today's economic mess.

      If you walk into a bank today and apply for a conventional loan, the numbers are 28/36%. FHA loans are 29%/41%.

      Back in the 1980's, the debt to income ratio for first time home buyers doing 5% down and PMI was 28% housing+taxes+insurance/33% total debt. You basically had to zero out any credit card debt and you couldn't have an expensive car loan.

      With those criteria, default rates have always been quite low. After a decade of total insanity, we're right back to where we started.

      If you want some links to support those numbers, here are the first two on Google:
      http://www.bankrate.com/finance/mort...ou-buy--1.aspx

      https://www.wellsfargo.com/credit_ce...nders_consider
      i am fine with those number having been what was quoted in the 80's and early 90's even. but for 20 years anyone in the RE industry i have talked to, overheard, or read about were talking 40%.

      good or bad, that is the number a lot of people were working from based on info from people in the industry that we all had thought had our interests in mind when offering these suggestions.
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    23. Member GeoffD's Avatar
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      07-13-2012 01:05 PM #73
      Quote Originally Posted by dunhamjr View Post
      i am fine with those number having been what was quoted in the 80's and early 90's even. but for 20 years anyone in the RE industry i have talked to, overheard, or read about were talking 40%.

      good or bad, that is the number a lot of people were working from based on info from people in the industry that we all had thought had our interests in mind when offering these suggestions.
      I presume you couldn't be bothered to click on the two links I provided. One is the lending guidelines at Welles Fargo. 28%. The other is the goto website for interest & mortgage rates... bankrate.com. They also say 28%.

      Sub-prime lending is over. Nobody is going to write a loan where it puts 40% of your gross income into mortgage + interest + taxes.

    24. Senior Member dunhamjr's Avatar
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      07-13-2012 01:11 PM #74
      Quote Originally Posted by GeoffD View Post
      I presume you couldn't be bothered to click on the two links I provided. One is the lending guidelines at Welles Fargo. 28%. The other is the goto website for interest & mortgage rates... bankrate.com. They also say 28%.

      Sub-prime lending is over. Nobody is going to write a loan where it puts 40% of your gross income into mortgage + interest + taxes.
      no i didnt. BUT the very first thing i did was agree with you, so i assumed it wasnt needed to then go double check your numbers.

      also.

      the current lending practices are very different from what happened over the past 5-10 yrs, which put the RE market into the condition it is now... and therefore put the buyers in that time frame in the 'less than optimal' to 'dire straight' conditions that many found themselves in.

      your statement that 'Nobody is going to write a loan where it puts 40% of your gross income into mortgage + interest + taxes' may be valid today. but 5-10 years ago that is just not the case.

      so YES. sub prime is over. but that doesnt correct 10 yrs of subprime happen in the past. this thread isnt about whether or not subprime still exists.

      its about what to do when you got snookered by subprime and you need to dig your way out.
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      07-13-2012 02:03 PM #75
      Quote Originally Posted by GeoffD View Post
      Probably that you were gonna get rich because housing prices always go up?
      you're thinking of the sophisticated computer models used by fitch and S&P to rate CDO's.

      OP - whatever decision you make, don't for a second think it has anything to do with personal morality or someone else's antiquated idea of ethics.
      you think the mortgage banks are ethical?

      finance rigged the system, tanked the market & then got bailed out by the taxpayer when it all blew up - you don't owe the banks a goddamn thing. just make the best long term decision for you & yr family. good luck.

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