Can't you just wait until home prices go back up? Clean out the garage - really clean it out - after all, if it's in the garage, you aren't using it, right? If you absolutely HAVE to have a bigger house, why don't you spend some money on adding on or doing some remodeling - knock out a few unnecesary walls for a newer, more open floor plan, if your have an older house like we do. Didn't you say you had 10K or 20K to put down on a new house? You could use that for remodeling. Most people don't have that kind of savings and I don't think you value just how well off you actually are.
You aren't going to be stuck there forever, unless our country's economy stays on it's course for the toilet, and then it won't matter much. Housing prices will go up again. It may take a few years, but they will.
The free money for purchasing a house is wonderful if you're in the market for one. I'm looking to buy one at the moment, I just have to have my income verified for the bank. I found out I have to get a get a (4506 t form) verification done before I can purchase but I think everything will be fine and I will be able to sign the mortgage documents soon.
one of the previous commenters said the following "With 1/4 of all homes underwater right now, banks couldn't possibly afford the loss of writing down all of those mortgages. They need you to have some skin in the game to show you're serious about defaulting."
the fact is that banks don't care if you default in the current world. a huge portion of loans are guaranteed by the FHA or Fannie/Freddie. Fannie & Freddie have what is basically a blank check from the treasury. So if you default, the banks get their money back from the guvment. if you keep paying then they don't care either.
My husband and I have decided, even after college and getting jobs, we are not ready for a house. We could save and put money down and fit the status quo. Buying a house in our families is VERY important. We just don't get why. "I'm putting my money towards the value of my house and not rent." That seems like an excuse to not rent. What is wrong with renting? I have beautiful home, all problems are fixed for me, and my out of pocket is close to zero. People get wrapped up in houses and owning in a way that I think my generation is seeing as a misconception of wealth and status. I see paying towards a mortgage like hedging bets that your property with appreciate value. With an apartment, that isn't my problem and the rent I pay get a great value and good amenities at a stable price.
I guess I hear all sides of this debate in the comments and realize how complicated and nasty buying house can be. My sister has a plumbing issue and it's on the city side but they don't want to pay her. That is stress I'd PAY to have out of my life. They owe her around $1000 and refuse to pay without proof. This is all too much to have an extra bathroom or two compared to my apartment. I'm not convinced buying a house is the best thing.
Thank you for sharing, and I harbor no judgment. I am just fortunate to learn from people's stories before finding myself in situations like yours. It made total sense to buy a house for yourself and family, didn't it? You did everything responsible and good as a buyer and credit holder? Why would things change so dramatically? It's obviously out of your hands and not your fault. Good luck with your home and remember that despite the stress this brings, you are teaching you children that life is not cut and dried. It's complicated and we all have problems. No one is perfect, even if they do everything right in their mind.
"I will save my sympathy for those who've lost their jobs in the economic crash accompanying the irresponsible and immoral speculation of houses as financial "vaporware" and who can not now pay their mortgages. They want desperately to stay and yet cannot. You are willing to walk away from your financial obligations because they are currently inconvenient to your lifestyle."
I don't understand this mentality. You sympathize only with the "poor souls" who lost their job through no fault of their own (at least according to you) and now cannot pay their mortgage, but you cannot sympathize with the people also bought at the top and are underwater by tens of thousands of dollars, just because they can currently afford their mortgage.
Why not?
That's like saying I only feel bad for the starving kids in Africa because they have no food and no shelter, whereas the impoverished children in America at least have shelter. How dare they complain!
Just because these people can afford their mortgage, at least for now, doesn't mean that they aren't hurting. I bet many of these millions of homeowners who find themselves underwater are struggling with a lot of stress, trying to balance it all while praying they don't lose their job.
And what happens when they do lose their job? Do you suddenly feel sympathy for them because now they know suffering. Just because losing your job AND your house is worse than losing a hundred grand in equity doesn't mean the the former invalidates the latter. They both suck and let's at least acknowledge that, while he is lucky, it doesn't mean he doesn't have a right to be upset.
All that I'm asking is for some consistency here. Either you care about these people or you don't. Don't try to be some judge of morality and compassion, lending your pity to one party while passing judgment on another.
Ours certainly have in the last few years. We've made several international moves. I'm looking at a career change and we're hoping to have kids. That's a lot of shifting. We're happy now that we didn't get too 'set' in planning for any one financial goal because this allows us flexibility.
Check this out............it'll give you a laugh!!! http:/www.youtube.com/watch?v=aTyY8dQtyi4&NR=1&feature=fvwp . Like something out of that movie, Deliverance. Toothless 'billies cooking up some 'shine in a confined space on a propane burner. With the foulest-looking wash you've ever seen, from an enamel bucket. Nice still, though. Just hope that's TIN soldering, and not lead.....!
I don't give gift cards anymore. We've been given cards for Christmas and a local merchant will go out of business with no recourse for the holder or giver of the card.
Gift cards force people to either buy more or less of what they want/need or leave a balance that benefits the corporation.
I will give gas gift cards because the most people purchase gasoline and will use the whole amount.
So you are angry at Citi for not letting you out of a loan agreement you made? 5 years ago banks were not going to home owners asking to modify loans because their homes were worth much more than what they bought them for.
Here's some advice I think others have already given you. Don't move and keep making payments. I pay my mortgage and pay taxes. Why do I have to support your bigger house?
If in a non-recourse state, walk away. Consider a strategic default. You've done your part. The bank has done what they can (or they claim).
Give them back the keys to the house. That's all you have to do per your mortgage agreement if you no longer want to make payments on you house. Let them deal with it.
You know, I don't really understand your problem here. You bought a house and agreed in advance to both the price and the interest rate. The house is worth whatever YOU paid for it until the point at which you sell (and transfer the worth to someone else). You're only whining about being underwater because you want to sell it. If you were willing to live in it, you'd not know or care about its market value. If you paid the mortgage off and left it to your kids, how much would it be worth then?
Houses are not financial instruments, they are investments in security, community, and lifestyle. If we haven't learned this basic lesson by now, then we are bigger fools than I feared. You own a house that you can afford to pay for! So it's a little small. Deal. Expand or get storage or quit buying so much crap.
Our house is 1076 square feet (including garage) and nice for the three of us and dog. But the family who sold it to us had 9 members living at home! Somewhere between us and them (what our generation does and what our grandparents' generation routinely did) is a large gray area where you can make due and make it work.
I will save my sympathy for those who've lost their jobs in the economic crash accompanying the irresponsible and immoral speculation of houses as financial "vaporware" and who can not now pay their mortgages. They want desperately to stay and yet cannot. You are willing to walk away from your financial obligations because they are currently inconvenient to your lifestyle.
Thank you for sharing. Your post brought up some thoughts that have been troubling me for the last year or so.
There are 2 assumptions that get you into trouble:
1. You asume that that you deserve free money and the bank is out to abuse you. You made an agreement that you signed. It included intrest payments. You are only entitled to what you agreed to. You used their money to buy a house. You agreed to pay them extra for the privelage to use their money. You can still pay your bill. I am not sure why you think they should forgive a legal debt (ie give you free money).
2. You have outgrown your house. As others have mentioned, there are options. Bunk Beds? People all over the world live in "cramped" homes. There is nothing wrong with that... be creative and enjoy living close to each other... if you have so much stuff that you can't live in your house... get ride of the stuff. Are you really using it?
These could be summed up in is a perceived assumption that "I deserve"... if you work on your wants and values, you might find that you are in a good place after all.
nordstrom has a great shoe sale from time to time. i've gotten a few pairs of prada shoes for about $100 each. they're very comfortable and well made and definitely worth $100.
I guess it is a common misperception that the BOA program and others like it are designed to reduce principal on underwater mortgages. They aren't.
The federal programs established to assist homeowners in peril, and those adopted by the banks are for just that: people in true danger of losing their homes. It is unfortunate that you find yourself in an underwater position on your mortgage, but as noted by a couple of other posters, this is a debt you CAN afford to pay. There are hundreds of thousands of homeowners in this country that (whether due to buyer or lender irresponsibility) CANNOT pay. Outside of a debate over whether the government should be helping out homeowners, you must accept that the people in the most immediate danger need to get helped first.
I am an attorney doing volunteer work assisting people with foreclosure work outs. There has been progress, but thus far it is PAINFULLY slow. People are getting trial mods, but the number of permanent modifications is only in the hundreds!
Instead of thinking of all the reasons why you deserve better treatment from your lender (and likely you do) think about how much worse it would be if you had an interest-only loan, lost your job, had a medical crisis in the family, etc. and your mortgage now represented 50% or more of your household income. Those are the people these programs are designed to help.
If you're willing to roll the dice and go into default, you will get their attention, but spend some time with the FDIC Mod in a Box program: http://www.fdic.gov/consumers/loans/loanmod/loanmodguide.html and see whether you would actually qualify for assistance. Bottom line: if your mortgage is already less than 35% of your income, you don't.
That is probably pretty standard advice since most folks are paying PMI. What does the bank care if you throw your credit under the bus, they will get their money in a few months.
"It was their lending practices that inflated the bubble and forced you to overpay for your home in the first place."
With all due respect, nobody forced you to buy a home. It was as much a choice on the borrowers part to take out the loan as it was by the lender to originate it. Both sides are "at fault" if you wanna play that game. However, I don't think it really matters much at this point in helping Paul get out of his current predicament. I do think it's important to look at for historical reasons, but playing the blame game isn't necessarily important right now.
"Your credit score is their leverage to keep you from walking away."
I think a lot of people are under this impression and it's kinda absurd if you think about it; I think putting a different angle on it may help. Most people think, "If I default, I'm going to lose that credit score that I worked so hard to attain. I can't let that happen!" But what if I told you that you could earn/save $50,000 - $100,000 if you let me lower your credit score a couple hundred points? Or better yet, what if I said that I will raise your credit score from 580 to 780 for $50,000?
Would you take that offer? Heck no you wouldn't! But that's effectively what you are doing by choosing to keep paying on an underwater house instead of stopping payment and starting to bank that mortgage payment.
The average length that a defaulted borrower gets to live in their house before foreclosure is 18 months! Yes, they get a year and a half of rent free living before they get kicked out. Take advantage of that fact and start saving your mortgage payment. That money will easily add up to tens of thousands of dollars which can be used to secure a nice place to rent after you are foreclosed upon.
And what's the price that you have to pay for this? Your credit score. How much do you have to pay? Probably several hundred points. However, if you stay current on your other bills, which should be easy with all the "extra" money, then it won't be as bad as many people think.
"I recommend against trying to lawyer up on this."
A lawyer should not cost you an arm and a leg here. Something like $500-$1,000 should be enough to get some decent legal advice. You're not going through a divorce or bankruptcy here. You just want to know what you legal options are and what the consequences would be if you exercise them. Paul said he would have to bring $20,000-$30,000 to the table if he sold, so the cost/benefit is easily there.
"Here's the follow-up problem, though. You've presumably been saving up for the down-payment on your next home. Now you can choose to spend that down-payment money to get out of your current loan, leaving no money to put down on your next. Alternately, you can try to hang on to the money and default, leaving your credit in too poor of shape to get a loan on a new home (plus, the bank will come after that money anyway). Lose-lose."
This actually angers me a little. Why? Well because you're creating a false dichotomy. There are more options, the best of which is to just freakin' rent. If rent prices are so much lower than home prices (still), then suck it up and go rent a place! This isn't rocket science, and renting is not some evil thing that only poor people do. So rent a house and save some serious cash for when your credit score is better and housing prices have come down even further. OMG, win-win! The irony is that you actually mention renting in your last paragraph but somehow can't see that option here.
"The state of the economy has paralyzed even responsible people with the inability to shed their home burdens."
The new Obama program's guidelines "encourage" lenders to cut principal, but it's not required. The new plan to let people refinance into FHA loans and cut principal also comes with a caveat that the homeowners are about to default. Unfortunately it is a bizarro world where if you honor your contracts you don't get a big hunk of debt forgiven.
Maria said:
"He purchased the homebrewer’s bible, The Complete Joy of Home Brewing (Charlie Papazian) and I bought him The Home-Brewer’s Answer Book (Ashton Lewis ), each of which retails for about $15, new."
Charlie Papazian is a God among homebrewers as his book was the big reason why many of us picked up this hobby in the the first place. That being said, "The Complete Joy..." is a woefully out-of-date book and I would recommend John Palmer's "How to Brew" for a updated treatment of the topic. Even better, an earlier version of Palmer's book is available online, free of charge!
I would also encourage you to also check out online discussion boards for some updated procedures and recipes. A lot of the ingredients mentioned in Charlie's book aren't even made anymore.
Maria said:
"Being a huge fan of DIY cost-saving items, I am anxious to sample, but am told it takes about three weeks before it is ready to drink."
I will tell you that that three weeks from brewing to drinking is way too short of a time and you may be very disappointed with the results. This would mean your beer would ferment for a week, be bottled and left to carbonate for two weeks (if I remember the time-line advocated in The Joy of Homebrewing). The resulting beer will be very "green" if you drink it at this point and could probably use further time to age (Months, preferably!). The general consensus among homebrewers these days is to leave the beer in the fermenter for three weeks, then bottle.
Patience is key, and I think many new homebrewers are turned off by how long is actually takes to make drinkable beer.
You have every right to be angry with the banks. It was their lending practices that inflated the bubble and forced you to overpay for your home in the first place. Unfortunately, I doubt you'll ever see them willing to help out someone who is on-time with their loan.
With 1/4 of all homes underwater right now, banks couldn't possibly afford the loss of writing down all of those mortgages. They need you to have some skin in the game to show you're serious about defaulting. Your credit score is their leverage to keep you from walking away. If they suddenly offered deals to borrowers in good standing, they'd have a "run on the bank" from the (many) people who are currently going to great lengths to keep current on their notes.
All of us homeowners who bought in the 2000's are in the boat with you. In this case a 20% _initial_ down-payment would have saved you from this out-of-pocket because you'd currently be around 30% equity on your original price. I recently had to sell a rental home at a 25% loss, but fortunately walked away from closing with a couple thousand dollars.
Here's the follow-up problem, though. You've presumably been saving up for the down-payment on your next home. Now you can choose to spend that down-payment money to get out of your current loan, leaving no money to put down on your next. Alternately, you can try to hang on to the money and default, leaving your credit in too poor of shape to get a loan on a new home (plus, the bank will come after that money anyway). Lose-lose. The state of the economy has paralyzed even responsible people with the inability to shed their home burdens.
I'd have to disagree with a previous poster, though. I recommend against trying to lawyer up on this. If you are really only 5% underwater then you would spend more in outrageous lawyers' fees than you would stand to gain. Sounds to me like you'll have to either put up with your home for a few more years while saving up for the next down-payment or spend your savings cushion now and save while renting.
I believe that one should get out of debt outside of credit cards as soon as possible.
Yes, car loans and student loans have the lowest interest, in most cases. I realize that.
But, if your car is paid for then it can't be repossessed, can it?
If your student loan is paid off, then you won't incur late fees and extra interest when times are hard, will you?
Getting out of debt as much as possible and as fast as possible reduces risk.
Once the car payment(s) and student loans are paid for, then you will have more money to invest in 401k's, etc.
I haven't carried any debt since paying it all off, minus the house, since December 2007. I have had two layoffs since then as a single mom. Having no debt outside of the house enabled a sense of peace.
I didn't have anyone calling me telling me my car payment was late. I had no student loans to put on deferral. Nothing of that type.
I had a years worth of the basics in my savings account. I didn't have to worry about making the mortgage payment while I hunted for and found a new job.
In this economy with such high unemployment, it would behoove most people to pay off as much debt as soon as possible and built a strong savings account.
What is owned cannot be taken away, except in very unusual circumstances.
Hang in there, according to the most recent information Colorado real estate values are stabilizing. http://www.today.colostate.edu/story.aspx?id=3452
-look for stock-gap measures
--remodeling or a rental unit seem the most pragmatic
--what about renting it out ... can that get close to paying the mortgage?
-Colorado is a hot retirement spot
--baby boomers will likely come in droves as they retire
-Colorado cities keep winning "best place to live, retire, start a business ..." awards
--the future is bright
... your home is likely to do well in the future
Can't you just wait until home prices go back up? Clean out the garage - really clean it out - after all, if it's in the garage, you aren't using it, right? If you absolutely HAVE to have a bigger house, why don't you spend some money on adding on or doing some remodeling - knock out a few unnecesary walls for a newer, more open floor plan, if your have an older house like we do. Didn't you say you had 10K or 20K to put down on a new house? You could use that for remodeling. Most people don't have that kind of savings and I don't think you value just how well off you actually are.
You aren't going to be stuck there forever, unless our country's economy stays on it's course for the toilet, and then it won't matter much. Housing prices will go up again. It may take a few years, but they will.
The free money for purchasing a house is wonderful if you're in the market for one. I'm looking to buy one at the moment, I just have to have my income verified for the bank. I found out I have to get a get a (4506 t form) verification done before I can purchase but I think everything will be fine and I will be able to sign the mortgage documents soon.
If that link doesn't work, just check it out by googling.... youtube/still making moonshine........honest-to-jasus, it'll slay you!
one of the previous commenters said the following "With 1/4 of all homes underwater right now, banks couldn't possibly afford the loss of writing down all of those mortgages. They need you to have some skin in the game to show you're serious about defaulting."
the fact is that banks don't care if you default in the current world. a huge portion of loans are guaranteed by the FHA or Fannie/Freddie. Fannie & Freddie have what is basically a blank check from the treasury. So if you default, the banks get their money back from the guvment. if you keep paying then they don't care either.
My husband and I have decided, even after college and getting jobs, we are not ready for a house. We could save and put money down and fit the status quo. Buying a house in our families is VERY important. We just don't get why. "I'm putting my money towards the value of my house and not rent." That seems like an excuse to not rent. What is wrong with renting? I have beautiful home, all problems are fixed for me, and my out of pocket is close to zero. People get wrapped up in houses and owning in a way that I think my generation is seeing as a misconception of wealth and status. I see paying towards a mortgage like hedging bets that your property with appreciate value. With an apartment, that isn't my problem and the rent I pay get a great value and good amenities at a stable price.
I guess I hear all sides of this debate in the comments and realize how complicated and nasty buying house can be. My sister has a plumbing issue and it's on the city side but they don't want to pay her. That is stress I'd PAY to have out of my life. They owe her around $1000 and refuse to pay without proof. This is all too much to have an extra bathroom or two compared to my apartment. I'm not convinced buying a house is the best thing.
Thank you for sharing, and I harbor no judgment. I am just fortunate to learn from people's stories before finding myself in situations like yours. It made total sense to buy a house for yourself and family, didn't it? You did everything responsible and good as a buyer and credit holder? Why would things change so dramatically? It's obviously out of your hands and not your fault. Good luck with your home and remember that despite the stress this brings, you are teaching you children that life is not cut and dried. It's complicated and we all have problems. No one is perfect, even if they do everything right in their mind.
"I will save my sympathy for those who've lost their jobs in the economic crash accompanying the irresponsible and immoral speculation of houses as financial "vaporware" and who can not now pay their mortgages. They want desperately to stay and yet cannot. You are willing to walk away from your financial obligations because they are currently inconvenient to your lifestyle."
I don't understand this mentality. You sympathize only with the "poor souls" who lost their job through no fault of their own (at least according to you) and now cannot pay their mortgage, but you cannot sympathize with the people also bought at the top and are underwater by tens of thousands of dollars, just because they can currently afford their mortgage.
Why not?
That's like saying I only feel bad for the starving kids in Africa because they have no food and no shelter, whereas the impoverished children in America at least have shelter. How dare they complain!
Just because these people can afford their mortgage, at least for now, doesn't mean that they aren't hurting. I bet many of these millions of homeowners who find themselves underwater are struggling with a lot of stress, trying to balance it all while praying they don't lose their job.
And what happens when they do lose their job? Do you suddenly feel sympathy for them because now they know suffering. Just because losing your job AND your house is worse than losing a hundred grand in equity doesn't mean the the former invalidates the latter. They both suck and let's at least acknowledge that, while he is lucky, it doesn't mean he doesn't have a right to be upset.
All that I'm asking is for some consistency here. Either you care about these people or you don't. Don't try to be some judge of morality and compassion, lending your pity to one party while passing judgment on another.
Ours certainly have in the last few years. We've made several international moves. I'm looking at a career change and we're hoping to have kids. That's a lot of shifting. We're happy now that we didn't get too 'set' in planning for any one financial goal because this allows us flexibility.
Check this out............it'll give you a laugh!!! http:/www.youtube.com/watch?v=aTyY8dQtyi4&NR=1&feature=fvwp . Like something out of that movie, Deliverance. Toothless 'billies cooking up some 'shine in a confined space on a propane burner. With the foulest-looking wash you've ever seen, from an enamel bucket. Nice still, though. Just hope that's TIN soldering, and not lead.....!
Really, gift cards are the biggest scam.
I don't give gift cards anymore. We've been given cards for Christmas and a local merchant will go out of business with no recourse for the holder or giver of the card.
Gift cards force people to either buy more or less of what they want/need or leave a balance that benefits the corporation.
I will give gas gift cards because the most people purchase gasoline and will use the whole amount.
So you are angry at Citi for not letting you out of a loan agreement you made? 5 years ago banks were not going to home owners asking to modify loans because their homes were worth much more than what they bought them for.
Here's some advice I think others have already given you. Don't move and keep making payments. I pay my mortgage and pay taxes. Why do I have to support your bigger house?
Another common misperception - there are very few non-recourse states, and as Paul noted in the main article, Colorado is not one of them.
If in a non-recourse state, walk away. Consider a strategic default. You've done your part. The bank has done what they can (or they claim).
Give them back the keys to the house. That's all you have to do per your mortgage agreement if you no longer want to make payments on you house. Let them deal with it.
IANAL. YMMV. But screw the banks.
Forgiven principal typically equals income to you, and the lender will likely report it as such to the IRS.
And that concludes the advice any attorney can give you.
You know, I don't really understand your problem here. You bought a house and agreed in advance to both the price and the interest rate. The house is worth whatever YOU paid for it until the point at which you sell (and transfer the worth to someone else). You're only whining about being underwater because you want to sell it. If you were willing to live in it, you'd not know or care about its market value. If you paid the mortgage off and left it to your kids, how much would it be worth then?
Houses are not financial instruments, they are investments in security, community, and lifestyle. If we haven't learned this basic lesson by now, then we are bigger fools than I feared. You own a house that you can afford to pay for! So it's a little small. Deal. Expand or get storage or quit buying so much crap.
Our house is 1076 square feet (including garage) and nice for the three of us and dog. But the family who sold it to us had 9 members living at home! Somewhere between us and them (what our generation does and what our grandparents' generation routinely did) is a large gray area where you can make due and make it work.
I will save my sympathy for those who've lost their jobs in the economic crash accompanying the irresponsible and immoral speculation of houses as financial "vaporware" and who can not now pay their mortgages. They want desperately to stay and yet cannot. You are willing to walk away from your financial obligations because they are currently inconvenient to your lifestyle.
I hope you see the difference.
Thank you for sharing. Your post brought up some thoughts that have been troubling me for the last year or so.
There are 2 assumptions that get you into trouble:
1. You asume that that you deserve free money and the bank is out to abuse you. You made an agreement that you signed. It included intrest payments. You are only entitled to what you agreed to. You used their money to buy a house. You agreed to pay them extra for the privelage to use their money. You can still pay your bill. I am not sure why you think they should forgive a legal debt (ie give you free money).
2. You have outgrown your house. As others have mentioned, there are options. Bunk Beds? People all over the world live in "cramped" homes. There is nothing wrong with that... be creative and enjoy living close to each other... if you have so much stuff that you can't live in your house... get ride of the stuff. Are you really using it?
These could be summed up in is a perceived assumption that "I deserve"... if you work on your wants and values, you might find that you are in a good place after all.
nordstrom has a great shoe sale from time to time. i've gotten a few pairs of prada shoes for about $100 each. they're very comfortable and well made and definitely worth $100.
I guess it is a common misperception that the BOA program and others like it are designed to reduce principal on underwater mortgages. They aren't.
The federal programs established to assist homeowners in peril, and those adopted by the banks are for just that: people in true danger of losing their homes. It is unfortunate that you find yourself in an underwater position on your mortgage, but as noted by a couple of other posters, this is a debt you CAN afford to pay. There are hundreds of thousands of homeowners in this country that (whether due to buyer or lender irresponsibility) CANNOT pay. Outside of a debate over whether the government should be helping out homeowners, you must accept that the people in the most immediate danger need to get helped first.
I am an attorney doing volunteer work assisting people with foreclosure work outs. There has been progress, but thus far it is PAINFULLY slow. People are getting trial mods, but the number of permanent modifications is only in the hundreds!
Instead of thinking of all the reasons why you deserve better treatment from your lender (and likely you do) think about how much worse it would be if you had an interest-only loan, lost your job, had a medical crisis in the family, etc. and your mortgage now represented 50% or more of your household income. Those are the people these programs are designed to help.
If you're willing to roll the dice and go into default, you will get their attention, but spend some time with the FDIC Mod in a Box program:
http://www.fdic.gov/consumers/loans/loanmod/loanmodguide.html and see whether you would actually qualify for assistance. Bottom line: if your mortgage is already less than 35% of your income, you don't.
That is probably pretty standard advice since most folks are paying PMI. What does the bank care if you throw your credit under the bus, they will get their money in a few months.
"It was their lending practices that inflated the bubble and forced you to overpay for your home in the first place."
With all due respect, nobody forced you to buy a home. It was as much a choice on the borrowers part to take out the loan as it was by the lender to originate it. Both sides are "at fault" if you wanna play that game. However, I don't think it really matters much at this point in helping Paul get out of his current predicament. I do think it's important to look at for historical reasons, but playing the blame game isn't necessarily important right now.
"Your credit score is their leverage to keep you from walking away."
I think a lot of people are under this impression and it's kinda absurd if you think about it; I think putting a different angle on it may help. Most people think, "If I default, I'm going to lose that credit score that I worked so hard to attain. I can't let that happen!" But what if I told you that you could earn/save $50,000 - $100,000 if you let me lower your credit score a couple hundred points? Or better yet, what if I said that I will raise your credit score from 580 to 780 for $50,000?
Would you take that offer? Heck no you wouldn't! But that's effectively what you are doing by choosing to keep paying on an underwater house instead of stopping payment and starting to bank that mortgage payment.
The average length that a defaulted borrower gets to live in their house before foreclosure is 18 months! Yes, they get a year and a half of rent free living before they get kicked out. Take advantage of that fact and start saving your mortgage payment. That money will easily add up to tens of thousands of dollars which can be used to secure a nice place to rent after you are foreclosed upon.
And what's the price that you have to pay for this? Your credit score. How much do you have to pay? Probably several hundred points. However, if you stay current on your other bills, which should be easy with all the "extra" money, then it won't be as bad as many people think.
"I recommend against trying to lawyer up on this."
A lawyer should not cost you an arm and a leg here. Something like $500-$1,000 should be enough to get some decent legal advice. You're not going through a divorce or bankruptcy here. You just want to know what you legal options are and what the consequences would be if you exercise them. Paul said he would have to bring $20,000-$30,000 to the table if he sold, so the cost/benefit is easily there.
"Here's the follow-up problem, though. You've presumably been saving up for the down-payment on your next home. Now you can choose to spend that down-payment money to get out of your current loan, leaving no money to put down on your next. Alternately, you can try to hang on to the money and default, leaving your credit in too poor of shape to get a loan on a new home (plus, the bank will come after that money anyway). Lose-lose."
This actually angers me a little. Why? Well because you're creating a false dichotomy. There are more options, the best of which is to just freakin' rent. If rent prices are so much lower than home prices (still), then suck it up and go rent a place! This isn't rocket science, and renting is not some evil thing that only poor people do. So rent a house and save some serious cash for when your credit score is better and housing prices have come down even further. OMG, win-win! The irony is that you actually mention renting in your last paragraph but somehow can't see that option here.
"The state of the economy has paralyzed even responsible people with the inability to shed their home burdens."
It's called defaulting. See above.
This is pretty common advice from mortgage lenders. they won't help until you stop paying, because they know they can get money from you. I wrote about this a while ago: http://www.wisebread.com/should-you-skip-a-mortgage-payment-to-get-a-ban...
The new Obama program's guidelines "encourage" lenders to cut principal, but it's not required. The new plan to let people refinance into FHA loans and cut principal also comes with a caveat that the homeowners are about to default. Unfortunately it is a bizarro world where if you honor your contracts you don't get a big hunk of debt forgiven.
Excellent points, esp. about car loans as having reliable transportation is essential to getting and keeping a job.
Welcome to the addiction that is homebrewing!
A couple of quick comments:
Maria said:
"He purchased the homebrewer’s bible, The Complete Joy of Home Brewing (Charlie Papazian) and I bought him The Home-Brewer’s Answer Book (Ashton Lewis ), each of which retails for about $15, new."
Charlie Papazian is a God among homebrewers as his book was the big reason why many of us picked up this hobby in the the first place. That being said, "The Complete Joy..." is a woefully out-of-date book and I would recommend John Palmer's "How to Brew" for a updated treatment of the topic. Even better, an earlier version of Palmer's book is available online, free of charge!
http://www.howtobrew.com/
I would also encourage you to also check out online discussion boards for some updated procedures and recipes. A lot of the ingredients mentioned in Charlie's book aren't even made anymore.
Maria said:
"Being a huge fan of DIY cost-saving items, I am anxious to sample, but am told it takes about three weeks before it is ready to drink."
I will tell you that that three weeks from brewing to drinking is way too short of a time and you may be very disappointed with the results. This would mean your beer would ferment for a week, be bottled and left to carbonate for two weeks (if I remember the time-line advocated in The Joy of Homebrewing). The resulting beer will be very "green" if you drink it at this point and could probably use further time to age (Months, preferably!). The general consensus among homebrewers these days is to leave the beer in the fermenter for three weeks, then bottle.
Patience is key, and I think many new homebrewers are turned off by how long is actually takes to make drinkable beer.
Good Luck!
You have every right to be angry with the banks. It was their lending practices that inflated the bubble and forced you to overpay for your home in the first place. Unfortunately, I doubt you'll ever see them willing to help out someone who is on-time with their loan.
With 1/4 of all homes underwater right now, banks couldn't possibly afford the loss of writing down all of those mortgages. They need you to have some skin in the game to show you're serious about defaulting. Your credit score is their leverage to keep you from walking away. If they suddenly offered deals to borrowers in good standing, they'd have a "run on the bank" from the (many) people who are currently going to great lengths to keep current on their notes.
All of us homeowners who bought in the 2000's are in the boat with you. In this case a 20% _initial_ down-payment would have saved you from this out-of-pocket because you'd currently be around 30% equity on your original price. I recently had to sell a rental home at a 25% loss, but fortunately walked away from closing with a couple thousand dollars.
Here's the follow-up problem, though. You've presumably been saving up for the down-payment on your next home. Now you can choose to spend that down-payment money to get out of your current loan, leaving no money to put down on your next. Alternately, you can try to hang on to the money and default, leaving your credit in too poor of shape to get a loan on a new home (plus, the bank will come after that money anyway). Lose-lose. The state of the economy has paralyzed even responsible people with the inability to shed their home burdens.
I'd have to disagree with a previous poster, though. I recommend against trying to lawyer up on this. If you are really only 5% underwater then you would spend more in outrageous lawyers' fees than you would stand to gain. Sounds to me like you'll have to either put up with your home for a few more years while saving up for the next down-payment or spend your savings cushion now and save while renting.
I believe that one should get out of debt outside of credit cards as soon as possible.
Yes, car loans and student loans have the lowest interest, in most cases. I realize that.
But, if your car is paid for then it can't be repossessed, can it?
If your student loan is paid off, then you won't incur late fees and extra interest when times are hard, will you?
Getting out of debt as much as possible and as fast as possible reduces risk.
Once the car payment(s) and student loans are paid for, then you will have more money to invest in 401k's, etc.
I haven't carried any debt since paying it all off, minus the house, since December 2007. I have had two layoffs since then as a single mom. Having no debt outside of the house enabled a sense of peace.
I didn't have anyone calling me telling me my car payment was late. I had no student loans to put on deferral. Nothing of that type.
I had a years worth of the basics in my savings account. I didn't have to worry about making the mortgage payment while I hunted for and found a new job.
In this economy with such high unemployment, it would behoove most people to pay off as much debt as soon as possible and built a strong savings account.
What is owned cannot be taken away, except in very unusual circumstances.
Hang in there, according to the most recent information Colorado real estate values are stabilizing.
http://www.today.colostate.edu/story.aspx?id=3452
-look for stock-gap measures
--remodeling or a rental unit seem the most pragmatic
--what about renting it out ... can that get close to paying the mortgage?
-Colorado is a hot retirement spot
--baby boomers will likely come in droves as they retire
-Colorado cities keep winning "best place to live, retire, start a business ..." awards
--the future is bright
... your home is likely to do well in the future