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After consulting some friends in the market and an attorney, the decision has been made to walk away from my mortgage and let the company foreclose. We are approximately $100k in the hole on a $250k house. If it was $10k-$25k in the hole, that's one thing, the credit score is worth saving. But my credit score is not worth $100k to me. Attorney has advised staying in the house, saving up $, then prepare to be foreclosed on in as little as 3 months. Could be 3, could be 30 -- always a crapshoot with the banks. I am in a recourse state, so the bank can come after me for a judgment afterwards. Even still, walking is the smart decision, and here is why.

Much of the loss of valuation comes from foundation damage on the house that our home inspector failed to catch. We brought out a guy to check the foundation a couple months ago as we suspected problems, and he stated that the inspector we had was either incompetent or just ok'ing houses for his realtor to move them through, the foundation damage had been patched over to give the appearance of it being fixed, but it wasn't.

Before we found out the foundation damage, I had tried on 3 different times to refinance my 5/1 ARM into a fixed rate loan with Bank of America. They wouldn't talk to me. My loans aren't backed by Freddie or Fannie, so no government programs are going to help.

After considering all the options, we've decided to move where the job market is better for my line of work (75-100% raise), schools are better, etc. I'm sure I'll get the 'pay your bills, deadbeat!' comments, but I don't care -- my goal has to be doing what is best for my family. And staying in this damaged house with a mortgage that is basically a time-bomb is not a sound financial decision. Buying the house in the first place wasn't one, my fault for not seeing through the veil of "you must buy now!" and everyone in my family basically telling me renting is throwing money away, when you get married you need to buy a house and settle down, etc. We had planned on moving in 5 years (when the ARM was up) -- wasn't banking on any sort of financial gain from the house, but it seemed logical to build equity. Oops.

So, for the sake of contributing to the board and others who may be weighing this decision, I'll detail what I've gone through and provide updates.

2/1/11 - Missed first payment, technically due late on the 15th. Credit score via credit karma is 740.
2/15/11 - No notices or anything from bank.
3/1/11 - Notice from bank informing us of our upcoming ARM reset. Credit score 756.
3/5/11 - Notice from bank that our escrow payment is increasing $120 a month due to property value assessment raised (wtf) and homeowner's insurance increase.
3/8/11 - Credit score 762. No phone calls from bank as of yet.
3/13/11 - Credit score 690.
3/?/11 - Notice of intent to accelerate.
~4/1/11 - New job secured, 85% pay raise. Looking for places to rent.
4/5/11 - Credit score 713.
4/19/11 - Rental application approved. Starting the new job in a week. Nothing else new on the bank front yet. Still not a single phone call.
5/7/11 - Credit score 700. Still no phone calls from the bank.
5/26/11 - Nothing really new to report. Still packing up the place. Credit score is still 700.
6/1/11 - Moved into new place.
6/1/11-6/9/11 - Applied for store credit card, approved. Other credit card limit slashed 85%.
6/9/11-6/15/11 - Other credit card limits proceed to get cut. No closures yet though.
7/23/11 - some more credit lines slashed. 3rd party debt collectors/'we want to help you stay in your house' companies begin contacting me, but i'm not even sure they are from BoA. May be just vultures. They purposely make it hard to tell. STILL no phone calls from the bank!
7/29/11 - BOA finally enters the picture, calling about loan re-mods, etc. not interested for obvious reasons.
12/27/11 - Letter from Recontrust arrives stating I have 30 days to validate the debt. Credit score 646.
12/29/11 - Received Notice of Default from Recontrust.
~1/7/12 - Received notice of foreclosure sale date at courthouse for end of January.
~1/?/12 - Foreclosure sale postponed (again .. probably 4-5x now)
3/25/12 - Credit Score 641
~7/20/12 - Foreclosure sale scheduled for September.
7/30/12 - Credit Score 646
9/8/12 - House bought back by bank for over a 40% loss. No bids at auction.

Member Summary
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It did for me. I was just wondering if everything got filed correctly for OP (1098 and 1099-C were received by now), an... (more)

MilleniumBuc (Feb. 07, 2014 @ 8:46a) |

Pretty sure they sent me that stuff, my mind is a bit of a blur thinking about the current tax year, but I sent all the ... (more)

walking (Feb. 07, 2014 @ 11:28a) |

OP, anything going on? Any developments? Have you been contacted by 'x'?

DarthEnol (Apr. 10, 2014 @ 8:28a) |

2/1/11 - Missed first payment, technically due late on the 15th. Credit score via credit karma is 740.
2/15/11 - No notices or anything from bank.
3/1/11 - Notice from bank informing us of our upcoming ARM reset. Credit score 756.
3/5/11 - Notice from bank that our escrow payment is increasing $120 a month due to property value assessment raised (wtf) and homeowner's insurance increase.
3/8/11 - Credit score 762. No phone calls from bank as of yet.
3/13/11 - Credit score 690.
4/1/11 - New job secured, 85% pay raise. Looking for places to rent.
4/5/11 - Credit score 713.
4/19/11 - Rental application approved. Starting the new job in a week. Nothing else new on the bank front yet. Still not a single phone call.
5/7/11 - Credit score still 700. Still no phone calls from the bank
5/26/11 - Nothing really new to report. Still packing up the place. Credit score is still 700.
6/1/11 - Moved into new place.
6/1/11-6/9/11 - Applied for store credit card, approved. Other credit card limit slashed 85%.
6/9/11-6/15/11 - Other credit card limits proceed to get cut. No closures yet though.
7/23/11 - some more credit lines slashed. 3rd party debt collectors/'we want to help you stay in your house' companies begin contacting me, but i'm not even sure they are from BoA. May be just vultures. They purposely make it hard to tell. STILL no phone calls from the bank!
7/29/11 - BOA finally enters the picture, calling about loan re-mods, etc. not interested for obvious reasons.
12/27/11 - Letter from Recontrust arrives stating I have 30 days to validate the debt. Credit score 646.
12/29/11 - Received Notice of Default from Recontrust.
~1/7/12 - Received notice of foreclosure sale date at courthouse for end of January.
~1/?/12 - Foreclosure sale postponed (again .. probably 4-5x now)
3/25/12 - Credit Score 641
~7/20/12 - Foreclosure sale scheduled for September.
7/30/12 - Credit Score 646
9/8/12 - House bought back by bank for over a 40% loss. No bids at auction.
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what city are you in?

Please do keep us updated.

I am about 100K in the hole on my house and also in a recourse state, so would be interested to see how your experience goes.

Best of luck. Its interesting that your credit score has gone up as you decided not to pay.

swissarmy said:   what city are you in?

I'd prefer not to list it out of paranoia. That's also why I made a new account for this, as my fatwallet account is easily traceable to my name.

I'm not in what would be considered a typical boom market. The town I'm in is fairly rural, and I commute to a small city for my job.

The last time I called the bank, they had the house valued around 200k, about a 50k hit from where we bought. They do not know of the foundation damage.

Wait until the end then file for bankruptcy.

darkmeridian said:   Wait until the end then file for bankruptcy.

Our attorney wants us to avoid bankruptcy due to a more severe credit hit, etc. His hypothesis is with the wave of foreclosures, a foreclosure in the 2010s is going to look vastly different on a credit report than a foreclosure 20 years ago would.

I'm still paying off the credit card balances I do have (nothing major). The house is only in my name, which will spare my wife's credit, and we shouldn't need a new car for some time, so the things I would actually be using my credit score for are lessened. There is a bit of fear in being able to rent a house, but with so many unintentional landlords out there now due to the housing market, I think we'll find something.

We have no hope of a short sale, due to BoA's rules on those. We're just too far under for them to consider it. A deed-in-lieu is a very remote possibility, but that can't be broached until we stop payments for a few months.

Do you have a job offer in the "new" city yet? You said "we" so what name(s) are on the mortgage? Do you have any concern on pre-employement credit check?

edit: didn't see the last post..

Do you have a strategy to delay the foreclosure and stay in the house longer? For example, what are you going to tell the bank once they do call? I'd bet that if you were to say that you are no longer going to make any payments, that they would foreclose faster than if you "wanted to work something out". I'd be curious to know if anyone knows the "right" things to say to delay the foreclosure.

Will you still be paying property tax? Home owner's insurance or related?

Can't you sue the home inspector? How can he miss a foundation damage?

bbr said:   Do you have a strategy to delay the foreclosure and stay in the house longer? For example, what are you going to tell the bank once they do call? I'd bet that if you were to say that you are no longer going to make any payments, that they would foreclose faster than if you "wanted to work something out". I'd be curious to know if anyone knows the "right" things to say to delay the foreclosure.

From what I've read/been advised, do not talk to the bank for the first 60 days, as all they will be doing is trying to assess your financial situation/get money out of you. Only after a couple months will they begin to discuss alternatives such as short sale, deed-in-lieu, etc. I've set up a Google Voice number so I don't get bothered during the work day, as they will call 5+ times a day in some cases.

I do not have a job offer in the new city, but I have a good network of contacts there and work is plentiful. Finding employment is less of a concern to me than finding housing is, though both are minor.

adamsmart78 said:   Can't you sue the home inspector? How can he miss a foundation damage?

According to my attorney, no. I can possibly get back the money for the botched inspection, but that's peanuts. It's not going to change the underlying situation.

I honestly don't know what else I should have done. Get a second home inspector? We were moving to a new city where we knew no one, so we trusted our realtor when he recommended a guy.

My realtor friends say that so many realtors back then would just not a call a home inspector again if they didn't pass the house. So if the home inspector wanted continual work, they aren't going to say a peep.

sfvera said:   Will you still be paying property tax? Home owner's insurance or related?

The bank, generous as they are, took care of homeowner's insurance for the full year and property tax, and sent me a bill for the deficiency in the escrow account.

We were advised to keep current on our homeowner's dues, so we have done that.

good luck to you its a tough decision but the right one in some instances. the banks have been bailed out and refuse in some cases to wrok with people and lower interest rates, so i say screw the banks

we are underwater as well but we plan to be here over the long haul. luckily we refinanced under the harp program, but that did nothing for our second note. if we factor price paid and what we have put into the home we are $120k+ underwater, maybe $45k under from current mortgage.

Remember most of the payments u have made on that home to date have been pure interest (profit) for the banks. Sometimes they don't care if you walk, they have made that off you and will try and seek additional funds via the sale and judgement against you. If the mortgage is insured they recoup everything u lose!

But life goes on save that money while u wait it out.

walking said:    My loans aren't backed by Freddie or Fannie, so no government programs are going to help.

What? this is simply incorrect
You likely had the 'FHA Short Refinance Program' available to you

My inspector was terrible too, lesson learned, never hire on based on realtor recommendation.

More detail on the foundation issue, if you could. Root cause? Price of fix?

ZenNUTS said:   My inspector was terrible too, lesson learned, never hire on based on realtor recommendation.

More detail on the foundation issue, if you could. Root cause? Price of fix?


Absolutely, in general wherever there is a conflict of interest be very very cautious.

This thread is awesome. Please continue to update it.

Most people on the boards only threaten about walking away, and we never know if they ever do or not, let alone document the process. Good job for doing your research

pietromoon said:   walking said:    My loans aren't backed by Freddie or Fannie, so no government programs are going to help.

What? this is simply incorrect
You likely had the 'FHA Short Refinance Program' available to you


You can go to the Freddie/Fannie sites to see if your mortgage is backed by them, mine isn't. I looked up that program you mentioned:

"In addition, the existing loan to be refinanced must not be an FHA-insured loan, and the refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent. Interested homeowners should contact their lenders to determine if they are eligible and whether the lender agrees the write down a portion of the unpaid principal."

So, if I'm reading that right, in theory that is available to me (the HAMP and other programs aren't). Sounds like a long shot considering how underwater I am, and there are two mortgages (80/20) on the house.

Regardless, we're looking to leave, not stay at this point. The school system in the new city, relatives nearby, and a massive raise are huge reasons to leave.

walking said:    But my credit score is not worth $100k to me.

Amen. Its just a credit score. If you plan, you will have little, fi any, need for it.

walking said:    but I don't care -- my goal has to be doing what is best for my family.

Congrats on putting what should be first.... first.

walking said:    2/1/11 - Missed first payment, technically due late on the 15th. Credit score via credit karma is 740.
2/15/11 - No notices or anything from bank.
3/1/11 - Notice from bank informing us of our upcoming ARM reset. Credit score 756.
3/5/11 - Notice from bank that our escrow payment is increasing $120 a month due to property value assessment raised (wtf) and homeowner's insurance increase.
3/8/11 - Credit score 762. No phone calls from bank as of yet.



OP, I guarantee you will be in shock at how little the bank desires to own your home. It will not be 3 months, but more like 18 before they take it over - assuming a national lender.

Are you going to put on the fascade of enrolling in some of the banks programs for modifying etc. Of course, never paying them a dime again, but just to see how long this can be stretched out.

Also. as you credit score will drop, please tell me you have a plan in place to save that mtg payment and bank as much money as possible.

Also, that foundation issue is a very important issue TO THE BANK. You may want to seriously run possible scenarios to determine whether you want to not disclose that problem in regard to the issue of will this speed up, slow down, or just halt their foreclosure process.

Also, who is the lender. Have you done research on their regular practice and procedure - including scare tactics - for a home debtor (home owner) who stops paying. Remember the internet is your friend and their are possible detailed blow by blow accounts out there with info that could help you in living rent free for while.

I HOPE the bank is a large national lender as they are less apt to forecloase as fast as some well run locals.

OP, Keep us posted. I am subscribing.

And, its just a house. Nothing more.

Can you move assets to your spouse/child name to protect it from bank ? .

Right. The realtors have told me that, the bank in no way will be eager to take over a house with foundation damage. If we wanted to stay longer, we'd easily be able to put the house on the market for a short sale. Problem is the attorney thinks there's a 0% chance the bank would take it, as a realistic offer is probably in the 100k-120k range right now. Even that may be overestimating it.

We are socking as much money in possible to a non-BOA savings account. I've heard stories of them raiding bank accounts of people behind on mortgage payments.

We'd like to move by the winter, so we probably don't want to stretch this out, even though we could. The foundation damage includes a bunch of mold on the supports.. and understandably, the wife is a little freaked out by that.

can't you sue the previous homeowners for not disclosing the damage? They obviously knew about it since they tried to cover it up.

tante said:   can't you sue the previous homeowners for not disclosing the damage? They obviously knew about it since they tried to cover it up.

That'd be a long process, and not one guaranteed to bring about any successful closure. Pretty sure that's what the attorney said, I'll need to doublecheck as I'm curious. Proving the case may be difficult, all I have is 1 foundation guy who gave us his opinion on what happened.

This is a very interesting topic. It's also well written/handled by the OP. I don't have any brilliant suggestions, but you do have my virtual moral support.

I certainly hope finding a new (and much higher paying) job, and a new home, will be as easy as you hope.

Please keep us updated.

walking said:   tante said:   can't you sue the previous homeowners for not disclosing the damage? They obviously knew about it since they tried to cover it up.

That'd be a long process, and not one guaranteed to bring about any successful closure. Pretty sure that's what the attorney said, I'll need to doublecheck as I'm curious. Proving the case may be difficult, all I have is 1 foundation guy who gave us his opinion on what happened.


OP

You aren't thinking like a bank.

You don't sue to win, you file a suit pro se, of course, as another delay tactic to get more free months in the home saving money for your next move. Your argument could be you have recourse against the buyer for nondisclosure, but the bank would not. Further, wouldn't the bank just hate it if it the hundreds of thousand of dollars in foundation damage to your house became public record. Don't rule anything out. But, I am guessing, this may be above your risk tolerance. This is all about saving money every month.

One more thing-

Start applying for all the CC deals you can! You won't be able to apply in a few months.

Good point patch. If we weren't looking to move by this winter, we'd certainly have an array of time stalling techniques at hand due to the situation.

Our plans could change, but the wife really wants to be gone by winter at the latest. I have to also factor in how much money I'm losing by staying at my current job where I'm making a lot less than what I would be elsewhere.

Another reason for the move is my current company, one of the few that employs people here with my skillset, is likely going to be laying people off soon. I should be safe, but it's certainly another factor -- moving to a city where there are more employment opportunities.

Have you thought of renting out the home? Whats the difference between the market rent and mortgage? Even if you still go through with the forclosure..and even if you leave physically by Dec you could collect rent on the place while the proceeding were going on.


What are the estimates to fix the foundation work? What was the root cause? What are the symptoms? Did you get a 2nd opinion?

walking said:    Finding employment is less of a concern to me than finding housing is, though both are minor.

I hope your are correct, but what if you are not?
I don't consider either one minor.

walking said:   We are socking as much money in possible to a non-BOA savings account. I've heard stories of them raiding bank accounts of people behind on mortgage payments.


What about holding on to your money as cash or in someone elses name? Im not sure Id want it to show on any records if it were me. I would probably give it to my parents to hold in a seperate account. They would be able to gift it back to me tax free up to $24k per year when I would need it back.

Oh and stick it to BOA as much as possible

walking said:   
We'd like to move by the winter, so we probably don't want to stretch this out, even though we could. The foundation damage includes a bunch of mold on the supports.. and understandably, the wife is a little freaked out by that.


Spray the mold with bleach. Use one of those yard sprayers (you can one for pretty cheap) spray all visible mold with bleach straight from the bottle (no further dilution). After you spray, setup a fan ($10 box fan) in the vicinity to promote airflow.

Your primary concern is to minimize the impact to your Family's health (but it may also be possible to eliminate the mold altogether).

Shore up the supports then. I wonder how many Harbor Freight jack stands to hold up a house...

arsguide said:   Have you thought of renting out the home? Whats the difference between the market rent and mortgage? Even if you still go through with the forclosure..and even if you leave physically by Dec you could collect rent on the place while the proceeding were going on.


What are the estimates to fix the foundation work? What was the root cause? What are the symptoms? Did you get a 2nd opinion?


We looked into renting, the rates aren't great. I'd also have to pay at least 10% into a management company to run the place. I am far from a handyman. The difference is about $600 a month short.. and I'm renting a place with known foundation damage. I don't know if I can even do that in the first place. Either way, the ARM timebomb is still there as well.

The estimates to fix the foundation work are 12k for the crawlspace/jacking the house back up, but that doesn't solve all the other problems that's already been done to the house. Floors sloping in areas, cracks in the driveway/drywall, etc. Our appliances are a bit dated, and we need a new sliding patio door (approx 3-5k since our door opening is a non-standard size). The house needs a fair amount of work aside from the foundation to get it into a sellable condition.

Symptoms (this is a guess) is the way the rainwater flows towards the house, we're on some pretty soft land. We've dug some little trenches to divert water away from the house, ran the water from the downspout gutters further away from the house -- we did this a few years ago, not long after we moved in, after we got a couple bad rainstorms and saw what was happening. Unfortunately the damage to the house had largely already been done, so our efforts really didn't do much of anything, though I guess it probably slowed down the damage. I have not got a 2nd opinion on it, but it's clear enough to me there's foundation damage from all the symptoms listed above, doors not shutting properly, sloping floors, etc..

woowoo2 said:   walking said:    Finding employment is less of a concern to me than finding housing is, though both are minor.

I hope your are correct, but what if you are not?
I don't consider either one minor.


We'll have both lined up before we move. If I'm wrong, we can drag out the foreclosure process to buy me more time to find something.

Grue237 said:   walking said:   We are socking as much money in possible to a non-BOA savings account. I've heard stories of them raiding bank accounts of people behind on mortgage payments.


What about holding on to your money as cash or in someone elses name? Im not sure Id want it to show on any records if it were me. I would probably give it to my parents to hold in a seperate account. They would be able to gift it back to me tax free up to $24k per year when I would need it back.

Oh and stick it to BOA as much as possible


I've told my wife to put the money into her savings account. Since she's not on the mortgage, we should be in the clear.

Who said getting married was a bad financial decision?

gatzdon said:   walking said:   
We'd like to move by the winter, so we probably don't want to stretch this out, even though we could. The foundation damage includes a bunch of mold on the supports.. and understandably, the wife is a little freaked out by that.


Spray the mold with bleach. Use one of those yard sprayers (you can one for pretty cheap) spray all visible mold with bleach straight from the bottle (no further dilution). After you spray, setup a fan ($10 box fan) in the vicinity to promote airflow.

Your primary concern is to minimize the impact to your Family's health (but it may also be possible to eliminate the mold altogether).


Thanks! I'll get to that ASAP.

Have you looked into donating the house to your local fire department?

Seriously though, OP, you mention a possible 100% raise, but nothing about the cost of living increase in the new city. Are you planning to buy or rent in the new city?

I'd start looking at securing a new job, moving to the new city, and leaving this mess behind as soon as possible. There's no need to delay what you're planning to do, unless you have stock options vesting at your current place of employment or something similar in the coming months. Your stress levels are going to elevate as this progresses. If the bank moves quickly, you'll potentially have to move once somewhere locally, then find an out of town job, then move again. Securing a job is tough enough, with everything else going on in the background it'll be a challenge to keep your sanity.

Once you leave try and rent the house as others have mentioned. Or donate it.

The uncertainty has to be killing you right now, and it's time to move on with your life. Oh and mitigate that mold!!

Skipping 803 Messages...
OP, anything going on? Any developments? Have you been contacted by 'x'?



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