DealWinners said:DavidScubadiver said:Are you sure you are upsidedown by as much as your neighbor's house would seem to suggest? I did not think housing prices had dropped by that much anywhere. ....It depends on the area. Mine is almost the same as OP's (20% - 40% down).The house next door to me sold for $399K in 2006, the house next to it sold recently for $265K, which is exactly what we paid in mid 2004. What a clusterf#$%. Good luck, OP, and hold on for dear life - wish I had some better advice.

Here is what I would SERIOUSLY do.

Assumptions: A. You seem to be a good saver.
B. I assume you are married.

1. Do everything to keep your AND YOUR wife's credit score as high as possible. MONiTOR AND CLEAN.

1b. Make sure your wife is NOW developing some small yet quality business CCS. (I would recommend Advanta, Home Depot , Dell, etc)

2. Keep the money ($50K) in the bank. Do NOT use it to pay the 2nd down.

3. YOU (and NOT the wife) get 100K in 0% BT offers. Only the biggies (BOA CHASE CITI USBANK). Keep utilization down

3a. Use $50 K to pay off the 7.5%

3b Do not use the Citi BT (12 month 0% after 1st BT which has to be done in 12 months) and keep the rest alive and available in case of a 0% BT mistake.

4. Send that extra $600 AND ANY SAVINGS to the 0% BT CCS.

5. In 10 months PAY off all your credit cards and have wife do a SMALL BUSINESS AOR credit cards. Again, keep some cards open and available in case of error. (Tag Team AOR with a safety net)

6. In 20 months you do the BUSINESS AOR and wipe wifey's CCS clean.

RESULT: In 10/2010 you should owe $16K - 25K less on that balance - which is ALL on business credit cards. (A 25k line is a pitance for someone who could be approved for a $400K home loan) Remember you ARE NOT contributing to savings - you already have $50K in the bank.

You are not paying any of that 7.5% interest on the second loan.

Your credit should be great.

Dureing the entire process you had extra UNUSED 0% Bt offers in case of error/mistake.

You should have no problem qualifying for a new home loan in the 2010 world of foreclosures, defaults, missed and late payments. It is going to be a nightmare for sure !!!

BUT --- You will be looking pretty with spectactular credit, only a $315K home loan, a little ($25K) business credit card debt), REAL money in the bank.

You deserve Kudos for facing this reality. 10-18 months of EXTREME savings - no vacations , no eating out, bringing your lunch to work and use of 0% BT offers will save your family.

vrb747 said:Walking away (Jingle mail) is an option if you have carefully considered the negative consequences of the credit hit you would take. (jobs, financing cars, future homes, leasing apartments etc.)

In addition to the credit hit, he's also walking away from the $45K he's sunk into the house so far. Granted, there is the appearance that the $45K is already gone, but when the house starts to appreciate in value again (and it will, eventually) he'll get that $45K back plus more. If he walks away now there's no way to get that $45K back.

pringle said:Here's my situation:

- $410k home bought on 10/05
- 80/15/5 loan
  - 80% 5/1 ARM @ 5.375% [$315k remaining]
  - 15% 15yr fixed @ 7.5% [$50k remaining]
  -  5% Down payment
- The House next door has been on the market at 290k for 1 month.

OP, I don't know what to suggest since it is a tough situation, except for you to carefully look at your home price assumptions, for both the current market and 2010.

For the current market, you should check if your neighbor's house is a true comparable. Nationally the average home price had declined almost 12% in 2007. On the state level the bottom 4 states (CA, AZ, NV and FL) average 25% decline. However, the national average HPA for the last 5 years is still (annualized) positive 5-6%. The numbers you cited are at the lower end of the spectrum.

For 2010 the current expectation from economists is another 15% of price decline nationally. YOu should build some further price decline in your analysis.

NorthStar2020 said:Many people wouldn't like this but this is a perfect opportunity to walk away from the house.
You are already down 120k (410-290) and considering the 6% commissions, you are down even more...

What!? OP said that the house next door has been up for sale for 290k for just 1 month. This is the beginning of the totally irrelevant information in the story problem, intended to confuse and befuddle the math student. Obviously, the ploy worked on NorthStar. The asking price of the house next door means nothing. Maybe the house next door is 800 square feet, needs a new roof, siding, windows, wiring, plumbing, well, basement, septic, etc.

Correct advise to the OP: take a chill pill. You have no clue of the current value of your house. If you are that freaked out, call a RE agent and tell them you're considering putting your house on the market. Have them come out and do a walk-through and advise you on an asking price. Then you'll have some basis for knowing whether or not to freak out.

NorthStar2020 said:Would you agree to tuck your tail between your legs and walk away if OP says the next door house is identical to his?

Yep.

Rathipon said:michal1980 said:wow, I cannot belive theres FWF members that are actually advises someone to not pay what they owe.


what happened to the 'pay up deadbeat comments?' I know that they dont apply to the OP becuase he wants to do the right thing. But the fact that people here are actually talking about short sales, walking away, hinting at foreclosuer. etc. WOW.

I'll hope if you are giving that advice you never tell someone to 'pay your bills deadbeat'.

If OP wanted morality advice he would be at a different forum. Negotiating with lenders, short sales, and walking away are perfectly legitimate options for underwater homeowners from a financial and legal perspective.

and thats different then not paying you bills?

and since when is FWF not about morality? been here long enough? come on now, if he was trying to get away with not paying a bill, 1/2 this place would hang him... But since the market turned sour its ok now to pay less?

When the market was going up, should the lender come back and tell the homeowner, I know the loan we gave you was for 400k, but the house is now really worth 800k, and we just doubled your loan?

michal1980 said:and thats different then not paying you bills?Yes. A typical 'bill' is in exchange for services rendered. Using the service without paying for it is indeed a different matter.and since when is FWF not about morality? been here long enough? come on now, if he was trying to get away with not paying a bill, 1/2 this place would hang him... But since the market turned sour its ok now to pay less?Again, this is not a bill in exchange for some service. His monthly payments are part of an agreement he made with the bank. The rest of that agreement went along the lines of "If you do not pay, we will take your house." If the lender was not OK with the possibility of default, they wouldn't have gone ahead with the mortgage. They're not a charity, they're a business. They don't have to sell everyone a mortgage.When the market was going up, should the lender come back and tell the homeowner, I know the loan we gave you was for 400k, but the house is now really worth 800k, and we just doubled your loan?Now that just makes no sense.

michal1980 said:what happened to the 'pay up deadbeat comments?' I know that they dont apply to the OP becuase he wants to do the right thing. But the fact that people here are actually talking about short sales, walking away, hinting at foreclosuer. etc. WOW.I gotta sympathize with Michel1980 on this. FWF is riddled with "You signed a contract; take it like a man" comments on countless other threads where people suggested breaching a contract as a business decision. I tend to think the deepening financial crisis is making many of us reevaluate our morals, and crises tend to do.

FWIW, I'm firmly in the 'business decision' camp. OP should do a cold, rational analysis of his alternatives. If it makes long-term financial sense to stop paying, delay the foreclosure as long as possible so he can live rent free and walk away when he's forced to, that's precisely what he should do. He's not robbing people or cheating old ladies here after all - the big banks and mortgage companies can take care of themselves.

I find it interesting that we hold individuals to high moral standards, but since large business/corporations continually screw people over they don't get held to the same standards. I understand two wrongs don't make a right. However, if those who bring up the moral issue believe a corporation wouldn't stick it to an individual to pad their bottom line they living in a dream world.