patrick.net

what do your Real-Estate-Agent and Mortgage-Broker say?

www.YouWalkAway.com

I guess the answers to your questions can be answered by yourself.

First of all, will you be able to afford the payments? If not, what can Wells Fargo do to help you to be able to afford it? If it's unrealistic, then you cannot keep the home.

If you can afford it, do you want to keep this house? If the answer is no, then seek advice on the best approach whether it be to squat, deed in lieu of foreclosure, or short sale.

Keep in mind your credit will be wrecked after any of this.

any additional mortgages/HELOCs taken after the first, original mortgage are not covered by that protection.
He bought in 2006, so it looks like the 5 Year HELOC was recorded at the same time as the first. IANAL, but even odds he can just walk on the whole thing.
Could you give us a general idea idea of the neighborhood (Rockridge, Temescal, Montclair, etc...)?

If you have to pay back the heloc, and they go after you couldn't you rent more cheaply than paying the mortgage?

The gorilla protest way: Bury your money in a fire proof box. If the garnishment of your wages is less than the payment on the heloc or if the garnishment would be way less than overpaying on your mortgage plus the heloc, you could walk away and be better off.

Disclaimer: this is not legal or financial advice. And if you need your credit score to find another place move to Reno where they don't care what your credit score is, and commute. :)

Shrekgrinch is correct about the HELOC being the issue.

Any chance you can rent the place out for close to the cost of the mortgage and HELOC, extend the length of the HELOC while you rent something less expensive yourself, and then pay the HELOC off? Then you can walk away from the first mortgage if things dont improve by then.

You would have a place to live while the market stabilizes over the next 3-4 years.

Yeah. The HELOC was a piggyback at the time of purchase. I'm pretty sure I could rent a house for less than I'm paying (maybe $4200 + Taxes + insurance--with Prop 8/Decline in Value it's gone down but is still at 8K or so).

The neighborhood is Upper Dimond/Lincoln Heights, just below the Montclair Village and Mormon Temple--nice area, but with the economy the way it is I don't see it becoming a Rockridge any time soon)

I might be able to rent out the place, but with the 7 year Jumbo due in 2 years, what will likely happen then?

Would a Real Estate Attorney be the place to go to weigh my options and their repercussions?

We can pay it, but not sure I want to. It's out first house, and the wife is okay if we need to walk. I'd predict that by renting and wage increases I'd have a few hundred thousand in a few years. That, plus our income would make us ideal house purchasers if not for the black mark a foreclosure would cause. But I can't imagine any smart lender will use that in the future since there will be so many like us, and they'll need to move inventory. (Plus, aren't I a smarter capitalist by walking away?) :)

Let me know your opinions/thoughts, and any questions I can answer to clarify.

Thanks!

CL says

Yeah. The HELOC was a piggyback at the time of purchase. I’m pretty sure I could rent a house for less than I’m paying (maybe $4200 + Taxes + insurance–with Prop 8/Decline in Value it’s gone down but is still at 8K or so).
The neighborhood is Upper Dimond/Lincoln Heights, just below the Montclair Village and Mormon Temple–nice area, but with the economy the way it is I don’t see it becoming a Rockridge any time soon)
I might be able to rent out the place, but with the 7 year Jumbo due in 2 years, what will likely happen then?
Would a Real Estate Attorney be the place to go to weigh my options and their repercussions?
We can pay it, but not sure I want to. It’s out first house, and the wife is okay if we need to walk. I’d predict that by renting and wage increases I’d have a few hundred thousand in a few years. That, plus our income would make us ideal house purchasers if not for the black mark a foreclosure would cause. But I can’t imagine any smart lender will use that in the future since there will be so many like us, and they’ll need to move inventory. (Plus, aren’t I a smarter capitalist by walking away?)
Let me know your opinions/thoughts, and any questions I can answer to clarify.
Thanks!

I would think that a smart lender would tend to avoid loaning money to someone who defaulted on a prior loan. That would indicate a high risk of default.

CL says

Would a Real Estate Attorney be the place to go to weigh my options and their repercussions?

Yes, with the emphasis on REAL ESTATE attorney. Generally speaking, lenders are not interested in short sales until you are delinquent. Assuming (based on your post) you are current on your payments, that won't work. Same with deed in lieu of foreclosure. If you are current, the lender will always be unresponsive as you state Wells is. Unfortunately, the only thing that seems to get their attention is when you are delinquent. Being that you are underwater by $200K, it is probably safe to say Wells won't be interested in any loan modification, but you might try. Typically, lenders are taking a long time foreclosing and forcing an eviction due to the high volume of foreclosures, so it's conceivable you could stay rent free for a considerable amount of time. Unfortunately, there is no easy way out for you and the millions of others that are in a similar situation.

If you lose the home, unless something changes in the future, you won't be mortgaging a purchase for at least 2 years. If you can put away enough to pay cash for your next purchase, you won't ever have to deal with the rip-off of financing your primary residence again.

if you plan to rent you might want to do it before non payment of mortgage starts effecting your credit.

That's the only downside to living rent free for 1-2 years.

You might want to rent out your house. Go find a rental somewhere. Then you can decide whether to stop paying. You can stop paying while you're still collecting rent from your tenant.

I know that's a shitty thing to do to your tenants but since morality is being thrown out the window it's the probably the best thing for you financially.

by the way if you do walk away and rent it will probably have to be an apartment. Renting from private owner is risky you could find yourself
on the street with bad credit looking for rental and that's the last thing you want.

If it were me since your're only 200k underwater and bank is willing to extend? I would try to keep the house since you can afford it, there's a lot less headaches involved.
With the walk away option by the time you're able to buy again prices could be back to what you paid in 2006.

I think you should get another job or two, same for your wife, and pay your bills, deadbeats.

Stop paying, live rent free as long as you can, get a rental (drop 1 year cash into escrow and no landlord will care about your credit rating), and save up your next house.

I know that’s a shitty thing to do to your tenants but since morality is being thrown out the window it’s the probably the best thing for you financially.
Morality is not being thrown out the window. Mortgages (in California) come with an implied put -- which he is exercising.
I do agree that renting the place out with the intent to go into foreclosure would be ethically deficient, though.

sfbubblebuyer says

Stop paying, live rent free as long as you can, get a rental (drop 1 year cash into escrow and no landlord will care about your credit rating), and save up your next house.

second thatEBGuy says

I know that’s a shitty thing to do to your tenants but since morality is being thrown out the window it’s the probably the best thing for you financially.
Morality is not being thrown out the window. Mortgages (in California) come with an implied put — which he is exercising.
I do agree that renting the place out with the intent to go into foreclosure would be ethically deficient, though.

Dont forget that there are some situations that this would actually work out.
I belive in full discloser to tenant, and a rent reduction or flexiblity n lease terms ( first month free, 20 percent of going rent.)

example
I'd love to relocate to Oakland, and since I know this forcloser game I would be comfortable riding this out with an owner. if he could work with me a little.

I think together a tenant and "owner" could really work it.

roberto said: No ethical problem at all!
Well, for one, you may run afoul of the PROTECTING TENANTS AT FORECLOSURE ACT (PDF Alert!). Specifically Section 702(b)(3):
the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property. IANAL, so I leave it up to you to decide what is substantial.

zzyzzx says

I think you should get another job or two, same for your wife, and pay your bills, deadbeats.

lol.

CL says

Plus, aren’t I a smarter capitalist by walking away?)

your IQ hasn't changed since you made your last "smart" decision of overpaying $200k for your house.

i wouldn't feel so smug if i were you.

Who's smug? The masters of the universe exercise their rights under contract law all the time, and even if buying my first house was a bad decision (if I had all of the facts about how duplicitous the banks et al were, I would not have committed the crime of buying a house) that doesn't change the decision's impact in front of me.

A bad decision does not necessitate a 2nd bad decision (continuing to pay) any more than making a good decision erases that. They are not mutually exclusive.

My point was that they won't be able to keep well-paid house-seekers out of the market if they ever want a healthy economy again.

CL says

Who’s smug? The masters of the universe exercise their rights under contract law all the time, and even if buying my first house was a bad decision (if I had all of the facts about how duplicitous the banks et al were, I would not have committed the crime of buying a house) that doesn’t change the decision’s impact in front of me.
A bad decision does not necessitate a 2nd bad decision (continuing to pay) any more than making a good decision erases that. They are not mutually exclusive.
My point was that they won’t be able to keep well-paid house-seekers out of the market if they ever want a healthy economy again.

..well then the smartest decision would be to walk away. Let the bank live up to the contract.

CL says

Who’s smug? The masters of the universe exercise their rights under contract law all the time, and even if buying my first house was a bad decision (if I had all of the facts about how duplicitous the banks et al were, I would not have committed the crime of buying a house) that doesn’t change the decision’s impact in front of me.
A bad decision does not necessitate a 2nd bad decision (continuing to pay) any more than making a good decision erases that. They are not mutually exclusive.
My point was that they won’t be able to keep well-paid house-seekers out of the market if they ever want a healthy economy again.

You will be able to repair your credit over time and may even be able to get a loan before your credit is completely repaired. I wouldn't be surprised though if you are punished by future lenders for the walk away. You may not get the best interest rates, for example. Then again maybe they won't care. I suspect loan standards will get tougher and from what I have seen already have. Worst case though you clear up your credit and move on. Like others suggested you can always rent for a while.

sfbubblebuyer says

Stop paying, live rent free as long as you can, get a rental (drop 1 year cash into escrow and no landlord will care about your credit rating), and save up your next house.

as a landlord I can tell you that I would care about his credit. Why would I rent to a deadbeat with no rental history? I'd be just opening myself up to problems.

I think that the banks, once lending becomes really fluid again, won't care much about foreclosures. Too big of a slice of their customer base would be excluded. They'll rationalize it with "Well, it was a different time back then, and everybody was doing it". There will be too much money to be had.

CL says

Would a Real Estate Attorney be the place to go to weigh my options and their repercussions?

No, RE Attorney handle the sales contract at inception of the sale, and not the financing of purchases. Other lenders is your best options here, or a Financial Planner who specializes in RE financing.

CL says

A bad decision does not necessitate a 2nd bad decision (continuing to pay) any more than making a good decision erases that. They are not mutually exclusive.

This thread somehow reminds me of that San Jose deadbeat lady who was using baby's health as an excuse.
If the above is his response...

zzyzzx says

I think you should get another job or two, same for your wife, and pay your bills, deadbeats.

This doesn't look like something to lol about.

toothfairy says

as a landlord I can tell you that I would care about his credit. Why would I rent to a deadbeat with no rental history? I’d be just opening myself up to problems.

toothfairy. since when you become a landlord? I remember you said you're not a landloard when you're asking about buying an SF home an year ago. So, it looks like you bought it, and you're doing well. Then you got my congratulations. And yes, I agree w/ you on above comment. If someone thinks "continue to pay is bad decision", what gurantees him not working away from the rent?

chapter 11 or 13

@CL
what is your neighborhood zip?
how is your neighborhood doing? Are there many for-sale signs? Are any of your neighbors in default?

toothfairy. since when you become a landlord? I remember you said you’re not a landloard when you’re asking about buying an SF home an year ago. So, it looks like you bought it, and you’re doing well. Then you got my congratulations. And yes, I agree w/ you on above comment. If someone thinks “continue to pay is bad decision”, what gurantees him not working away from the rent?

I'm actually not doing that well :p I'm struggling just like most people. But I always look for SF homes that work as rentals.
I've been a landlord off and on for a while now so I've seen the deadbeat renters.
the last thing I need is to have to evict some deadbeat who decides to stop paying because "it's the smart thing for them financially"

Zip is 94602. Oddly, the neighborhood did not have that many foreclosure for the first couple years of the meltdown. They started popping up, and then only innocuously. Some down the hill have gone on the market and then back off but have no residents. Some larger properties with views, etc have sold nearby, but for less than I paid in '06.

I suspect that the entire bay area may be able to delay but not avoid the worst of the crisis. Does anyone think the inner bay is going to avoid the spiral of the hinterlands?

And I don't care much if a particular landlord makes a foolish decision to not rent to me. A rational one would see the rest of my perfect credit (841 3 months ago) and know that this is not a character problem. Folks suffering with inflated views of themselves would make lousy landlords, IMO. And I do have rental history, prior to '06.

Thanks for the input, though!

ZLXR:

The HELOC was used to buy the home, so wouldn't it be treated the same as the Jumbo? Thanks for the info on Wells' recalcitrance!

I also have USAA accounts (for military and their families), and I'm pretty sure they'll not turn their backs on me.

My husband and I were in a similar situation, our home value dropped 55%!!! Whenever we called Wells Fargo, where we have both of our loans, they continued to tell us they could do nothing for us. After seeking legal and financial counsel we put our home on the market opting for a short sale... which the bank kept telling us we would not qualify for. Well we won... we don't have financial hardship, but we had a hardship letter and that's all they care about. We will owe a small fee to leave the home, but we are leaving. I'm thrilled, we were very concerned that we were going to have to foreclose. In our letter we basically outlined why we couldn't live in the home and that our only other alternative aside from a short sale would be foreclosure. I urge you to do the same. Best of luck.

I also just wanted to mention a few words about foreclosure and short sale and the difference on your credit and how you are perceived by a landlord.

Foreclosure will ruin your credit for about 5 years. It will drop significantly. A short sale will drop by about 100 points and you will be able to buy after a year or 2, unlike foreclosing where it will be about 5 to 7. If you short sale and have been up to date on your home payments your new landlord will not see any sign of short sale on your credit since it takes 2 months to process. Many landlords will not take a foreclosed home owner. We know this since we have been shopping for a place to rent and the landlords have said they have turned down several people with a foreclosure.

Hope that helps.

If the house is that far underwater, the second mortgage holder may consider a settlement. You need to talk to their Loss Mitigation department - talking to anyone else is just pissing up a rope.

I don't know about Wells but Citi has been taking 5-10% settlements on seconds as long as they see that they aren't secured by any equity. I would imagine all the big dogs are making the calculation (especially in a non-recourse state) and taking what they can get. While it might be fun to think that you can get out for $0, you DID borrow the money, sign contracts, etc...paying $10k to get out of the second might get you in a better position to short sale. Also, since you used the HELOC during the purchase it should be covered by the mortgage debt forgiveness law so the 1099 might not matter. Make sure you have a lawyer as well as an accountant that has done this before - bankruptcy attorneys are probably more familiar with these gyrations than real estate closing attorneys. The last thing you want to do is do a settlement only to find out later that it turned the rest of the debt into something unsecured.

Thanks Condohelp and Eightball! I'm meeting with a RE attorney today, so we'll see how that plays out.

and Eightball gets points with me simply for using "piss up a rope" (ever heard the Ween song?) :)

From what I've been told, both loans are in Wells' portfolio, if that makes a difference in approach.

CL says

We can pay it, but not sure I want to. It’s out first house, and the wife is okay if we need to walk. I’d predict that by renting and wage increases I’d have a few hundred thousand in a few years. That, plus our income would make us ideal house purchasers if not for the black mark a foreclosure would cause. But I can’t imagine any smart lender will use that in the future since there will be so many like us, and they’ll need to move inventory.

Strategic default makes you exactly the type of person that no bank would ever want to lend to. You lack any integrity or sense of needing to fulfill your obligations. The fact that there are other people like you (unfortunately) doesn't mean you are a prospective borrower some day, or even a preferable one. It means that our populace is rotting, and you are a prime example of it.

(Plus, aren’t I a smarter capitalist by walking away?) :)

No, you are a deadbeat.

CL says

A bad decision does not necessitate a 2nd bad decision (continuing to pay) any more than making a good decision erases that. They are not mutually exclusive.

You opted to jump into the idiot circus car and not do your homework. Life doesn't come with mulligans. Your abdication of personal responsibility is not avoiding a bad mistake or negating your first mistake. You will continue to be a deadbeat.

Your opinions mean little to me. (Although I do appreciate your comment). Explain to me how this works in your head? The system gets rigged by Wall Street goons, and the banksters.... I buy a house at inflated rates, encouraged to do so by the Government and Corporate titans, so that all involved can make their money.

Why do you suppose I and people like me should bear the burden of the sins of the country and world? I just wanted a fucking house, with reasonable appreciation and interest rates. I put money down, improved the property, have excellent credit.

Now, I don't much about YOU, but you sound like a sanctimonious anus. (And that's juts my opinion).

CL says

Explain to me how this works in your head? The system gets rigged by Wall Street goons, and the banksters…. I buy a house at inflated rates, encouraged to do so by the Government and Corporate titans, so that all involved can make their money.

Read "The Big Short" by Michael Lewis. Nobody rigged anything. It was a classic asset bubble, the origins of which are heavily debated (and blame exists everywhere, including you for participating). Everybody on Wall Street was just as clueless as the buyers that bought into the hype. However, there are millions of thoughtful people, folks who actually did their homework before making the biggest purchase of their lives, and realized that it was an unsustainable housing bubble. They made the right decision by not buying, and having to listen to the righteous scorning of those bubble-purchasers telling them they would be "priced out forever" and are "throwing money away on rent". How is it that you think you're a victim when other rational people in the same situation managed to avoid your mistakes?

Now we have those that bought into the bubble, thus making it worse, are crying foul like they are a victim, and are convincing themselves that they are in the right to stop paying. I'm not saying that walking away is a bad idea, but it is irresponsible and your tone sounds like one of complete self-abdication.

CL says

Why do you suppose I and people like me should bear the burden of the sins of the country and world? I just wanted a fucking house, with reasonable appreciation and interest rates. I put money down, improved the property, have excellent credit.

What burden? You bought at a price that was satisfactory for you, right? So what sort of undue burden are you experiencing? Prices didn't keep climbing 15% year after year? Didn't get to tap that equity like the other morons? You aren't entitled to any appreciation. If you were, you would have done five minutes worth of homework, held off buying for a few years, and be fine. It's like somebody liquidating their 401k, losing it at the casinos, and demanding it all back when they leave.

CL says

Now, I don’t much about YOU, but you sound like a sanctimonious anus. (And that’s juts my opinion).

I am sick of people whining about how life is unfair just because they don't get instant gratification and profits from their stupid bubble-buying home purchase. I know a lot of people that bought when you did, saw their house drop by considerably more, yet are doing everything they can to pay down the principal and EARN the equity they want to see. You on the other hand want money to fall from the sky. Call me sanctimonious, but I can't stand that selfish attitude. Why don't you admit that you made the biggest purchase of your life without doing any homework? Why can't you own up to your own mistake? Why do you think you are entitled to profit from a speculative purchase, but without any risk or skin in the game on your part?

of course they would. You probably should offer to put 1 year worth of rent in a escrow of some sort.

Condohelp says

I also just wanted to mention a few words about foreclosure and short sale and the difference on your credit and how you are perceived by a landlord.
Foreclosure will ruin your credit for about 5 years. It will drop significantly. A short sale will drop by about 100 points and you will be able to buy after a year or 2, unlike foreclosing where it will be about 5 to 7. If you short sale and have been up to date on your home payments your new landlord will not see any sign of short sale on your credit since it takes 2 months to process. Many landlords will not take a foreclosed home owner. We know this since we have been shopping for a place to rent and the landlords have said they have turned down several people with a foreclosure.
Hope that helps.

klarek says

Why don’t you admit that you made the biggest purchase of your life without doing any homework? Why can’t you own up to your own mistake? Why do you think you are entitled to profit from a speculative purchase, but without any risk or skin in the game on your part?

But he is owning up to his mistake. He is losing money. And his credit score is taking a hit. For each action there is a consequence and he has decided the consequences are worth taking.

That's exactly right Tatupu70. (and, fwiw, I don't mind the negativity, but nobody should expect that I won't respond from my vantage point). I've lost money, and will likely lose credit.

But to compare my home purchase to a casino has it all ass-backwards, IMO. The banks got the appraisal that miraculously equaled the loan amount, they approved the purchase, they invested too, n'est-ce pas? As co-equal partners, why is my skin the only skin in the game? Why is only my end of the contract sacrosanct?

And there's no guarantee that any of the options before me are good, only the best of several lousy ones. So, if one considers chewing off your own foot to free yourself from a trap a blessing, I can't agree.

I never said anything was unfair, or woe is me. I just need to consider all options on the table, as is my right under the contract, no?

CL says

I never said anything was unfair, or woe is me. I just need to consider all options on the table, as is my right under the contract, no?

I think you've been listening to too many ambulance-chasing lawyers. A consequence for not fulfilling one's terms of a countract is not the same thing as fulfilling the terms of the contract.