When the writing is on the wall

[jojoblevins]

My husband and I live in Arizona and purchased our first home three years ago. We put down 30k on a modest but newly constructed home because we wanted to be financially responsible even though we qualified for more than we purchased. After a few months the value started declining which was anxiety producing but I figured it would all work out. 9 months after buying the home our very small business started showing signs of fatigue (economy driven) so I decided to be proactive and secure a job. We were able to keep the business going but it was not generating the income it had in the past. Working I was able to save some money and do some retirement investing which we had long neglected. One year after obtaining employment I was laid off due to lack of work. In the 18 months since being laid off I have not been able to secure employment. After considering our options we came to the conclusion that if we moved to another state the opportunities would be much better for our (specific opportunities) business and since decent paying jobs in my field were just not available in Phoenix there was nothing keeping us here. What we did not know is that our house value had dropped over 50% and we were stuck.

 

Months past and things became more serious when I found out that neighbors were doing short sales for their identical homes for $70k when they had purchased at nearly $200k. It was clear we could not wait this out and throwing the last bit of savings at paying the mortgage monthly was not prudent when we were going to run out of savings and lose the house anyway. Yes, we did file for loan modification in October of 2009 with BOA and were told we would hear in 45 days. Though I have called back several times 5 months later I have not received any word from BOA.

 

I decided to do some further research and attended two seminars one on loan modifications, foreclosures and short sales and the other on bankruptcy. At the first seminar it became pretty clear that foreclosure was really our only option and that would afford us some time in the house without paying to save money to relocate. Short sales would leave us vulnerable to being pursued down the road for the deficiency and it was apparent BOA was not interested in offering us a loan modification. I decided to meet with an attorney to get his advice and he suggested I foreclose and stop paying credit cards and strike a deal with them later. We owe $23k in total credit cards and it is divided among 4 accounts all in my name. About 1/4 of it is 0 interest until next month which I have saved the money to pay back but was waiting until just before the interest rate went up, the attorney suggests using that money to make a deal with all 4. My husband has no debt besides the house. We drive an old car that we share so no car loan. I do have $30k in student loans which I imagine will not go away or can't be bargained down. He stated that we would lose our lines of credit after the mortgage was late and it was our best bet at a fresh start. At the bankruptcy seminar it became transparent that it was not for us because we carry a business inventory that would be seized. Without the inventory we would be completely destitute and the way the property would be auctioned would result in almost nothing for the creditors since we serve a niche market.

 

At this point the mortgage is 2 months behind and I am paying the minimum on cc's. Credit which was nearly pristine I am sure is now just about done in. I need to stop paying the cc's but somehow still hope there is some other way out of this mess.

 

Would appreciate any advice or input on what steps to take next.

 

 

Thanks!

[Mayor]

My husband and I live in Arizona and purchased our first home three years ago. We put down 30k on a modest but newly constructed home because we wanted to be financially responsible even though we qualified for more than we purchased. After a few months the value started declining which was anxiety producing but I figured it would all work out. 9 months after buying the home our very small business started showing signs of fatigue (economy driven) so I decided to be proactive and secure a job. We were able to keep the business going but it was not generating the income it had in the past. Working I was able to save some money and do some retirement investing which we had long neglected. One year after obtaining employment I was laid off due to lack of work. In the 18 months since being laid off I have not been able to secure employment. After considering our options we came to the conclusion that if we moved to another state the opportunities would be much better for our (specific opportunities) business and since decent paying jobs in my field were just not available in Phoenix there was nothing keeping us here. What we did not know is that our house value had dropped over 50% and we were stuck.

 

Months past and things became more serious when I found out that neighbors were doing short sales for their identical homes for $70k when they had purchased at nearly $200k. It was clear we could not wait this out and throwing the last bit of savings at paying the mortgage monthly was not prudent when we were going to run out of savings and lose the house anyway. Yes, we did file for loan modification in October of 2009 with BOA and were told we would hear in 45 days. Though I have called back several times 5 months later I have not received any word from BOA.

 

I decided to do some further research and attended two seminars one on loan modifications, foreclosures and short sales and the other on bankruptcy. At the first seminar it became pretty clear that foreclosure was really our only option and that would afford us some time in the house without paying to save money to relocate. Short sales would leave us vulnerable to being pursued down the road for the deficiency and it was apparent BOA was not interested in offering us a loan modification. I decided to meet with an attorney to get his advice and he suggested I foreclose and stop paying credit cards and strike a deal with them later. We owe $23k in total credit cards and it is divided among 4 accounts all in my name. About 1/4 of it is 0 interest until next month which I have saved the money to pay back but was waiting until just before the interest rate went up, the attorney suggests using that money to make a deal with all 4. My husband has no debt besides the house. We drive an old car that we share so no car loan. I do have $30k in student loans which I imagine will not go away or can't be bargained down. He stated that we would lose our lines of credit after the mortgage was late and it was our best bet at a fresh start. At the bankruptcy seminar it became transparent that it was not for us because we carry a business inventory that would be seized. Without the inventory we would be completely destitute and the way the property would be auctioned would result in almost nothing for the creditors since we serve a niche market.

 

At this point the mortgage is 2 months behind and I am paying the minimum on cc's. Credit which was nearly pristine I am sure is now just about done in. I need to stop paying the cc's but somehow still hope there is some other way out of this mess.

 

Would appreciate any advice or input on what steps to take next.

 

 

Thanks!

The same can happen with foreclosure depending on your state -- I wouldn't go with foreclosure just because of that. A short sale will be a better outcome unless you plan to go the bankruptcy route and include the home.

[jojoblevins]

I live in Arizona and it is a no recourse state in regard to foreclosure. All the bank can do is take the house.

 

Thanks

[Cactus Flower]

I live in Arizona and it is a no recourse state in regard to foreclosure. All the bank can do is take the house.

 

Thanks

 

 

This is true. That's why so many ARE going the route of foreclosure...

they are S.O.L. If they are agreeing to the amount on a short sale, how can they come after you for the deficiency? Are we talking years down the road? I've never heard of this.

 

The real question I ask .. if you cannot afford the payment, then it's a no-brainer, but I work w/ a lot of people just pissed off b/c their house has "dropped in value" by half or more...

they can afford to pay for it, they just don't CHOOSE to. They want to walk away, get a fresh start and buy a cheaper house.

 

 

Personally, it was easier for me to wait for the bubble to burst (I knew it would, AZ incomes don't support the housing prices) ..

and then buy. So I did what I felt I should do .. rent until that happened.

 

I am all for people doing something if they HAVE to, but not if they simply WANT to (sour grapes).

 

I just got this month's copy of MONEY magazine and it states the following.. 8% of the homes in Phoenix are in foreclosure and that prices are predicted to drop another 18% in the next year particularly the more "expensive" homes...

 

I am not sure what your business inventory is, but any chance you can institute a fire-sale and start getting it gone before a trustee is forced to do so?

It really seems you are between a rock & hard place here........

 

I hate to be the wet blanket, but I see it being a long time before AZ's economy turns around ...

Edited March 18, 2010 by Cactus Flower

[Mayor]

I believe if you plan to purchase a house down the road a short sale looks better than a foreclosure in trying to purchase down the road -- Do the short sale...but its your choice.

[jojoblevins]

I agree AZ economy will not recover for many years and in light of that I do not see our situation turning around without an out of state move. I am not opting out of the house thinking I can size up, rather the loss of income and the need to relocate to where I could earn more is forcing my hand.

 

Banks do not always pursue the deficiency in a short sale but it almost always states that they reserve the right to. They can came after us in a few years when we are doing better financially. I am very open to a short sale but realize the bank probably won't accept what we could get in one and about 30% of our small neighborhood have for sale signs and/or are vacant which makes me think my neighbors aren't having luck with that either. Two weeks ago both of our next door neighbors moved out taking their appliances which is a sure sign of foreclosure and even lower property values.

 

Thanks for the input.

[jojoblevins]

Surprisingly BOA has now offered us a temporary modification. The amount is substantially lower than our current monthly payment and my thought is to take it. I told the rep I had to speak to my husband first (she was pushing a little for a verbal acceptance) and he seems to think we should accept it. While this will be a help in the short run it does not address many of the other issues we are facing. The house is still seriously underwater, job opportunities in our area are just not there for me and the banks seem to keep people on "temporary" status with modifications leaving us very vulnerable.

 

I read that beginning April 14th the feds are rolling out a program to encourage and reward short sales over foreclosures. BOA probably will not participate but this could buy us time to see if they do and try a short sale. I want to be happy about the modification but I see so many pitfalls I can't be.

 

Is there any problems with accepting a modification? Is there any reason not to accept it at all?

 

Thanks

[Mayor]

Surprisingly BOA has now offered us a temporary modification. The amount is substantially lower than our current monthly payment and my thought is to take it. I told the rep I had to speak to my husband first (she was pushing a little for a verbal acceptance) and he seems to think we should accept it. While this will be a help in the short run it does not address many of the other issues we are facing. The house is still seriously underwater, job opportunities in our area are just not there for me and the banks seem to keep people on "temporary" status with modifications leaving us very vulnerable.

 

I read that beginning April 14th the feds are rolling out a program to encourage and reward short sales over foreclosures. BOA probably will not participate but this could buy us time to see if they do and try a short sale. I want to be happy about the modification but I see so many pitfalls I can't be.

 

Is there any problems with accepting a modification? Is there any reason not to accept it at all?

 

Thanks

A temporary modification? I've enver heard of that.. It sounds like a forbearance agreement

[jojoblevins]

It is a modification but it is offered for 3 months and than possibly could go permanent. Do you know if there any pitfalls with accepting this deal? I understand BOA will rarely offer a permanent modification but I am hoping this could buy us some time to see if they implement the new fed short sale program. With the fed program they forgive the deficiency which makes this possibility extremely attractive for me.

 

Thanks

[caffeinekid]

It is a modification but it is offered for 3 months and than possibly could go permanent. Do you know if there any pitfalls with accepting this deal? I understand BOA will rarely offer a permanent modification but I am hoping this could buy us some time to see if they implement the new fed short sale program. With the fed program they forgive the deficiency which makes this possibility extremely attractive for me.

 

Thanks

Well, one obvious pitfall would be that the money that you could otherwise be saving would go to BofA. If I were a banker, I would string you along for as long as possible- draining you of every available penny- all under the auspices of a potential deal (however unlikely it will be). Since your situation isn't likely to get better, I wouldn't humor the offer. Save your money. These banks are taking advantage of a lot of people in your exact position right now.

[Mayor]

It is a modification but it is offered for 3 months and than possibly could go permanent. Do you know if there any pitfalls with accepting this deal? I understand BOA will rarely offer a permanent modification but I am hoping this could buy us some time to see if they implement the new fed short sale program. With the fed program they forgive the deficiency which makes this possibility extremely attractive for me.

 

Thanks

Well, one obvious pitfall would be that the money that you could otherwise be saving would go to BofA. If I were a banker, I would string you along for as long as possible- draining you of every available penny- all under the auspices of a potential deal (however unlikely it will be). Since your situation isn't likely to get better, I wouldn't humor the offer. Save your money. These banks are taking advantage of a lot of people in your exact position right now.

 

I wouldn't agree with that. I forgot to mention I have heard of that (blonde moment) -- It's with non-GSE investors. I think VA loans do that too -- at least that's what I think i remember from the training. But, it's either a HAMP trial plan or a "wanna-be" HAMP that leads to a modification (some investors have custom mods which are basically HAMP but not HAMP). Either way, they generally do get approved for a real mod -- I would take it. Make sure it is supposed to lead to a modification and not a forbearance agreement.

[caffeinekid]

 

I wouldn't agree with that. I forgot to mention I have heard of that (blonde moment) -- It's with non-GSE investors. I think VA loans do that too -- at least that's what I think i remember from the training. But, it's either a HAMP trial plan or a "wanna-be" HAMP that leads to a modification (some investors have custom mods which are basically HAMP but not HAMP). Either way, they generally do get approved for a real mod -- I would take it. Make sure it is supposed to lead to a modification and not a forbearance agreement.

Maybe. But even so you have to ask what "kind" of modification...and does it do anything to alleviate the gross negative equity?

 

Just an example of the kind of things people are running up against. Also, this IS Bank Of America.

[jojoblevins]

It does nothing to address the negative equity and since it is BOA I am highly doubtful it would be made permanent regardless of the hoops I jump through. My though about accepting it short term is it is half of our current mortgage and less than renting someplace new.

[SportsNut]

The same can happen with foreclosure depending on your state -- I wouldn't go with foreclosure just because of that. A short sale will be a better outcome unless you plan to go the bankruptcy route and include the home.

 

Not sure that Mayor's opinion expressed is accurate here.

Based upon a quick review of FNMA 1003, Uniform Residential Loan Application, which is what each of us fill out when applying for any mtg loan; Section VII C. states:

 

c. Have you had property foreclosed upon or given title

or deed in lieu thereof in the last 7 years?

 

So apparently this form treats foreclosure and DIL under one broad brush.

I do believe that there is far too little experience at this point in time to KNOW exactly how lenders are going to treat this issue 3 to 5 yrs from now.

 

So we each have our opinion here and mine is Foreclosure and DIL are an equal negative to any future mtg loan application. You make your own decision.

Edited March 22, 2010 by SportsNut

[Mayor]

The same can happen with foreclosure depending on your state -- I wouldn't go with foreclosure just because of that. A short sale will be a better outcome unless you plan to go the bankruptcy route and include the home.

 

Not sure that Mayor's opinion expressed is accurate here.

Based upon a quick review of FNMA 1003, Uniform Residential Loan Application, which is what each of us fill out when applying for any mtg loan; Section VII C. states:

 

c. Have you had property foreclosed upon or given title

or deed in lieu thereof in the last 7 years?

 

So apparently this form treats foreclosure and DIL under one broad brush.

I do believe that there is far too little experience at this point in time to KNOW exactly how lenders are going to treat this issue 3 to 5 yrs from now.

 

So we each have our opinion here and mine is Foreclosure and DIL are an equal negative to any future mtg loan application. You make your own decision.

 

Dunno -- I guess that question would be better asked in the mortgage forum.

[SportsNut]

Dunno -- I guess that question would be better asked in the mortgage forum.

 

Mayor... don't you come in contact with underwriters in your line of work? If so, maybe you could ask that question of them. Is DIL looked at any diff than foreclosure when u/w a new loan.? Anyone in that industry, whether active u/w or not, should be able to answer that question... I would think.

 

The only other thing that I would add here... and I realize that you were voicing your opinion and nothing more, that DIL is better for the debtor than foreclosure. Sure, folks shouldn't act on advice that they receive here w/o asking legal counsel, but hopefully you see that the answer could be harmful to the OP... Yes or no?????

 

The concern that I have with the above is that the answer is more of a "company line", which is better for the lender, seeings how that is the slant on your viewpoint... since you work in the Banking/mtg default industry.

 

I'm NOT trying to be derrogatory toward Mayor, but hopefully you can see both sides of the issue here. Cheers.

[Mayor]

Dunno -- I guess that question would be better asked in the mortgage forum.

 

Mayor... don't you come in contact with underwriters in your line of work? If so, maybe you could ask that question of them. Is DIL looked at any diff than foreclosure when u/w a new loan.? Anyone in that industry, whether active u/w or not, should be able to answer that question... I would think.

 

The only other thing that I would add here... and I realize that you were voicing your opinion and nothing more, that DIL is better for the debtor than foreclosure. you see that the answer could be harmful to the OP... Yes or no????? Sure, folks shouldn't act on advice that they receive here w/o asking legal counsel, but hopefully

 

The concern that I have with the above is that the answer is more of a "company line", which is better for the lender, seeings how that is the slant on your viewpoint... since you work in the Banking/mtg default industry.

 

I'm NOT trying to be derrogatory toward Mayor, but hopefully you can see both sides of the issue here. Cheers.

 

No underwriters are a totally different dept -- there not even in my building. I was saying that comment from something i saw in the mortgage forum (where they were talking about lending). I work with borrowers who ALREADY have loans, so I'm less knowledgeable of the proecssing of getting to the loan. DIL are usually more meant for borrowers who haven't gone deliquent into foreclosure -- that is why you usually don't see them while someone is in foreclosure or delq.

 

I'm sure also every lender has different requirement on what they like to see on your credit report when getting a loan -- and I'm sure there is a lender out there that rather see a short sale than a foreclosure (for approval purposes)..But I could be wrong

[jojoblevins]

Being the optimist I am, I called today to accept the offer. My thinking was it would buy us some time to see if we could do a short sale under the new fed program which bars the lender from pursuing the deficiency at the minimum and potentially even keep us in our home. I assumed I would start with the modified payment either immediately or on the next billing date and I would no longer be late as the unpaid amount was to be put on the back of the loan. Boy was I ever wrong! I was told the new payment would not begin until I received the paperwork from BOA. I was than told that it would take 30 to 45 business days for them to send it out and I should pay the full amount until then. I said I could not do that and was told I was welcome to pay the new amount but it would only go towards the arrears and I would continue to be reported to the cb's as late.

 

The last time I was told something would take 45 days was 5 and a half months ago when BOA told me that in regard to loan mod. They never sent me anything about that original application though I contacted them several times inquiring. I can't imagine BOA is going to put aside any action until such a time as they get around to sending me the loan mod. So much for a glimmer of hope. On the bright side it just steels my resolve to make the best decision for myself and my family and not worry so much about BOA taking a loss. It seems that they don't care much if it they end up back with the house.

[Mayor]

Being the optimist I am, I called today to accept the offer. My thinking was it would buy us some time to see if we could do a short sale under the new fed program which bars the lender from pursuing the deficiency at the minimum and potentially even keep us in our home. I assumed I would start with the modified payment either immediately or on the next billing date and I would no longer be late as the unpaid amount was to be put on the back of the loan. Boy was I ever wrong! I was told the new payment would not begin until I received the paperwork from BOA. I was than told that it would take 30 to 45 business days for them to send it out and I should pay the full amount until then. I said I could not do that and was told I was welcome to pay the new amount but it would only go towards the arrears and I would continue to be reported to the cb's as late.

 

The last time I was told something would take 45 days was 5 and a half months ago when BOA told me that in regard to loan mod. They never sent me anything about that original application though I contacted them several times inquiring. I can't imagine BOA is going to put aside any action until such a time as they get around to sending me the loan mod. So much for a glimmer of hope. On the bright side it just steels my resolve to make the best decision for myself and my family and not worry so much about BOA taking a loss. It seems that they don't care much if it they end up back with the house.

So when they offered this is what not in writing? I would agree if it was verbal than yes than BOA would need in writing and signed by you -- so you coudldn't do it until it was signed and returned. I'm just curious -- who is the investor?

[jojoblevins]

No the offer was verbal. BOA never responded in writing (or in anyway) to my original application for a loan mod that was made in October of last year.

 

30 to 45 business days is ridiculous. A friend works for them and she said everything is system generated and they could have it to me in 3 days if they wanted to. Obviously they are stringing me along in the hope I will start trying to chomp the carrot they are pulling on the string and pay the full payment.

 

Whether or not they want to offer a modification is clearly their choice but I resent the false hope they throw around and the game playing. I am not playing anymore.

[Optimistic]

Jojo my family is going through the same run around with BOA. We have recieved in writing that they recieved all of our paperwork from October three weeks ago! A representative did come to our home and took pictures of the exterior. Other than this nothing. I am no longer even considering the modification after speaking to representatives in the foreclosure department. They stated that if one accepts the modification they will not be able to pursue a "deed in lieu" or a short sale because the account has already been reviewed for the modification and the modification once accepted bars one from any further review process. Now if what they told you is true 30-45 days could easily mean 5 more months!

 

We also began this process in Oct. So far I have heard nothing just a couple of letters letting me know that my documents were recieved. So come April 5th I am asking about the HAFA program. I posted another post about this but apparently noone has heard of it. Just Google the acronyms HAFA. You will read several article about how the short sales will be given much more consideration and assistance as of the 5th of April. One must be in the HAMP program in order to get into the HAFA program. Ones lender must be participating and I found out that BOA is participating. A rep told me they had a town hall meeting in regards to the new program and that they just haven't recieved the guidelines but they are aboard. They are even setting up the manpower to handle these "short sales" that will be on the market come the Spring. This way the process will be more expeditious.

 

BOA is playing alot of games. I am in GA and I believe it is a recourse state that's why I only want a short sale. I am getting ready to meet with a Realtor and weigh my options.

 

Just research. The Wall Street Journal had an article and so did bankrate.com. HAFA also has its own page where one can read all about it.

 

Hope this Helps.

Edited March 23, 2010 by Optimistic

[Mayor]

Considering VERBAL trial plans are going away and it will be verified that won't be a problem much longer.