Thread: House Value drops > 40%. What should I do?

Big equity at purchase? Hold it for another 10 years...
No equity at purchase? you may move on but your credit will be screwed...

I'll leave the ethical choice up to you however I'm seeing a lot of people who are in your situation purchase a new house at today's bargain prices while their credit is still good and then after they close on the new house they quit making payments on their old house; at that point they are less concerned about the hit to their credit.

Much of foreclosure law is government by state laws however in many states you can walk away from the first mortgage without any further financial obligation; assuming the bank forecloses by advertisement. If you have more than one mortgage on the property they may attempt to collect however it isn't very likely if they're one of the national banks. Even if they do attempt to collect you could likely negotiate a settlement for pennies on the dollar.

Full disclosure: I'm not offering legal advise and I'm not an attorney.

Originally Posted by agentsranking

I'll leave the ethical choice up to you however I'm seeing a lot of people who are in your situation purchase a new house at today's bargain prices while their credit is still good and then after they close on the new house they quit making payments on their old house; at that point they are less concerned about the hit to their credit.

Much of foreclosure law is government by state laws however in many states you can walk away from the first mortgage without any further financial obligation; assuming the bank forecloses by advertisement. If you have more than one mortgage on the property they may attempt to collect however it isn't very likely if they're one of the national banks. Even if they do attempt to collect you could likely negotiate a settlement for pennies on the dollar.

Full disclosure: I'm not offering legal advise and I'm not an attorney.

If they quit making payments on their old house, can the lender go after their 401k/saving/checking account? The new house will be their primary residence right?

Originally Posted by Mikili

I bought my house in 2006 for $350,000 in California. Now, my house is worth <$200,000. I am still current on my mortgage but barely make it. Should I continue paying for a house that is already dropped more than $150,000 of its original value? What are my choices here? Many similar houses in my area are already in foreclosure.

Did you enter into an agreement to pay this mortgage? If so, did it say anything about you paying on it "unless the value of your house drops"?

I would contact your lender and try to get a re-work. If nothing else you may at least be able to lower your monthly payment on the home. If you are not sure how to do this I would contact a loan officer you trust and like to work with and have them start the process of working with your lender. I know a few loan officers that are starting to do this for a fee and they only get paid if it works out for you.