Thread: Are there options for responsible homeowners currently upside-down?

In Feb. 2007, my wife and I purchased our first home in the Northern Virginia area. We spent some time looking at homes and, at the time, we found a house that had a lot of what we wanted: Sits on a pond, large yard, large garage and an unfinished basement. We were able to pick this property up for $335,000 which, as our Realtor showed, was several tens of thousands below other comps. Since then, we've invested nearly 30K into the property finishing the basement, installing sump pumps and landscaping.


Unfortunately, we've taken a hit on the property with the current economic situation started turning south the months after we purchased and, according to Zillow.com, our home is now valued at $212,000. Just last month, the foreclosed home across the street sold for $145,000. As we sit back idly and watch all these magnificent homes drop in price, we wonder if there is anything we can do to wipe our hands of this mess and pick something up for less. I know it sounds ridiculous but we keep hearing that properties will never go back to their inflated value. That means we'll forever have a loss, and that sucks.


When we bought the home, my wife and I were making around $100,000/yr, pre-tax. Now, we're doing about $125,000/yr, pre-tax. We both had good credit (Both above 740) and were able to secure good interest rates on our loan. Our mortgage (80% 30-Year Fixed) was at 5.875% and our second loan (20% 30-Year Fixed Equity Line) is at 8%. Currently, we're making every payment which amounts to $2200/mo. We also save money and have around $20,000 in the bank. We both have steady jobs and virtually no debt; just the home and a vehicle.


I've contacted Wells Fargo, my mortgage company, and asked what options I had available. They didn't have much for me. They had a HARP that would let me refinance the 80% Mortgage to a rate 1/2 percent lower, but in doing so, we would pay over $8000 in fees. That reduction would only give us a $120 savings per month, so that's not ideal. I asked about principal reduction and the gentleman laughed, saying I signed into this deal. Well, this is true - I did. I'm also paying them interest on a property that will most likely never be as much.


I've seen stories on line and heard on the radio about law firms going to court to represent the client to force a principal reduction. Interested, I called one of these groups and they wanted $5000 upfront and couldn't guarantee that anything happens. The man with the law firm said, "We won't take the case if we know we can't get something." Still, something isn't necessarily a principal reduction. They might negotiate the same 1/2% on the mortgage I considered with Wells Fargo.


My wife and I have entertained the idea of just holding onto this property and buying a second home. Gorgeous homes in the area, much larger and nicer than the one we're in, are selling for $80,000 less than what we paid. If we could buy one of those homes and then rent this property, and pay both the new mortgage and the difference on this one, then we might have a way to come out on top since the nice home will likely gain some equity. I've heard so many horror stories with tenants skipping out or destroying the rental property, so I'm not sure is the risk is worth the potential gains.


Lastly, I've seen signs talking about Short Sales. I haven't investigated that option yet and perhaps I could've before I posted this novel.


I guess I'm here because I feel stuck, lost and stupid. I've tried to live the American Dream but everywhere I look, those who bought more home than they could afford are being rewarded by having their home values adjusted. I want to keep my high credit rating, but I feel that I have no way to take advantage of this situation and, because of my savings and income, no one will work with me since I can afford it. My goal is to get a return on my investment, but I'm not sure how I can do that. If anyone has any ideas, suggestions or advice, please drop it here. I'd love to see and tips or tricks you may all have up your sleeves, should such tricks exist.


Thanks in advance.