Thread: foreclosure best option?

as crazy as it sounds, it seems that foreclosure might be my best option.

Here is my situation, I bought my house in 03, the original mortgage amount to acquire the then 325k property was 292k.

in around 04, i refinanced for 369k and took some cash out

in 05-06 time frame I took out a 2nd for 130k when the property was perhaps generously appraised by my credit union for around 600k

so today I owe 500k and the property could maybe sell for 425k...

I have zero money, zero assets, i changed careers, I'm broke, etc, etc.

I made a deal with my 1st mortgage company to skip 5 payments and modify the loan to put those missed payments on the back end, they were supposed to get back to me with loan modification paperwork and my payment was supposed to be due in Jan 08, I haven't heard from them, calling them isn't high on my list.

re: my 2nd mortgage which is with a credit union that also I also have an auto loan with, in the same time frame I asked for help from the 1st mortgage company I asked them for help, they agreed to cut both my 2nd mortgage and auto loan payments in half for 6 months, at the end of the 6 months, provided I made the 6 half payments on time, they say they will modify both loans to put the back payments/half payments on the back end and call me current. I've made 3 of the 6 half payments, so I'm on track at the moment.

so I'm sitting here this week thinking... surely the 1st mortgage company is going to be contacting me soon, they did call once early in the week, I went to answer on about the 3rd ring and they had already hung up, they didn't leave a message.

let's assume they call me this month and we somehow agree that I'll start paying on Feb 1st at 2200/mo.

my 4th half payment of 650 is due by the end of Jan

so I'm 650 in Jan
2850 in feb
2850 in mar
3500 in apr and moving forward.

I've come to the realization that I'm not interested nor can I afford, to pay 3500/mo for this home. Even if I could afford it, it doesn't seem to make any sense (certainly not for a now single man living alone in a 4000 sq ft house)

so what to do?

1. rent it out for maybe 2000 if lucky, then go live somewhere else for 1200/mo, only saving 800/mo and again, what's the point? seems like bad idea.

2. get roommates, about the same, not worth it.

3. short sale to get out, this was sounding semi encouraging, but there are some issues. I understand there was a recent law passed, H.R. 3648: Mortgage Forgiveness Debt Relief Act of 2007, however it seems, as I understand it to only be applicable if the debt was used to acquire the home, in my case, assuming a sale price of 400k, the 1st mortgage co will get paid in full and the 2nd mortgage co will get the change and have to eat the remaining unpaid amount of from the 130k due them. this is if they agree to the short sale which as I understand it, they must do. couple things here:

a. even with the new law, because the 2nd wasn't used to acquire the home, it seems that the 2nd mortgage company would be REQUIRED to 1099 me for the unpaid amount and thus create a huge tax bill for me, is this correct?

b. I've read that is some cases, even though the 2nd 'agreed' to the short sale, that they can still come after you for the unpaid amount, is this correct?

4. file chapter 7 bk, talked with BK lawyer today, seems this really won't do much other than keep them from coming after me for money owed after the foreclosure, they will still foreclose whether I file BK or not, so this may be necessary later, but it doesn't solve anything per se/prevent the foreclosure.


so to me it's either short sell and take on a big tax bill or let them foreclose, then file BK as needed.

see any better option?

and if foreclosure is the route i decide to accept, what's the best way to do it? seems like I should stall as long as I can, they just live in the house until they kick me out? at what point will that happen? the bk lawyer today said i could stay until the new owner that bought the home at auction came knocking. he said i have 90 days to get caught up, then it goes up for sale. what if they can't sell it (which seems likely???), can I stay until it sells or will the bank kick me out? will i get a certain amount of time to move out? in the new owner knocking on the door scenario that the bk lawyer outlined, he said if i refuse to move out, then the new owner would have to file some paperwork and have the sheriff come after a while, I wouldn't let it go that far, but will there be a similar situation from the bank once the 90 days is up or do i get the extra time while the bank sells/auctions off the home?


i screwed myself (so don't feel bad) and I'm not happy about where I am, but i can't change the past, my credit is already destroyed, I'm basically in damage control mode to minimize the damage, I'd like to buy a home again someday, but understand I'll be a renter for quite a while no matter what...