Walking away from mortgage- please no flames here just advise or experiences

[stacy347]

Things like this don't ONLY happen to people living beyond their means. Most of the people we know who have lost homes were two-income families who bought modest (under 150K) homes. But when those jobs go away and we're living with a 25% local unemployment rate, there aren't good answers and it ceases to be as simple as "I could go to work full time and afford the mortgage)". I can understand the resentment/anger towards those who bought into the ARM merry-go-round, but not everyone in dire straits with their mortgage got there via irresponsibility. Bad things DO happen to good people.

ITA ~ I see this everyday and am constantly being told by my DDs that another kid from school has moved away because one or both parents couldn't find another job. Sure, there needs to be a fall-back plan (savings) for when these things happen, but even the experts regularly recommended 6-12 months worth of savings (now I hear them suggesting more like 2 years if you are able) and the people around here are routinely out of work much, much longer than that by the time they give up.

Heck, we had to drastically downsize our own life and it has not been a fun time the last few years (former Ford family here ) ~ we were blessed that DH was able to find another job but honestly, the day he went to apply for this position, hundreds of other people also showed up. We know how lucky we are that he was picked. My point is that it is not nearly as black and white as some posters want to believe ~ sometimes, no matter how hard you try and how much you prepare, life kicks you to the ground and it isn't always easy to get back up.

Back to the OP, I realize her situation is different than that but I wish her all the best and hope that whatever she decides works out for her and her DD. She obviously has very mixed feelings based on her original post ~ I don't believe from her tone that she is taking it lightly so no flames here.

 

[robsmom]

For an individual, the house that you purchase is an investment, it can go up or down and that is risk. As noted above it is just like a mutual fund. Your mortgage is a debt. It does not fluctuation. For the bank, the mortgage is a loan. I guess it can be viewed as an investment for the bank in that yes there is risk to the bank, but the value is not intended to fluctuate. It is never an issue of the "buyer absorbing the bank's risk". It is in fact the bank that is absorbing the buyer's risk when the buyer defaults. This is built into interest rates and loan costs. There will always be defaults and the people who do this are not "deadbeats". Life happens and sometimes there will be no other choice. Where there are other assets or income, I think that people have the moral obligation to pay the debt that they agreed to, regardless of the value of the house. As someone said above, the big bad bank is owned by people. Someone pays for this in the long run and we all pay through higher interest rates and bank fees.

 

[Planogirl]

Yes they do but it angers me when people don't even try to do the right thing and live up to their obligations that they entered in of there own free will. The poster does have options other than sticking the rest of us with her bills. She has money saved!!!! She just doesn't feel like using it because then oh my she will have to save it all over again, or when she retires or maybe not retire as nicely.

She has money and should pay her bills not walk away and expect the rest of us to give up things so she doesn't have to.

Keep in mind that she is undecided about what she will do. She hasn't decided to stick the rest of us with anything.

 

[NHdisneylover]

Why is it immoral for a person to walk a way from a financial disaster, but not a company/corporation? Corporations file bankruptcy all the time, they walk away from bad debt all the time. No one questions their morals. But when an individual does the same, all of a suddden they are deadbeats living off the system. I don't get it.

I think it is immoral for companies too. I always have.

 

[pixiewings71]

Maybe the rest of us live within our means. DH could lose his job or divorce me( not likely, 20 years and happy ) and I could go to work full-time and afford to still make the mortgage payments.

Yea we could have afforded a way larger home but chose not to for the above reasons. When are people going to be held accountable?

As PP's have already stated sorry no hugs from me, I'm sick of people not taking responsiblity for what they created.

Well DH and I made compensations incase something does happen. His job is not secure as like alot of peoples. I am lucky to have a career that is still in demand , so yes I could pick up more hours or work full-time if need be.

Mortgages don't just go upside down. This takes time. I would think I would try and sell my home before I would just walk away. Did the OP's ex not have to buy her out? Is his name not on the mortgage?

I understand there are many people down on their luck, but defaulting mortgages hurts everybody.

Really?? So you could just walk out your day and get a full time job tomorrow? I find that somewhat hard to believe. Congrats on your 20 years and being happy, that doesn't happen with everyone. Some of us get divorced and have to deal with the aftermath. And I absolutely do not see the OP NOT taking responsibility, she asked for opinions and she's getting them, she asked for options, she's getting them. She very well could have left out the fact that she has any type of 401k. She didn't ask to lose her job, it doesn't even sound like she asked for a divorce (but I could be wrong there) and she's trying to find out her options, how is that not responsible? She also has a CHILD to take care of you and you know what? My children take place of my mortgage ANY day! Sure she can use her 401k but as someone else said what if she doesn't have a job or a 401k in a few more months? What then? Her 401k might be the last thing keeping her and her child from being homeless. I totally get what you're saying but let's not lump the OP in with others who made stupid choices and refuse to deal with them, she does not sound to be that person.

And YES houses DO go upside down with NO warning. We had a house worth $500,000, a 1400 square foot house with 3 bedrooms/2 bathrooms in a decent neighborhood, nothing overly fancy and nothing outside our means when we bought it. When the market crashed our home value dropped to LESS than what we bought it for 6 years ago!! No, we did not refi ourselves into the $500k hole but we did refi after our house fire because we did some upgrades. We refi'd to help cover those upgrades (some were covered by ins but not all of them). Then the market crashed, we lost over half the value of our home, we are now upside down but we are toughing it out. As long as we can make our payments we will do so but not everyone has that choice. BTW, we paid $280k for our house when we bought it, at it's peak it was worth $500k, now we hear it would be worth "about $210-225k" from our realtor friends, so yes, houses DO go upside with no warning. Of course if we'd refi'd the house for the full $500k the BANK WANTED TO GIVE US we would have been screwed long ago. LOL

Yes they do but it angers me when people don't even try to do the right thing and live up to their obligations that they entered in of there own free will. The poster does have options other than sticking the rest of us with her bills. She has money saved!!!! She just doesn't feel like using it because then oh my she will have to save it all over again, or when she retires or maybe not retire as nicely.

She has money and should pay her bills not walk away and expect the rest of us to give up things so she doesn't have to.

I don't think she's expecting any of us to cover her mortgage, she's trying to get OPTIONS here, she hasn't made any type of choice at this point. And yes, it angers me too, but remember the OP did NOT ask to lose her job. I think that's a key factor here that some of us are forgetting.

 

[Hannathy]

I would have a whole different point of view if she said I've used up all my 401 and still haven't found any job, now what?

And by thinking of walking away she is asking someone else to pay her bills, when she has money to pay them but she just doesn't want to because it isn't the easy way out.

I'm still curious how she came out of her divorce with the whole house and no compensation from her husband toward it.

 

[GingerJay]

Another option besides letting it go into foreclosure is to talk to them about giving a "Deed in Lieu of Foreclosure". This means you simply sign the deed over to them, and in many cases, your debt is foregiven. This does leave a mark on your credit report, but it is less than a foreclosure would be. Also, it is good for the lender because they save all the expense of going through foreclosure and are able to sell it for top value.

If they sale the home at foreclosure, they actually have to pay you any equity that you may have it the home. Since you said your upside down, it may not be a possibility, but could still be a bargaining point.

Talk to an attorney or your lender to see what options are available in your state and good luck

 

[MEM]

My DSis stopped paying her mortgage three years ago when her now-ex-husband walked out on her. She is still in the house (!) and hasn't paid a dime. In her case, its not that she can't afford the mortgage, she chooses not to pay it. She says she doesn't care what happens to the house. I guess she assumed her ex would not allow his kids to end up homeless and he might step in to pay his half. He did not...he remarried and rode off into the sunset. In their case it was horrible financial decisions - including using the house as an ATM instead of paying it off when they could.

I don't know how my rant helps the OP, but I would try everything to save my home.

 

[jmpellet]

There are some real knowledgable people on fatwallet dot com. Why not pose this question to them?

 

[Colleen27]

Yes they do but it angers me when people don't even try to do the right thing and live up to their obligations that they entered in of there own free will. The poster does have options other than sticking the rest of us with her bills. She has money saved!!!! She just doesn't feel like using it because then oh my she will have to save it all over again, or when she retires or maybe not retire as nicely.

She has money and should pay her bills not walk away and expect the rest of us to give up things so she doesn't have to.

I think the responsible thing to do in that situation is to assess the long term picture. Will cashing out the 401K make a difference, or would it just postpone the inevitable? Can she reasonably expect to earn a salary that would pay the mortgage? There is no sense in cashing out the 401K to plow that money into the house too if it is still going to end in foreclosure; it just leaves her in a bigger hole down the line and doesn't make any meaningful difference to the lender.

 

[roliepolieoliefan]

Really?? So you could just walk out your day and get a full time job tomorrow? I find that somewhat hard to believe. Congrats on your 20 years and being happy, that doesn't happen with everyone. Some of us get divorced and have to deal with the aftermath. And I absolutely do not see the OP NOT taking responsibility, she asked for opinions and she's getting them, she asked for options, she's getting them. She very well could have left out the fact that she has any type of 401k. She didn't ask to lose her job, it doesn't even sound like she asked for a divorce (but I could be wrong there) and she's trying to find out her options, how is that not responsible? She also has a CHILD to take care of you and you know what? My children take place of my mortgage ANY day! Sure she can use her 401k but as someone else said what if she doesn't have a job or a 401k in a few more months? What then? Her 401k might be the last thing keeping her and her child from being homeless. I totally get what you're saying but let's not lump the OP in with others who made stupid choices and refuse to deal with them, she does not sound to be that person.

And YES houses DO go upside down with NO warning. We had a house worth $500,000, a 1400 square foot house with 3 bedrooms/2 bathrooms in a decent neighborhood, nothing overly fancy and nothing outside our means when we bought it. When the market crashed our home value dropped to LESS than what we bought it for 6 years ago!! No, we did not refi ourselves into the $500k hole but we did refi after our house fire because we did some upgrades. We refi'd to help cover those upgrades (some were covered by ins but not all of them). Then the market crashed, we lost over half the value of our home, we are now upside down but we are toughing it out. As long as we can make our payments we will do so but not everyone has that choice. BTW, we paid $280k for our house when we bought it, at it's peak it was worth $500k, now we hear it would be worth "about $210-225k" from our realtor friends, so yes, houses DO go upside with no warning. Of course if we'd refi'd the house for the full $500k the BANK WANTED TO GIVE US we would have been screwed long ago. LOL



I don't think she's expecting any of us to cover her mortgage, she's trying to get OPTIONS here, she hasn't made any type of choice at this point. And yes, it angers me too, but remember the OP did NOT ask to lose her job. I think that's a key factor here that some of us are forgetting.

Yea, i can find a full-time job tomorrow. Hard to believe, sorry if you think it is. But there are some regions and careers that are still in need of people to fill job positions, even full-time ones with benefits. What do you think that there is not a full-time job to be found in this whole USA?

And as far as your house, you live in an area that the home prices inflated ridiculously, I'm guessing, could be wrong. . If you bought the home for 280, it was worth 500, and now is worth 210, so then what is it really worth? When supply and demand were in its peak, I'm guessing you live in a pretty desirable area. People wanted to move there, the homes for sale were few and far between so the value of your home increased dramatically. Is it really worth that much? Obviously not because now that the bottom fell out, its back down to probably closer to its normal value. I understand why you borrowed against it, because of the fire, but it still was taking a huge risk. Yes, none of us knew the market was going to crash, but with everything that was going on , it was bound to happen sooner or later.

I don't live in a place where our home prices inflated dramatically . They pretty much have always stayed the same. We don't know where the OP lives, but her situation is different from yours. You borrowed and got burnt because the value of your house dropped dramatically. She is walking away (maybe) because she can't straight out pay her mortgage.

 

[barbarabini]

OP
You are in a difficult situation - but here are the options

1st - i would try listing the house for a short sale with a request to the bank to agree not to pursue the deficiency judgment. This has been successful in all of the short sales that I represented. Now, short sales do take a while (originally it was about 3 mos, but now in NJ, I see mine running 6-8 months).

2. In the meantime, at least in NJ it takes about 12 mos plus to foreclose on the property --if the house doesn't sell in that period, maybe your employment will get better and you can do a workout.

3. Last, ok - so they foreclose, get a judgment against you on the deficiency, you can reevaluate and then declare bankruptcy.

None of these options are as fast as turning over the keys, (Deed in lieu of foreclosure) but at least the first one may save you a deficiency judgment.

Your credit will get hurt in any of these scenarios.

 

[wdwfan16]

Things like this don't ONLY happen to people living beyond their means. Most of the people we know who have lost homes were two-income families who bought modest (under 150K) homes. But when those jobs go away and we're living with a 25% local unemployment rate, there aren't good answers and it ceases to be as simple as "I could go to work full time and afford the mortgage)". I can understand the resentment/anger towards those who bought into the ARM merry-go-round, but not everyone in dire straits with their mortgage got there via irresponsibility. Bad things DO happen to good people.

If they needed both incomes to pay for that under $150K home and they had no extra money to save and no saving then YES they were living beyond their means.

We are a dual income family but only used one income to buy our home.

 

[Disney-Kim]

OP...its just a house. walk away if that is what is best for your family.

so what if your credit gets dinged, its just credit and it isn't forever 7-10 yrs at the most and your credit will recover in 1/2 that time enough for a car loan if needed. getting the lowest % rate or best credit card is not the end all of the world and not getting them isn't the end of the world.

life goes on and there are far more important things in life. do what is best for you. In the long run it may end up being the best for you.

 

[wdwfan16]

I think the responsible thing to do in that situation is to assess the long term picture. Will cashing out the 401K make a difference, or would it just postpone the inevitable? Can she reasonably expect to earn a salary that would pay the mortgage? There is no sense in cashing out the 401K to plow that money into the house too if it is still going to end in foreclosure; it just leaves her in a bigger hole down the line and doesn't make any meaningful difference to the lender.

I don't think she should use the 401K to keep making the monthly payments but she should use the 401K to pay the difference back to the bank.

 

[LisaNJ25]

..and I dunno what state you live in, but in NY it takes about a year of non payment for a bank to foreclose.

I have a friend going through a divorce and is on 14 months. Trying for short sales and not luck. I am surprised she is still in the house.

 

[Gr8t Fan]

Maybe the rest of us live within our means. DH could lose his job or divorce me( not likely, 20 years and happy ) and I could go to work full-time and afford to still make the mortgage payments.

Yea we could have afforded a way larger home but chose not to for the above reasons. When are people going to be held accountable?

As PP's have already stated sorry no hugs from me, I'm sick of people not taking responsiblity for what they created.

Wow, just wow! I'm sure the OP didn't plan on getting divorced and then losing her job. She didn't say she IS going to walk away from her mortgage, she just wants to know what her options are.

It must be so great to look down on all of us little people who struggle to find work, or struggle with relationships and feel so superior. Don't pat yourself on the back yet - you could be blindsided with job loss or divorce (yes, even after 20 happy years) and may need to come to these same people for advice.

 

[devores]

For what its worth,

My opinion is to sell the house, use your 401 to make up the difference and move on.

I know you didnt plan on all of this happening (who would), but you did state you could sell the house, but still owe some which your 401 could cover. This option, to me, is the only responsable one. Walking away or deciding to forclose is not a smart move and will only hurt you in the long run.

Just today I was reading about an individual who had purchased an RV. Thinking he had everything in check, he drove off the lot and home. He later found out the bank renigged on the loan because of a short sale that had just poped up on his credit report, a short sale he had made about a year earlier. He had to return the RV and pay some fees, so he was out of pocket for nothing to shoe. So it will come back to haunt you.

As others have asked, and the op has yet to respond, does the ex spouse have any say in this matter? If so, he could stop all of this as it will affect his credit as well. I know when I got divorced we divided all assets evenly. She continued to live in the house paying the mortgage with the understanding that when it came time to sell, I would be involved and recive half of the profit of the sale. She tried to sale the house to a friend for far far less than market value, basicaly what was owed on it. I spoke to a realtor who gauranteed they could sale it for $60,000 more than that. Long story short, I got $30,000 for the sale of the house and the ex was mad as heck......

But please think long and hard about writing off your debts. Sell it, rent it, keep it, but dont just write it off. It hurts the whole economy.

 

[luvsJack]

OP--lots of hugs to you. Financial problems can be so stressful and effect everything in your life and that of all your family members.

It is so wonderful that so many of you can be so judgemental and decide what is best for everyone around you. You must be a joy to deal with on a daily basis

OP, I wish I could tell you that walking away would be the best solution; but I don't know the answer. I do know you didn't post looking for all the judgement that is being given to you.

FYI folks: a house can be awarded in a divorce without any money exchanging hands between parties. My divorce and that of another family member was that way.

For those that are able to get a better paying job with more hours: WONDERFUL!! That is really great that you have that ability but to judge someone else because that is not an option for them or at least not in their area is just simply not fair.

And using only one income to buy your home? Great!!! But for some that would mean remaining without a home. And whose income do you base it on if they are not equal?? If the lower income is not enough to pay rent or mortgage and you only base it on the higher income and that person is laid off--then what??

Everyone basis their opinion on their own circumstances but not every circumstance is just like your nor can it be.

There are quite a few people around here that should hope and pray that they never have to eat their own words someday.

 

[pixiewings71]

Yea, i can find a full-time job tomorrow. Hard to believe, sorry if you think it is. But there are some regions and careers that are still in need of people to fill job positions, even full-time ones with benefits. What do you think that there is not a full-time job to be found in this whole USA?

And as far as your house, you live in an area that the home prices inflated ridiculously, I'm guessing, could be wrong. . If you bought the home for 280, it was worth 500, and now is worth 210, so then what is it really worth? When supply and demand were in its peak, I'm guessing you live in a pretty desirable area. People wanted to move there, the homes for sale were few and far between so the value of your home increased dramatically. Is it really worth that much? Obviously not because now that the bottom fell out, its back down to probably closer to its normal value. I understand why you borrowed against it, because of the fire, but it still was taking a huge risk. Yes, none of us knew the market was going to crash, but with everything that was going on , it was bound to happen sooner or later.

I don't live in a place where our home prices inflated dramatically . They pretty much have always stayed the same. We don't know where the OP lives, but her situation is different from yours. You borrowed and got burnt because the value of your house dropped dramatically. She is walking away (maybe) because she can't straight out pay her mortgage.

No I don't think there's not a single full time job anywhere, I also don't think you could go out tomorrow and just get hired that day. I think you might find it a little harder then you think to find a job. I'm glad you don't need to tho, it's good for you and your family and I'm being serious when I say that.

You know I could explain and explain but why? You don't know anything about the housing market in our area, you don't know why we refi'd or how or what type of loan we have. Bottom line is you said homes do not go upside down and yes they absolutely DO. Maybe not where you live but quite a few people I know are upside down in their loans and it's by no fault of our own. When we did our refi we did not take what the bank offered us, we took over $200k LESS then they wanted us to take, our home lost over half it's value in the crash so yes, we are upside down and so are many other people we know.

The OP is going thru a divorce AND she lost her job. Neither of which are things she had planned for, she didn't buy a house she couldn't afford at the time she bought it. There's a HUGE difference in her situation, mine and people who bought beyond their means and are now walking away.