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

[MrsPete]

My degree is in electrical engineering, with a nuke background. DH works at a nuclear power plant. .

My husband has that same degee and that same background, but he also has 20+ years experience. Quite a few guys at his office have been laid off, and he is rather relieved that his turn hasn't come yet. He is worried about what he'll do if he's laid off. He has a few irons in the fire, but I don't think he'd be working tomorrow. I don't think you would either -- not even if you called right now and asked for an interview tomorrow.

There are plenty of people who would like to move for work, but can't, because they can't sell their home. In fact, this is really the OP's problem.

Inability to sell a home IS a big problem, and it's not the only problem: My husband, for example, is limited to jobs in our current state (or border towns around our state). Why? Because I'm a teacher with almost two decades of experience, and if I move to another state I'll start all over again with my pension. He'd have to find some fantastic job to make it financially worthwhile for me to stop building what is a very valuable retirement asset. I'm sure this was easier back when one-career couples were the norm; today spouses have to coordinate two jobs, which sometimes means making difficult choices.

Other people might be tied to a certain area because they are morally bound to care for elderly parents, or because their parents provide them with free child card (which might mean that they'd have to come up with a really high-paying job to make up the difference they'd have to pay). Some of these are real, economic reasons NOT to move -- sometimes reasons that moving to what looks like a good job could turn out to be more expensive.

And, of course, some people just have whiney reasons: I don't want to move away from the beach, I don't want to move my kids to a different school. Some of these are excuses.

 

[MrsPete]

If it was wrong then it would be ILLEGAL!! It isn't wrong, it isn't illegal.

No, all choices in the world aren't divided into legal and illegal. For example, if you cheat on your spouse you're not breaking any law . . . but it certainly is both imoral and wrong by the standards of most societies and religions.

Really, there are two questions: Is it legal to walk away from a mortgage?
AND: Is it right or moral to walk away from a mortgage?

Similar questions could certainly be directed at the bank:
Is it legal to give a mortgage (or a credit card) to a person who probably won't be able to pay?
AND Is it right or moral to give a mortgage (or a credit card) to a person who probably won't be able to pay?

I'm not touching any of those answers, but don't confuse legal with right.

 

[Evi]

I feel for you and your family but I want you to take a big step back and a deep breath and then make a list of the things you can do to try to fix this. You may have to walk away but there are ways to do it. I'd start by finding out if there are any free attorneys offered in your city/state. Also if there is a housing dept that can offer you info on resources. You may qualify to refinance your mortgage. Also start planning ahead where you can cut finances to free things up for whatever you need money for. If you really plan to move somewhere smaller think of things you don't want to take with you consider selling them. Just to get yourself some petty cash to hold you so you don't dig into your 401k.

Ok, now you can sell it won't tech be a short sale but if your home is in a desirable area and fairly well maintained someone will buy it . I would talk to a few brokers get an idea how your market is doing and what they would price your house for. But don't sign anything yet you have to have cleared all your questions with an attorney first. It is possible to arrange a sale that involved the new owner paying the cost to get your property up to date so that your credit will remain clean.

When we purchased our home we looked at nonforclosed, preforclosed and forclosed properties. There are people out there who want to buy a home and are willing to be fare with the owner. But it is imperative that you speak with an attorney. Don't invest any money to repair your home or damage it in anyway you don't want to add value or incur costs until you know where you stand. Just like I said before see if a family member can watch the kids after school and spend a good day doing research and another one going to appointments. You'll feel better and you can always tell yourself that once you've figured this out you can deal with it emotionally but don't let the stress stop you from taking action. At the end of the day you will have to live with whatever choice you make and you want to have made the most educated choice for yourself.

God Bless and really know your not alone I truly wish you and yours the best and just be strong.

 

[John In Illinois]

First it isn't the banks fault! They didn't hold a gun to peoples heads and make them sign for houses they knew they couldn't afford.

True, they loaned money charging an interest rate that assumes a certain level of risk, and the borrower defaulting is one of those risks

Of course banks want to make money same as Disney they are in business to make money.

Again, the interest rate charged was based upon assuming risks to make a profit

If People did the ethical thing and not sign something they knew they could afford or being greedy themselves and trying to turn a quick buck this wouldn't have been happening. The banks aren't nanny's it is up to adults to nanny themselves. If people did the ethical thing and paid their obligations this wouldn't be happening.

So the OP having the hardship of divorce enter her life falls under which, being greedy or trying to turn a quick buck?

You say she shouldn't use her savings to make the bank happy cause she is having bad times, so then I guess when times were good she willingly gave the banks a little extra interest? shouldn't it be both ways?

You continually refer to savings. She discussed having RETIREMENT savings. Completely different funds

If you don't think she is doing something wrong in keeping her money and walking away from her bills and sticking it to the bank and us then we will never agree on the definition of doing something wrong.

How is this sticking it to "us"? Are you expecting to receive some sort of bill from a private business asking you to shoulder their losses? (oh wait, no need...they got that from the US Treasury already)

As far as taking food out of her kids mouth if she truly has no money her child will eat (food stamps, free school food) no one needs to starve in this country.

Is the view from up there in your Ivory Tower so cloudy that you seriously believe there is no child going to bed hungry tonight? Wow......just wow

 

[ajh88]

I do want to offer the OP support and well wishes. While I have been blessed not to be in such a dire situation, I have been at the edge and through the support of my family, hard work, and good fortune, I've made it back from that place, but due to drastic changes in our lifestyle and not without sacrifice. I hope that you will take some of the advice - consulting an attorney or a housing agency, to help you make the best decision for your particular circumstances.

I did have a family member go through something similar. They did NOT want to walk away from the home willingly, but ultimately did end up losing it to foreclosure. They knew that through changes in their circumstances, they could no longer afford their mortgage. They planned to relocate to live with a relative (hopefully temporarily) while they tried to sell their home. They contacted the lender to see what "help" they could offer. When they told the bank they needed to move because they could no longer afford the home, the bank told them that since they planned on moving, there was really nothing that could be done for them.

Their home was nice (modest) and pretty well-maintained - not perfect, but not in bad condition either and it was in a very nice neighborhood. They listed it with a realtor for 6 months. During that time, the price was reduced to $10K less than what they owed on it - a vicious cycle of the fact that other homes in the neighborhood were foreclosing or being sold short, therefore driving home prices down. Many potential buyers wanted some improvements made (new carpet, new windows, hardwood refinished, bathroom updated, etc.) that they couldn't afford to do - how do you justify spending $5K on a house that you're already losing $10K on? They had 2 potential short sales, but the bank denied both of them. At that point, what else could they do? Savings were gone, no prospect for a short sale, no serious buyers in over 6 months.

It was emotionally devastating to them and their family and it took a lot of consoling to convince them that they weren't terrible people. Never in a million years did they believe this would happen to them when they purchased the home. And they aren't extravagant people - they drive older cars that are paid for, they don't spend money frivolously. If you ask them now, they would say that buying that house was one of the worst mistakes they ever made.

The point is that circumstances are different for everyone. I lost sympathy for the bank in my family member's situation when they refused not 1 but 2 different offers (I honestly don't know what the offers were, so perhaps they were refused with good reason) on a short sale. I do believe in meeting your obligations, but I believe there is a distinct difference between obtaining financing fraudlently (i.e., with no intention of paying for the item you're purchasing) and obtaining financing in good faith, then having something extenuating occur (i.e. divorce, job loss, illness, etc.) and not being able to meet previous obligations.

I hope the OP is able to find a tenable solution to her current problems.

 

[princessmom29]

Is the view from up there in your Ivory Tower so cloudy that you seriously believe there is no child going to bed hungry tonight? Wow......just wow

I am not touching the mortgage debate with a 10 foot pole, but I can tell you that I teach hungry children every day. School lunch is the only meal some of them get. If you listen to them talk to one another it is amazing how much of thier life is focused on food and when and how they are going to get it. In fact, when we were out earlier in the year for atropical storm one of my students made the comment that he didn't want to be out of school, because "I won't get fed". There are truly those out there who struggle to feed their kids. Food stamp benefits are notadequate to actually feed the number of people they are supposed to, so yes many children do go to bed hungry.

 

[BuzznBelle'smom]

That part about being rusty CAN affect you up to a point. You'll find that some places will take the kids right out of school thinking that their knowledge is more up to date. (Been there!) That nuclear background might be even more useful than the degree.

I agree completely--I have NOT kept up my EE skills. If I did go to work, it would be as a tech writer or something similar, in the nuke field. DH's job has been real stable, so it's only been casual discussions for us--our youngest is in preschool, we're doing okay, so I don't HAVE to work.

BTW, when we moved last year, it took us a year to sell our old house. It was a royal PITA, but we did manage to move and all. It CAN be done. I know every circumstance is a little different, but it gets tiresome to offer possible solutions, and have people always come back with, "Well, I CAN'T..." Yeah, you could. You choose not to. Which is fine, but understand, there are choices.

 

[Planogirl]

I agree completely--I have NOT kept up my EE skills. If I did go to work, it would be as a tech writer or something similar, in the nuke field. DH's job has been real stable, so it's only been casual discussions for us--our youngest is in preschool, we're doing okay, so I don't HAVE to work.

BTW, when we moved last year, it took us a year to sell our old house. It was a royal PITA, but we did manage to move and all. It CAN be done. I know every circumstance is a little different, but it gets tiresome to offer possible solutions, and have people always come back with, "Well, I CAN'T..." Yeah, you could. You choose not to. Which is fine, but understand, there are choices.

There are choices, yes. However you can't immediately assume that a choice will be successful in the right time frame. I'm glad that you managed to move successfully but add in your DH being laid off or no longer being with you and you making less than what you once did. I'm not saying that this is what happens to all families that struggle but it is wisest to plan for worst case scenarios.

 

[jodifla]

I agree completely--I have NOT kept up my EE skills. If I did go to work, it would be as a tech writer or something similar, in the nuke field. DH's job has been real stable, so it's only been casual discussions for us--our youngest is in preschool, we're doing okay, so I don't HAVE to work.

BTW, when we moved last year, it took us a year to sell our old house. It was a royal PITA, but we did manage to move and all. It CAN be done. I know every circumstance is a little different, but it gets tiresome to offer possible solutions, and have people always come back with, "Well, I CAN'T..." Yeah, you could. You choose not to. Which is fine, but understand, there are choices.

And what if that home sale had taken you FIVE years? Would you have been able to manage then? That's how long some homes in my neighborhood have been for sale. And, no, they aren't overpriced.

 

[wdwfan16]

There are choices, yes. However you can't immediately assume that a choice will be successful in the right time frame. I'm glad that you managed to move successfully but add in your DH being laid off or no longer being with you and you making less than what you once did. I'm not saying that this is what happens to all families that struggle but it is wisest to plan for worst case scenarios.

I agree with the bolded.


Sadly I have know or heard of too many women who will do anything to keep the house in a divorce even when others show them the numbers of why they cannot afford it. The mothers want to keep the kids in the house but that is usually impossible. I have know of women who have given up any rights to 401K money, pensions and the savings of the family just to keep a home that the payment was over 50% of her income + alimony + child support. Sadly most lose the home and then have little to nothing left. If they sold the home when the divorce was happening and got 50% or more of the rest, they would have been able to find a smaller and less costly place to live without forfeiting their future.

 

[jodifla]

Please no flames.

I am in a tough situation and recently had a divorce. I am a single mom who gets very minimal child support because I used to have a well- paying job I was recently laid off from. My daughter is 5. I want to move to a less-expensive place and to be closer to family, but the house is upside-down on the mortgage- if it sells I would have to pay about $20-40 k into it and wipe out my 401K to do that. I don't think they will consider a short sale because I still do have the 401K. I also still have legal bills from the divorce. I really do not want to live there due to bad memories and distance from family, and if I have not found a job before my sev package runs out, I am thinking about not paying the mortgage anymore and walking away from the house. This may be a better situation than being out of work with no money at all and tapping into 401 K to pay into a house that will take at least 10 years to come around to my mortgage amount.

Has anyone done this? I know obviously this will hurt my credit, but I have talked to an accountant and it will hurt my credit less than a bankruptcy. I have very good credit and no balances on my credit cards. It's been the $15000 divorce that wiped out all my savings- all I have left is my 401K.

Please do not flame- I am not saying I am going to do this I would just like to learn what others experiences have been.

It is unlikely and perhaps even illegal for the bank to come after your 401(k) after a short sale says my DH, a personal finance expert.

A short sale will look almost as bad on your credit as if you simply walked away or declared bankruptcy, depending on where you live and other factors.

If your divorce isn't final, you should contact a certified divorce financial planner, which you can find on the Web.

If it is final, you should contact a bankruptcy attorney. Do not under any circumstances, says my DH, use your retirement accounts to settle this or any other debt. Your retirement accounts will be protected in bankruptcy and many times homeowners exhaust their retirement accounts and still fall short, then declare bankruptcy anyway, instead of protecting their retirement assets.


This is a business deal. You signed a contract with the bank. And the terms of the contract say, if you don't pay, we'll take the house. All you are doing is telling the bank, "I will take the deal I signed up for."

You don't see bankers feeling morally obligated they stole through fraudulent mortgages or to make up the value of your property that has been lost through the foreclosures they caused with ARMS, liar loans and so forth.

Your greatest moral obligation is to provide for yourself and your daughter. Good luck!

 

[Kriii]

OP, I can't even imagine how stressed you are after going through a divorce and job loss, and being a single mom to boot . Big hugs and whatever you decide, hope it goes well. Remember, sooner or later things do get better. Some posters mentioned short sales. I have experience as a buyer of a short sale. If you go this route, be prepared for a long and slow process that often fails. It truly might be easier to sell at a loss and use the 401 money to pay off the difference. I think I'd try and save my credit since you never know when it will be needed. I hope everything works out for you.

 

[barbarabini]

Actually bank risk models are based on prior purchaser behavior. When the behavior changes so will the models.

Overall I have to agree with you on almost everything you said, particularly that the moral hazard argument is complete blather!

- Pumpkin - you are correct those risk models are now changing (see new FHA guidelines ect.). Now, the question is what will that doe in the next couple years to interest rates, in order to properly price that risk. (ugh).

 

[DISdreamin']

And what if that home sale had taken you FIVE years? Would you have been able to manage then? That's how long some homes in my neighborhood have been for sale. And, no, they aren't overpriced.

Not getting into the whole mortgage debate, but as to the above...IMO, if a house doesn't sell within a reasonable amount of time, it *is* overpriced for current the market. It may have been worth more a while back, it may be worth more in the future, but right now...not actually worth more than it will sell for, IMO.

 

[wdwfan16]

Not getting into the whole mortgage debate, but as to the above...IMO, if a house doesn't sell within a reasonable amount of time, it *is* overpriced for current the market. It may have been worth more a while back, it may be worth more in the future, but right now...not actually worth more than it will sell for, IMO.

A correctly priced home will sell. That price may not be what the owner wants or needs after taking money out. Also 5 years ago we were in a housing boom. If they could not sell then it was definitely over priced.

 

[Kika]

First of all, big hugs to you. (I am also a single mom to a daughter.)

It sounds like you are still receiving severance from your former employer. Do you think you will be able to find a job (or two) that pays enough to pay your mortgage and other bills before your severance pay runs out? I would do this if at all possible in order to keep your good credit score and your house. I know the house is not where you really want to be right now, but if you can hang on and stay there until the market picks back up again, you could eventually sell and not have to do a short sale or walk away from the house.

If you do decide to sell and have to come up with another 20-40K at closing, is there some other way you can do this (loan maybe?) rather than dipping into your 401k?

I realize it is not an easy situation and wish you the very best.

 

[Holly79]

I haven't read every post, but if it were me, I would immediately begin the hunt for a roommate, and if I absolutely had to, I would dip into my 401K for a few payments in the meantime. Just my two cents.

 

[punkin]

- Pumpkin - you are correct those risk models are now changing (see new FHA guidelines ect.). Now, the question is what will that doe in the next couple years to interest rates, in order to properly price that risk. (ugh).

I don't think the full risk will be priced into the interest rates. I think the risk will mostly be mitigated in new underwriting standards. The rates will remain (comparatively) low but loans will be very hard to get.

 

[Colleen27]

Not getting into the whole mortgage debate, but as to the above...IMO, if a house doesn't sell within a reasonable amount of time, it *is* overpriced for current the market. It may have been worth more a while back, it may be worth more in the future, but right now...not actually worth more than it will sell for, IMO.

I understand that in principle, but in practice I'm not sure I agree. I just can't wrap my mind around the idea that perfectly good homes are basically worthless because of the tightening of credit standards, but that's what we're seeing in our area right now. The people who would buy in this town - a Mayberry-esque small town with excellent schools - can't get financing or are unwilling to take on debt, and price doesn't seem to be a factor. $25K homes are sitting on the market for months or years right along with houses priced many times higher.

 

[Jaklackus]

It is unlikely and perhaps even illegal for the bank to come after your 401(k) after a short sale says my DH, a personal finance expert.

A short sale will look almost as bad on your credit as if you simply walked away or declared bankruptcy, depending on where you live and other factors.

If your divorce isn't final, you should contact a certified divorce financial planner, which you can find on the Web.

If it is final, you should contact a bankruptcy attorney. Do not under any circumstances, says my DH, use your retirement accounts to settle this or any other debt. Your retirement accounts will be protected in bankruptcy and many times homeowners exhaust their retirement accounts and still fall short, then declare bankruptcy anyway, instead of protecting their retirement assets.


This is a business deal. You signed a contract with the bank. And the terms of the contract say, if you don't pay, we'll take the house. All you are doing is telling the bank, "I will take the deal I signed up for."

You don't see bankers feeling morally obligated they stole through fraudulent mortgages or to make up the value of your property that has been lost through the foreclosures they caused with ARMS, liar loans and so forth.

Your greatest moral obligation is to provide for yourself and your daughter. Good luck!

Agreed.

My husband and I hit a rough financial patch ...we would have only fell behind a month..but Countrywide wouldn't work with us...so we ended up not paying for 4 months and planned to walk away when the foreclosure process hit the court system....at 4.5 months Countrywide finally wanted to talk about working something out..2 months later(after repeating the process 2 times) we had a modification offer ....that shortened the term of the second mortgage by half and raised the monthly payment.....fortunately DH had just finalized a contract that increased our annual income 5 times over...if not for that contract we would have had to reject the offer. We went from our mortgage being equal to 3 times DH's annual income to representing a fraction o his annual income.

We went from having 25k in equity to being 40k upside down in less than a year..65K is a huge chunk of a house that was never worth more than 200k.
We are not in a rush to pay off our mortgage even though we have the means to do so....the other houses in the neighborhood that have been foreclosed upon and/or flipped are selling for 100k or less...which means when they sell the comps will force my home's value down even further...if something happens to my husband's contract I would prefer cash in the bank and the ability to walk away. Maybe I will someday feel confident enough to buy another home and we can turn this one into a rental..but for now we are sucking it up and paying $1600 a month(P&I, taxes, insurance) towards something we could rent for $800 a month because I don't want to pack and move again..and again(renters are getting eviction notices left and right because their landlords are defaulting on their loans)

That gap in payments has cost us...we started getting rate hike letters 4 months after we were back on track....we closed a lot of cards...but it seems that our gov't made sure that we would not suffer alone....now everyone is getting rate jacked to beat a deadline these days...so we really aren't getting punished any worse than the family down the street that managed to pay their mortgage payments on time and didn't get the 'ding' on their credit report.

If someone really has no choice but to 'walk away' this is probably the best time to do it.....when everyone else is doing the same thing. I would definitely talk to a lawyer about it before making the final decision.