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

[mythreemuskateers]

Sorry that your in this situation, but not sure if the laws are any different in your state but my parents went through a similar thing. My dad lost his job and almost everything he owned. His house had black mold from hurricane damage and it was killing my mom who had cancer, of course the insurance wouldn't do anything to help and the mortgage company wouldnt help either. When he tried to get help everyone told him NO cause he didnt even make enough money to do anything with. (He took a less paying job in mean time to try to make ends meet.) But the point is, is that when he let the house go the bank came after him for the difference from the selling amount and the amount that was owed. He ended up going bankrupt just to clear everything out cause they were gonna sue him for the difference. He actually has a better credit score now than he did before he filed. Hope this helps a little. Good luck in any decisions you make

 

[eliza61]

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 excelent 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.

Agreed. This is uncharted terrain we're in right now. All the usual rules just arent working. I live in SJ which for all housing price points use to be a pretty desirable area. It's close to 2 major cities (philly & NY) great schools with a small township feeling, very diverse. Nothing is moving. we had a small blip with the tax credit but people are not taking on debt because they are too scared their jobs will disappear and banks are not lending. We've had houses on the market 1-2 years and sellers dropping their prices 10,20, 50K just ot get nibbles.

 

[jodifla]

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.

Not when the bottom has dropped out of the market, like it has in Michigan.

If you had a home you bought for $150,000, would you sell it for $30,000? $25,000?

or $1,000? $2,000? It would be pointless to do so.

That's the reality of the market in Detroit, which has been down for almost 10 years. It missed the "bubble."

 

[wdwfan16]

Not when the bottom has dropped out of the market, like it has in Michigan.

If you had a home you bought for $150,000, would you sell it for $30,000? $25,000?

or $1,000? $2,000? It would be pointless to do so.

That's the reality of the market in Detroit, which has been down for almost 10 years. It missed the "bubble."

That was not ther reality 5 years ago. Greed prevented the sale 5 years ago. Colleen stated above that a home was worth $150K in 2006.

 

[kellyg403]

OP..hugs to you. This has to be a terrible decision for you. I know that I have been faced with having no job, a divorce and being a single mom. The stress of the decisions you are making for the 'future' and for today are downright scary. There is no easy answer and I hope that you feel confident in whatever decision you make.

For the other things I have seen on the thread, I also gave up my house in the divorce. It was an older home that the ex and I bought knowing we would have to fix it up some. We went into the agreement together, thinking and making plans. He found someone else to make plans with. I ended up with a house that needed about 25k worth of work and no income. There was no way I could keep the house or even try and sell it since the handyman part of the relationship no longer existed. So, I gave it to him to put the work into it and I did not claim any of the profits which actually were not much anyway. Our divorce in the end was very lopsided but it was the best choice for me and the kids to move out, rent somewhere where someone else could be responsible if the pipes burst or the toilet broke while we were getting back on our feet.

As for the banks and all that. I am sorry but I just don't agree with anything that has happened so far. At this moment my new dh and I have great credit. We have never been late on any payment including our mortgage. I don't have much of a 401K because when I was a single mom I had to take a loan out to put my first one through college. Like all papers signed by the judge in order to enforce them I would have had to come up with more money to take someone back to court to pay their half. It just isn't worth it when it comes to my child waiting to go to school or not. Anyway, in the last 9 months 4 of th 5 credit cards we carry have been ratejacked..one to almost 29.99 percent. We have opted out on everything but you know what it is a real downer to know that we have done everything right but the bank who got a big bunch of taxpayer money has turned around and repayed the favor on the group of people who deserve it the least. Sure they have to make money, sure they have a right to do what is legal. We have friends that are in mortgage hell. The banks aren't looking to make things work for everyone...they are looking to make things work for them. And as a big business I do understand the concept but also understand it is not morally or ethically correct. So as far as I am concerned its all about business. You signed a document if you can't make the payments the bank gets to keep/take back their asset...your house. Give it back. Thats what you agreed to in the beginning, just keep it business and give it back.

I am not saying I don't understand that somebody has to eat the loses, or we as taxpayers have to pay for others. But come on..we already are. Every single day. For people who aren't in tough situations but figure hey, who cares, in five years things will be better. The whole economy is out of control.

I read a great blog the other day. The gentleman was discussing the very issue of cc companies. The government bail out etc. When the news came out in Jan that a lot of people are no longer using cc and are just paying cash the cc companies were in a pickle. And will remain so. In the end, he is was saying that we the people have decided to put things in perspective. Very few agreed with the amount of bailout but the goverment did it anyway with the knowledge these CEO's were getting enormous bonuses. So in effect the people have opted out, not using credit and paying cash etc. The companies are still NOT going to make it in the end. They are still left with all the people filing bankruptcies and clearing the debt. They are still left with those who are just not paying. So, what was the bail out for. It struck a nerve in me.

OP...good luck. The mile you are walking is full of moutains. Do what is right for you and your dd. The reality is noone else will.

Kelly

 

[punkin]

Front page story in the NY Times today: buildings returned to creditors and no one is crying moral hazard.

OP, do what's best in your own financial situation; everyone else does.

 

[dvcgirl]

Not when the bottom has dropped out of the market, like it has in Michigan.

If you had a home you bought for $150,000, would you sell it for $30,000? $25,000?

or $1,000? $2,000? It would be pointless to do so.

That's the reality of the market in Detroit, which has been down for almost 10 years. It missed the "bubble."

Yep, Detroit never had a bubble.

We are absolutely in uncharted territory. I lived in Orlando from 2004-2007. I've never seen anything like the building and the bubble that built up there. We paid 370K in June of 2004. By the fall of 2005 (the peak there), I could have put a stake out in the front yard saying "for sale" and sold it for 600K in a day. No lie. It was that insane.

By the time we sold in February of 2007 the prices were falling fairly rapidly....2% a month. We lucked out and got out at 480K. A year later our next door neighbor could only get 339K. Now there are foreclosures in that same neighborhood going for 160K. Condos in that master planned community were selling like hot cakes for 150K for a one bedroom crappy converted apartment. Now there are hundreds of them in foreclosure priced at 40K. They'll be lucky to go for half that.

I hear Dave Ramsey talk about how the Orlando market and Tampa market are "artificially low" and that they'll bounce back as there's nothing wrong with their economies. And I scream at the radio every time. Building houses and selling them *was* the economy there during that time. It will take years and years (and years) for those properties to return to the 2004 levels....let alone the 2005-2006 levels.

Even here, back in NJ...a much more stable market, we paid 500K for our house....paid cash for it. We're easily down 15% by this point. So we're down 75K.

Here's how we look at it though. A house like mine is going for $2,500 a month to rent it. Subtract my property taxes of $600 a month and you get $1,900. So about 25K a year.....that's what we'd be paying net out of pocket to rent. We'll be here three years in June, so we're almost at a "break-even" out of pocket on our losses...had we been renters. Essentially we "spent" 75K of our equity, but we provided ourselves with a roof over our heads. And we have no plans to move.

Even getting into the opportunity lost on our 500K had we invested it.... if we had it in the market in June of 2007.....we'd still be underwater on that investment, even with the market recovery we've seen.

The key thing is....for us it's *real* money. We own the puppy outright, and we don't lose any sleep over the loss we've taken. We view our home as a place to live and not an investment. If we had to sell it tomorrow, we'd take what we could get for it and get a deal on the buy on the other side.

 

[eliza61]

Front page story in the NY Times today: buildings returned to creditors and no one is crying moral hazard.

OP, do what's best in your own financial situation; everyone else does.

I saw this, this morning Punkin. Isn't it funny that a big corporation does it (basically they are doing the same thing, they're walking away from their mortgage) and it's no problem. Just a business decision that went wrong but when an individual does it they are deadbeats.

here's the link:
http://finance.yahoo.com/news/Owners-54B-NY-housing-apf-2493139299.html?x=0

 

[Lucky4me]

No one. NO ONE can pass judgement on the op if they themselves have not been in the same position. Whenever I hear a person look down on someone who's going through a divorce, because "they" are happy in their marriage, I think uh, oh, karma is going to kick their butt for saying that. No marriage is 100% divorce proof. None.
No one gets married thinking they will get divorced in five, ten and yes, even TWENTY years later. As a matter of fact, next to seven years, twenty is when most divorces happen, mid life crisis and all that.
It happens every day. More than people going upside down on their mortgages.

To the op, sorry about your marriage and your housing situation.
If it was me, I'd walk and I wouldn't have a moments regret over it, or let anyone make me feel guilty about it.
Stuff happens.

 

[Colleen27]

That was not ther reality 5 years ago. Greed prevented the sale 5 years ago. Colleen stated above that a home was worth $150K in 2006.

For the people we know who have lost homes, there was no reason to sell 5 years ago. They still had jobs and savings then. Most of our old neighborhood was young-ish families who bought their homes post-2000, ourselves included. It really fell apart in my area about 2-3 years ago, with the implosion of the Big 3 and the domino effect down through the suppliers and other associated businesses.

We haven't really seen houses in our neighborhood sitting for 5 years, as Jodifla said is happening in hers, but my community was something of a bargain for the area. It is on the fringe of the Detroit area, close enough to commute if need be, and has a school system on par with suburban communities where home prices are 3-4x higher. Prices and sales around here peaked in 2005-2006, before the massive layoffs and high gas prices slammed the local economy. There are 3 industries here - automakers, marinas, and construction - and we saw them crash one-by-one. First the marinas, because gas prices in '07 & '08 were such that no one was boating. Then the collapse of the automakers. And finally, the housing meltdown that brought new construction to a halt and made people reluctant to even maintain, much less improve, rapidly depreciating homes. We haven't hit our foreclosure peak yet; there are too many people still making ends meet on unemployment and savings with no job prospects on the horizon. It will get much worse before it gets better.

 

[wdwfan16]

For the people we know who have lost homes, there was no reason to sell 5 years ago. They still had jobs and savings then. Most of our old neighborhood was young-ish families who bought their homes post-2000, ourselves included. It really fell apart in my area about 2-3 years ago, with the implosion of the Big 3 and the domino effect down through the suppliers and other associated businesses.

We haven't really seen houses in our neighborhood sitting for 5 years, as Jodifla said is happening in hers, but my community was something of a bargain for the area. It is on the fringe of the Detroit area, close enough to commute if need be, and has a school system on par with suburban communities where home prices are 3-4x higher. Prices and sales around here peaked in 2005-2006, before the massive layoffs and high gas prices slammed the local economy. There are 3 industries here - automakers, marinas, and construction - and we saw them crash one-by-one. First the marinas, because gas prices in '07 & '08 were such that no one was boating. Then the collapse of the automakers. And finally, the housing meltdown that brought new construction to a halt and made people reluctant to even maintain, much less improve, rapidly depreciating homes. We haven't hit our foreclosure peak yet; there are too many people still making ends meet on unemployment and savings with no job prospects on the horizon. It will get much worse before it gets better.

The poster I quoted was saying it was bad for 10 years. 10 years go and even 5 years ago the Big 3 were still handing out money to the union and workers. I agree it is bad now but I do not by it was bad 10 years ago.

Somebody who has not been able to sell their home for 5 years was greedy 5 years ago and wanted more than the market value of their home. 5 Years ago mortgages were extremely easy to get as long as the loan value was in line with the appraisal.

 

[Gr8t Fan]

No one. NO ONE can pass judgement on the op if they themselves have not been in the same position. Whenever I hear a person look down on someone who's going through a divorce, because "they" are happy in their marriage, I think uh, oh, karma is going to kick their butt for saying that. No marriage is 100% divorce proof. None.
No one gets married thinking they will get divorced in five, ten and yes, even TWENTY years later. As a matter of fact, next to seven years, twenty is when most divorces happen, mid life crisis and all that.
It happens every day. More than people going upside down on their mortgages.

Karma is exactly what I thought about when I read that too.

 

[ReneeA]

No one. NO ONE can pass judgement on the op if they themselves have not been in the same position. Whenever I hear a person look down on someone who's going through a divorce, because "they" are happy in their marriage, I think uh, oh, karma is going to kick their butt for saying that. No marriage is 100% divorce proof. None.
No one gets married thinking they will get divorced in five, ten and yes, even TWENTY years later. As a matter of fact, next to seven years, twenty is when most divorces happen, mid life crisis and all that.
It happens every day. More than people going upside down on their mortgages.

To the op, sorry about your marriage and your housing situation.
If it was me, I'd walk and I wouldn't have a moments regret over it, or let anyone make me feel guilty about it.
Stuff happens.

to the OP. We've seen so much of your type of situation in Detroit. I'm so sorry you are experiencing it, too.

 

[jodifla]

The poster I quoted was saying it was bad for 10 years. 10 years go and even 5 years ago the Big 3 were still handing out money to the union and workers. I agree it is bad now but I do not by it was bad 10 years ago.

Somebody who has not been able to sell their home for 5 years was greedy 5 years ago and wanted more than the market value of their home. 5 Years ago mortgages were extremely easy to get as long as the loan value was in line with the appraisal.

Actually, the last decade is being called "The Lost Decade in Michigan."

I live in a small community surrounded by much larger cities. My DH looked at those homes for sale that have been sitting for five years, and in fact, thought they were nice homes at good prices. But because the market here has been soft so long, the competition beat them out.

And in fact, I'm not sure what they could have slashed the price to to make the places attractive to buyers, when there was -- and is - a glut of homes on the market.

 

[Nom]

Wow! OP here, I did not expect this to get so long. I don't really post on the weekends so I have not seen all the posts.

Anyway, thanks to everyone for their advice- I am still figuring out what to do. Our house has lost about $120k in value from when we bought it in 2006 (top of the market sadly). We were totally within our means when we had two incomes, and I could afford the place with my income, so we did not buy above our means. We had a traditional 20% down, 30 year mortgage.

My ex is difficult so having no savings, in case I ever have to go back to court re my daughter is not an option. I have to have something to tap into as a contingency plan for potential legal issues, so I don't want to drain the 401 K entirely. If that is selfish, so be it- I need the money there for that reason, and that reason alone.

So anyway, thanks again everyone for your input. I am not discouraged by negativity- everyone has their opinions, but not everyone is in my shoes. I know I never thought I would be in the position I am in today, and I probably would have looked down at someone considering this as well!

thanks again.

 

[ReneeA]

Actually, the last decade is being called "The Lost Decade in Michigan."

I live in a small community surrounded by much larger cities. My DH looked at those homes for sale that have been sitting for five years, and in fact, thought they were nice homes at good prices. But because the market here has been soft so long, the competition beat them out.

And in fact, I'm not sure what they could have slashed the price to to make the places attractive to buyers, when there was -- and is - a glut of homes on the market.

Jodi & Colleen are right. Plus, everybody spouts statistics all day re. the market in Detroit and nobody seems to add in that we have lost over a million population-wise in the metro Detroit area in the past 10 years. The census will tell us exactly how many this year, but by all estimations, it's at or over a million.

These people owned homes - some sold, some walked away. Now there is not nearly the population here needed to fill all those empty homes.

People from different areas can talk all they want, but unless you live here and have witnessed the devastation this downturn has caused...you have very little idea of what you are speaking.

 

[wdwfan16]

Actually, the last decade is being called "The Lost Decade in Michigan."

I live in a small community surrounded by much larger cities. My DH looked at those homes for sale that have been sitting for five years, and in fact, thought they were nice homes at good prices. But because the market here has been soft so long, the competition beat them out.

And in fact, I'm not sure what they could have slashed the price to to make the places attractive to buyers, when there was -- and is - a glut of homes on the market.

You are proving my point. The were either over priced and the completion was better priced or the owner had not taken care of the house and even slashing the price would not make them saleable.

 

[jodifla]

You are proving my point. The were either over priced and the completion was better priced or the owner had not taken care of the house and even slashing the price would not make them saleable.

You don't want to listen to reason, so we'll just have to agree to disagree.

Hope you never have to see the market Detroit is in firsthand.

 

[jodifla]

Jodi & Colleen are right. Plus, everybody spouts statistics all day re. the market in Detroit and nobody seems to add in that we have lost over a million population-wise in the metro Detroit area in the past 10 years. The census will tell us exactly how many this year, but by all estimations, it's at or over a million.

These people owned homes - some sold, some walked away. Now there is not nearly the population here needed to fill all those empty homes.

People from different areas can talk all they want, but unless you live here and have witnessed the devastation this downturn has caused...you have very little idea of what you are speaking.

Boy, isn't this the truth!

 

[wdwfan16]

You don't want to listen to reason, so we'll just have to agree to disagree.

Hope you never have to see the market Detroit is in firsthand.

I have seen it first as the town I was born in took the same dive that Detroit did. They just did it before I was born.

I agree we will have to agree to disagree but the reason is that you do not want to admit the fact even when you present them.