Settling a 2nd mortgage?

[FP]

I purchased a house back in 2005 at almost the peak of the market. I currently have a first and second mortgage but am underwater about $150-200k. I have an ARM mortgage that is set to readjust in 2012. Before everyone lays into me I didn't get an ARM to purchase a house that was more than I could afford. I did it because I hadn't planned on living in this house for more than 4-5 years. I have never had a problem making my mortgage payments and have no financial hardship.

My original goal was to try to get my mortgage company to refi my loans. I want to give them more money each month. But every single time I have called (8-10x) they refuse to talk to me until I miss two payments. That is ridiculous. I have talked to other banks about refi'ing and they basically tell me that there is no way they can refi a house that is so underwater...

So, looking at the situation from a purely financial standpoint (and on the advice of a financial planner) walking away would be the best thing to do considering nobody seems to want to work with me. The house will likely not recover to pre-plunge prices for 6-10 years. In that time I can easily rent and my credit will slowly recover. That brings me to my question...

I have heard of people calling their lenders to negotiate a settled payoff amount. Basically you pay off your second mortgage for 10-50% of the amount in cash. This sounds very appealing because doing this would bring me up to a place where I can refi the first mortgage.

Has anyone ever done this before? Were there credit consequences? Did you use a lawyer?

 

[boomerang]

You lost me when you stated that you wanted to offload your obligation on me.

 

[smack Down]

You need to find out if the loans are recourse or nonrecousre.

 

[Jumpem]

I feel a little bit bad for you, but at the same time you borrowed more than you could afford.

 

[bignateyk]

Originally posted by: Jumpem
I feel a little bit bad for you, but at the same time you borrowed more than you could afford.

He didn't borrow more than he could afford. He just doesn't want to pay back everything he borrowed since his house lost so much value.

Not that that's any better... just clarifying.

 

[XZeroII]

Originally posted by: bignateyk

Originally posted by: Jumpem
I feel a little bit bad for you, but at the same time you borrowed more than you could afford.

He didn't borrow more than he could afford. He just doesn't want to pay back everything he borrowed since his house lost so much value.

Not that that's any better... just clarifying.

Exactly. This guy needs to suck it up. He's the reason why the banks are failing. Why should he lose all that money when the banks can?

You have a choice. Either do the responsible thing and live with your decision. Or you can cheat the system and pawn your problem off on everyone else.

BTW, where do you live?

 

[Jumpem]

Originally posted by: bignateyk
He didn't borrow more than he could afford. He just doesn't want to pay back everything he borrowed since his house lost so much value.

Not that that's any better... just clarifying.

I probably owe a bit more than I could sell for now too. Alot of people that bought houses just before the collapse are. you just have to keep paying your mortgage and stay in the house longer than you might have planned.

 

[Beattie]

If you were planning on moving now, why don't you move now?

Sell the house, get the bank to take a short sale or if they won't, then you just owe that money the same as you do now anyway.

 

[DaWhim]

you will only get flamed by posting it in here.

 

[bctbct]

"My original goal was to try to get my mortgage company to refi my loans. I want to give them more money each month. But every single time I have called (8-10x) they refuse to talk to me until I miss two payments. That is ridiculous. I have talked to other banks about refi'ing and they basically tell me that there is no way they can refi a house that is so underwater... "

So its the banks fault......dont think so.

 

[waggy]

hahahahhah oops.

 

[V00DOO]

Originally posted by: smack Down
You need to find out if the loans are recourse or nonrecousre.

California is a nonrecourse state given if he didn't refinanced or take out a HELOC.

This is why we are in this housing mess, everyone buying houses they couldn't afford unless they used an ARM loan especially in California. Thinking they sell and make a fortune within 3-5 years. Didn't your Realtor tell you Real-estates only go up.

 

[Bignate603]

So, looking at the situation from a purely financial standpoint (and on the advice of a financial planner) walking away would be the best thing to do considering nobody seems to want to work with me. The house will likely not recover to pre-plunge prices for 6-10 years. In that time I can easily rent and my credit will slowly recover. That brings me to my question...

Your financial planner is an idiot, or at the very least very slimy.

Dealing with your second mortgage sounds much better, but don't listen to anyone that tells you to start missing payments so you can negotiate.

 

[smack Down]

Originally posted by: V00DOO

Originally posted by: smack Down
You need to find out if the loans are recourse or nonrecousre.

California is a nonrecourse state given if he didn't refinanced or take out a HELOC.

This is why we are in this housing mess, everyone buying houses they couldn't afford unless they used an ARM loan especially in California. Thinking they sell and make a fortune within 3-5 years. Didn't your Realtor tell you Real-estates only go up.

And the bank lending the money was thinking the same thing.

 

[alkemyst]

The 'walking away' thing is one of those trying to emulate the Donald Trumps and J.P. Morgan's of the world on bad investments.

The problem is in housing it's not the same kind of deal, that impacts people much more directly.

So you played real estate tycoon and lost and now want to walk away and be made whole.

people suck today.

 

[sjwaste]

Originally posted by: smack Down

Originally posted by: V00DOO

Originally posted by: smack Down
You need to find out if the loans are recourse or nonrecousre.

California is a nonrecourse state given if he didn't refinanced or take out a HELOC.

This is why we are in this housing mess, everyone buying houses they couldn't afford unless they used an ARM loan especially in California. Thinking they sell and make a fortune within 3-5 years. Didn't your Realtor tell you Real-estates only go up.

And the bank lending the money was thinking the same thing.

No, the bank that lent the money didn't care because they knew they had a buyer on the note within the month, if not the same week. If investors were willing to accept a poorly underwritten note, then they didn't have to take the time to do a better job in originating it.

The ignorance in this mess went all the way to the top of the chain. I don't feel bad at all for the banks left holding the bag, not that they need my sympathy since they got my tax dollars instead.

Look, if our taxes are going to pay salaries at the larger banks, walk away if its in your financial best interest. I'm paying for the mistakes either way, so I'm past the point where I'm going to look down on someone for walking away. You might've borrowed what you could afford, but others didn't, and you're underwater because of that (in part). I'm not sure that paying off an underwater mortgage is a good financial move anyway. Your credit will suck for the better part of a decade, but if you can swing cash for a while, the bank can deal with their mistakes.

There are definitely people who borrowed more than they could afford. That sucks. It sucks that they did it, and it sucks that someone actually underwrote the note and gave them the loan. For the people that DID borrow within their means, they can still make their payments, but are doing so on what is now >100% LTV. Why should they? If it makes sense to walk away, I'm not judging them in the same light that I would the banks and borrowers who started this mess under false pretenses.

Either way, you could keep paying, stop paying, whatever. This has to correct eventually, so let's cross our fingers and hope that our politicians aren't really trying to prop up the market. That won't work, and it'll eventually crash. The measures taken need to soften the blow, not prevent the decline, and I'm not optimistic that we're working to soften the blow right now.

In short, make the best financial decision for yourself, because the macroeconomy isn't going to bail you out of a bad investment.

/rant

 

[iGas]

Price of said house at purchase?
Current assessment price of house?
How many years left of mortgages?
How much of a different between mortgage payment (interest ++ principal) vs. rent?
What is the traditional population growth rate in your town?
What is the expected population growth rate of town/city in the next 10-20 years?
What is the traditional real estate appreciation in town/city?

Factor all of the above before you make the decision.

It is a big decision therefore it make sense to have more than one financial advisor opinion.

 

[Godsend1]

Deed in lieu of foreclosure

 

[zCypher]

Originally posted by: smack Down
And the bank lending the money was thinking the same thing.

Actually, if you look up the Federal Reserve publication called "modern money mechanics" you'll find that banks don't "lend" you any of their "money", they actually create new "money" in exchange for your promissory note (the mortgage agreement) which you then pay back to them with interest.

I don't know the intricacies of your situation nor the laws which apply to you, BUT - I think you should seriously consider getting everything in writing regardless of any lawyer or what anyone else says. Write them by registered mail and possibly get it notarized as well. Inform them of your understanding of the situation and your intent to improve the situation. Compel them to give you a response in writing.

Being armed administratively can help you a lot, I think. Don't just take people's word, don't go off verbal or phone conversations or even in person meetings. At least if you have everything on paper, nothing can be twisted, ignored, used against you or in any other way bastardized to your disadvantage.

If they are refusing to assist you, on paper, or don't even respond to your letters (and you can prove they were received) this helps you a lot more than if you simply claim "but the bank wouldn't refi me!" ... no?