San Diego Housing Bubble News and Analysis

http://youwalkaway.com/

Someone in the money biz can correct me if I'm wrong, but I think you're on the hook for the HELOC. The 1st should be non-recourse and the bank has to take what they can get. Remains to be seen how long Countrywide will remain solvent, and how willing they will be to chase you for the delinquent HELOC, but theoretically they can.

If the second was a purchase money loan there is a good chance that it's also nonrecourse. Again, as suggested to the other "should I stay or should I go" poster, talk to an attorney and accountant that have expertise in this area. I believe there is some debate about the term HELOC for purchase money loans and whether they are recourse or not, and attorney can help you figure it out.

Good luck

Wrong place for advice this forum is!

Get as much as an EXACT figure of your mortgage payment for the place including tax benefits (speak to a CPA) and compare it against what you get for renting it out. Agreed, there will a "loss" at the moment. Figure out how much is the annual loss.. 5K..10K ? Every investment has its set of risks involved and this is a time when RE investment is not profitable for most ...and so are various other investment avenues not 100% profitable either.

Think ..are you brave enough with the loss amount right now ? Think long term here ... Its all up to your mental state and mettle. Don't just listen to just 1 section of crowd with purely sky is falling negative sentiment and make up your mind. Remember ...everyone lives a "influenced" life ...be aware of who or what s influencing you. How successful are the people who are advising you ... etc etc blah blah :-)

PS: Ok fellas, time for you guys to cut me into pieces! :-)

I looked at this lawyer's blog and it seems that both your loans, if never refinanced, seem non-recourse and therefore all the lender can do is take back your home if a foreclosure occurs.

http://activerain.com/blogsview/195649/C...

I would try to negotiate with Countrywide first to accept a short pay on the 2nd trust deed. They should know by this time that they will get zero in a foreclosure. You might get them to release their lien for a grand or two. Then you will be left with a 1st that is a borderline short sale and a lender that is apt to be more willing to work with you once the 2nd trust deed is gone. For a little money you might well come out of this relatively unscathed.

Try this before you listen to the uninformed chimps on this board.

Industry veterans are making the business decision to walk.

You'd have to be nuts to keep on making payments for nothing in return.

Choices, choices...

1) If you walk, you can save a guaranteed amount of $12,000/year plus compound interest.

2) If you hang on, the future future appreciation of condo needs to return all of that you and more (for the added risk). In the mean time, you'll be negative $1000/month until whenever.....

3) You keep on losing $1000/mo and your balloon payment comes due in Nov 2009. Now what? You can't refinance because the value is not there so the bank forecloses on you anyway. Who was the sucker?

Do the calculations and decide for yourself.

http://www.signonsandiego.com/news/metro...

“A lot of people are starting to look at it like a business decision,” he said. Most distressed homeowners are “your normal, hard-working families. They got caught up in the frenzy of the market and kept expecting it to appreciate.”

One of those people is Dave Pierce, a veteran real estate agent who recently went into default on a five-bedroom, 3,864-square-foot Torrey Highlands home, which he bought for about $1 million 3½ years ago.

Despite his 30 years in the real estate business, Pierce says he misjudged the market, getting in over his head with financing much like thousands of other San Diegans. He can't refinance his loan because his home is now worth far less than he paid for it.

You can make Countrywide your long term partner.
Consider continuing to pay on your 1st, but not on the 2nd.

It is doubtful that that CW will foreclose on the 2nd as they will get nothing today. It will remain as a lien on your property, and it will affect your credit scores, but it will also cut your losses every month.

It will allow you hang on a bit longer while you decide what to do. If it ever goes back up, you will have to deal with them or whoever owns the loan at that time.

If the HELOC was maxed out for the sole purpose of acquiring/purchasing the property, it "should" also be non-recourse debt, as well as the first.

Consult a CPA for your sitaution.
Considering that $1000 a month could be going into your retirement account, you are throwing away a huge amount of future net worth.

Real Options, Real Consequences

If you walk away, you'll save money, but you'll still be liable for the bank's loss unless you settle it formally through a short sale or bankruptcy. If your 2nd is a credit card type of HELOC rather than a closed 2nd mortgage, they can pursue you for that debt for 20 years! If you are really lucky, the banks will discharge your obligations in the foreclosure and not go after you, but if they report their losses to the IRS for deductions, you'll get a 1099 and your "forgiven" amount will be considered income that you will pay taxes on. Now, try and walk away from an income tax liability!

You can still do a short sale even if you are current and on time on your payments. You will need a REALLY REALLY good and EXPERIENCED short sale realtor. The first thing to do is write a letter to the lender explaining that you have a financial hardship and will not be able to continue paying. (Just know that if you stop paying while you wait for the answer, your credit will suffer.)

If you are really tapped out, you have no choice but to take the credit hit on late payments until a short sale is approved. KEEP TRYING TO DO THE SHORT SALE. It will stall a foreclosure for a while.

Another suggestion I have is to tell the lender to stop calling you and to only communicate with you via email or letter. It's your right and you have documentation of your correspondence.

Please see the advice that I gave the previous distressed seller in that other post. First thing I would recommend is to call your lender. It is not hard to do and dealing with the issue is the best thing to do. What sdrealtor said makes alot of sense. One current short sale I have, the second mortgage has been totally wiped out for the cost of $1000 and the first has formally accepted a 60k loss. Both lenders have agreed not to pursue the deficiency. Additionally the sellers had been in default for quite awhile. It has been a royal pain in the rear they are quite relieved. The short sale package was not trivial to fill out. Lenders all vary with the acceptance of a short sale. I would absolutely take everything you read here with a grain of salt. If you want to not talk to your lender that is your prerogative but I would advise you to talk to an attorney if you are going to play cat and mouse with them.

Whether your lender will let you wipe out the second totally or buy it for pennies on the dollar is not known to me but it sure couldn't help to try.

SD Realtor

" if they report their losses to the IRS for deductions, you'll get a 1099 and your "forgiven" amount will be considered income that you will pay taxes on. Now, try and walk away from an income tax liability!"

FALSE. New law makes this non taxable.

SD Reator, et al, short-sale works only for people who are in financial straights (because you need to complete the hardship package and prove that you are "deserving").

I believe that this couple here is wanting to do jingle mail or voluntary foreclosure.

I like said before, Dave Pierce that 30 veteran of real estate is going through voluntary foreclosure.

Would you believe that a 30 years veteran realtor has no equity from his previous houses?

I think that the accumulated equity has been safely transfered to his children and he's just protecting his assets by this jingle-mail action.

If veteran industry insiders are doing voluntary foreclosures to propect their assets, you'd be stupid to keep on paying HOPING for a future payback. Protect what you have NOW before it goes poof!!

http://www.signonsandiego.com/news/metro...

pw agreed... In my experience, a hardship is needed to get a short sale approved.

HOWEVER, (just to play devils advocate) I don't think you or I could say 100% for sure that a lender would not approve a short sale if you were not in a hardship case.

Surely I have not, and I doubt you have represented a seller trying a short sale that is not in hardship.

SD Realtor

Good point SD Realtor. It does not hurt to try for a short sell. It's unlikely that the lender will approve a short sale or agree to any kind of relief unless the borrower can prove hardship. But it doesn't hurt to try.

One thing the OP needs to keep in mind is that for every month that they make a bank payment, it's one month less of cash they could accumulate.

Now, not from a moral standpoint, but only dollars and cents, the OP might want to continue collecting the rent money, while not making any further mortgage payments. That will give them a cash hoard ($2,700 + $1,750 = $4,450/month) to use on a lawyer as they determine their best course of action. As long as foreclosure can be delayed, they will have $4,450 more per month that they wouldn't otherwise.

Why pay anymore if you already decided to walk?

----
PS: I am a very ethical person in my life. But all the real estate frauds have been so prevalent and glaring with wink-winks from the actors within the industry aiding and abating massive rip-offs.

At this point, I believe that homeowners need to fend for themselves and protect their assets rather than giving the industry a penny more than necessary.

BTW, my course of action is what a turnaround executive at a failing business would most likely follow. If you think of it as a business decision (and not a home) then the answers reveal themselves.

Look how long it's taking for banks to foreclose on houses.

If it takes the bank 1 year to foreclose, our OP here could "save" $53,400 before the bank takes the house. Were people able to "make" that much in 1 year on a modest condo during the boom?

I think that more and more people will start doing the math and opt for voluntary foreclosure.

http://bubbletracking.blogspot.com/2008/...