San Diego Housing Bubble News and Analysis

Check out http://www.youwalkaway.com

If this is your residence...i.e..your owner occupied home, the govt has given you real incentive to walk away if you do it in the specified time frame. No taxes on the amount that you owed and did not pay. And, if it was a purchase loan, odds are good that it's a non-recourse loan as well. So the lender cant go after any of your other assests. Waiting may hurt you as the time frame for the govt not taxing you may run out at the end of this calendar year.

One thing that puzzles me... if you are going to walk away for sure once the reset occurs, then why are you going to continue to pay on the loan at all? Basically you are saying that you are going to pay 15 months worth of mortgage payments, HOA and property taxes fully knowing that you will eventually default.

I don't mean to come down hard and I am one who has always been in favor of the morality of living up to the debt that you saddle yourself with. However, if you toss morality aside and attack the problem from a PURE logic perspective, then your choice of allowing a foreclosure to happen later yet feed the kitty for another 15 months is illogical. Perhaps I am incorrect but taking the bad medicine now allows the following:

- You can start to save money for your next home in a few years.

- You can start to rebuild your credit.

- You will not be saddled with your mortgage payment, HOA and property taxes.

- When you do move, save the difference in your (what I assume to be lower rent) new found savings, don't blow it on toys.

Now with regards to your taxes, don't trust what credit counselors tell you. Go to a CPA and ask them. If you want (which you will need) advice on how to rebuild your credit then talk to a credit counselor. If you want to learn about how to walk away from your home then yes go to the website that was mentioned above.

Also what has not been mentioned is that you can think about negotiating with your lender. You can simply tell them what is going to happen, and that you would be more then happy to work something out with them. Let them eat 100k and see if they will lock you into a fixed rate. Additionally you may want to call HOPE and see what they can offer for you as well. Finally, when Obama becomes president he will more then likely champion further legislation sponsored by guys like Schumer, Dodd and the rest of the Countrywide sponsered crew to help out lenders in the guise of helping out homeowners. Seriously there may be programs that can help you.

So I think there may be alot of alternatives, none of them great, but again, I believe if you are going to bail, I would think about getting it underway sooner rather then later.

Basically what SD Realtor is saying here is you need squat and consider jacking the place up, sell all the copper etc...live it up!!! have a beer,, bbq..invite us all...party..go out in style

SD Realtor,

I agree that from a logic perspective it does make sense to throw in the towel earlier than later. Especially since I have attempted numerous times to speak with my lender about working something out, and each time they tell me that there is nothing they can do. My only hope is to keep paying and wait for the government to do something.

"My only hope is to keep paying and wait for the government to do something."

Gotcha, I understand. With the new party coming into power I think you will have a fair shot at that happening.

It could be 5-10 years before that place has any equity after any sale/transaction fees. If you can barely come up with the current overall payment and if it takes a miracle plan by the government to give out another 5yr low rate plan to all the troubled arm holders, then the decision shouldn't be that tough.

If you got in over your head, then you got in over your head and their is not much you can do except learn from it. Talk to a CPA about tax implications, check to make sure it is non recourse, feel bad for a moment, then seriously consider walking away now. From what I hear it takes at least 3-6 months after stopping payments to get people out of their homes, so plan accordingly.

You may want to look into offering them the "Deed in lieu". They get the property back asap and they've accepted it in exchange for the debt owed. I dont know the details nor have I done it myself. But I've heard it mentioned before.
At the rate lenders are foreclosing on property, the process seems to be taking them a lot longer than the "normal" amount of time. So you could end up living at your residence rent/mortgage free for quite a while if you choose to go the foreclosure route. You get about a two weeks warning before being evicted by the authorities. So have a plan ready at that point.
But again, look into what it takes to get off the hook for the tax implications as well.

"I am looking for some advice. I bought in 09/2004 with a 0 down, 5 year ARM I/O loan. The same townhome that I paid 400k is now going for 300k."

"My only hope is to keep paying and wait for the government to do something."

So after taking on a wildly speculative and risky loan based on the fraudulent premise that you could afford to make the promised payments on such a mortgage product and contributing to the astronomical run up in real estate prices which prevented me from purchasing any kind of home to live in under any reasonable terms, you now
want me to also help pay to clean up after your mess through government confiscation in the form of increased taxes and inflation.
All this while asking for my advice on how you can avoid any tax implications yourself?

Do I understand correctly what you're asking?
Just want to make sure before I tell you what I think you should do.

I find it rather strange : for a person that is currently pleading not knowing or not being financially astute when you bought, you appear very careful now considering all details and implications.

I think you are very "easy going" and carefree when it comes to speculating with other people's money but you are very prudent when it come to saving yours.

And how come you got smarter when your reset is coming near ?

I have an advice for you deadbeat :

Keep paying your loan!!! Somebody was good enough to loan you money (and no they did not tricked you into that!), so make good on your obligation!

Ironman

Wow! Deadbeat huh? Thanks for the advice. I will admit that I am a 29 year old who bought my first home in Nov. 04' at the risk of being priced out of the market. I moved to San Diego in 2001 and saw a lot of people making a ton of money in real estate. At the time it seemed like a no brainer to get into the market. Was 400k more than I wanted to spend on a house? Yes. Could I afford a loan that required 20% down and a higher fixed rate? Absolutely not. I am not pointing fingers saying that it is anyone's fault but my own. I admit I made a mistake. However, I also want to do what is best for my family. Continuing to pay on the loan until it completely wipes out my savings and I have to foreclose anyways doesn't seem like the best idea. But again thanks for the advice.

If the Fed can bail-out Wall Street, then you should feel free to do the most effecient and effective thing for your personal finances.
I dont think the Fed's going to bail you out anytime soon.
I dont know why people feel the need to judge undividuals after the way big business behaves.

I think you are very "easy going" and carefree when it comes to speculating with other people's money but you are very prudent when it come to saving yours.

The whole idea of a capitalist system is that people who make poor capital investment decisions with THIER money do not get to keep it - rather capital accures to others who make good decisions and flees those who make poor ones. The lenders who abdicated thier responsibilities and MISALLOCATED thier capital into BAD LOANS should loose it to people who can be better shepards.

Dotherightthing - it is not your responsibility that some idiot lender made the decisions they did with THIER money. You should act within the boundaries of the law to maximize your outcome. It is a business question, not a moral question. If you doubt that it is all about business, ask yourself how many days reprieve on foreclosure and eviction that any lender would give to people whith hardship if it was going to cost them money? NOT ONE DAY. They would (and DO!) boot the bewlidered elderly coupe onto the street. They would (and DO!) have the sherrif remove cyring children and pile the toys and clothes on the curb.

Ironman's idealism has no bearing on the reality of this industry. It is ruthless and you should play savy hardball.

there is nothing they can do

Have you told them that you can't pay any more? That should at least draw their attention.

Can you tell who the lender is?

jonnycsd,

I certainly see (and partially agree) with your point and I am by no means defender of the banking institution ...

If someone walks away from a loan , do you think he would be screwing the bank ? I do not think that he will be like Robin Hood , stealing from the rich and giving to the poor!

Either the government will pick the loss (all of us) or small bank investors (think 401Ks or other retirement funds)
In a nutshell , he will be screwing his fellow man !

Now , do I say make good on your loan at the expense of your children going hungry , hell NO, BUT I say that you should live a couple of years under your means and pay us much as you can !

If we agree that the society is footing his bill then it would only make sense to tap that common resource only if you have to and not to just preserve your way of life!

And I do apologize if are the first category

Ironman

Don't feel sorry for the "banks" at all. I think there was a lot of mutual hand greasing going on in the broker business. What about PMI? second mortgages? I just hope the banks/companies are man enough to pay their taxes on all those repos they now are holding onto. I guess people like McCain have 5 years to not pay there taxes before it gets auctioned off. I am so glad my offers were never accepted, Hallelujah! I remember hearing from multiple real estate agents "oh just refinance after the reset" and I remember thinking at the time "yeh right" knowing full well interest rates could not stay down forever.

Here are the tax implications of walking away.

The government enacted a law in 2007 that expires in 2010. If your home is foreclosed on the difference between the appraised value (or sales price) the bank establishes when they take possession of the property and the amount owed on the note if considered taxable income. However, the law which was enacted allows homeowners to subtract the amount of the original loan amount plus any refinanced amounts that were used to improve the home from the taxable income. For all those interest only and neg am loans they should consider walking away from the home. This law has a limit of 2 million for married couples and 1 mil. for singles. It also only applies to properties that are a primary residence.