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Would you continue making payments in my situation? – Dan

Defaulting on 80/20 interest only loan intentionally. Have enough income to make mortgage payments. Home is approximately 100,000 underwater. Entering 6th year of mortgage, nothing towards principle at all. Payments adjust in 4 (2016) years with an increase of 400 dollars. DO NOT qualify for loan remodifications due to sufficient income. No chance of refinancing in the near future.

1ST Loan is 224000 at 7.6% 2nd loan is at 56800 at 9.5%

Without any hope of a loan remodification or refinancing would you walk away from this mortgage? With enough income to cover mortgage payments and no real hardship, i doubt I would even qualify for a short sale.

Your thoughts would be greatly appreciated.

Dan

Would you continue making payments in my situation? - Dan by

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  • Dan

    We received an offer on our home 2 weeks ago and forwarded it to GMAC (1st) I received an email from the lady assigned to my file by Gary Neuman (VP of GMAC) that states the following….

    “If you have a second mortgage on the prop you are trying to sell, then you have to have the realtor negotiate a pay off with them. If there is no agreement, then a short sale would not be possible.”

    It was my understanding from my realtor, who specializes in short sales, that the 1st mortgage would contact the second and work out an agreeable deal between the two companies and either decline the offer or counteroffer with their terms and conditions. Was I misinformed? Has anyone else had this same experience?
     

    • Dan

      The previous message has nothing to do with my situation.  I came across this discussion in another forum.  Does this person’s situation sound familiar to you Andy?  I’m considering a short sale, however, there are certain criteria that has to be met for GMAC to ok a short sale. Still trying to decide.

  • http://www.consumerrecoverynetwork.com/ Michael

    Hi Dan,

    You appear to be approaching the situation from a business position. Like banks do. I would indeed do the same.

    There are some questions I have:
    Is your state recourse or non recourse?
    Who originated the loans and who services them now?
    Are you okay with renting for the next 3 years or more?
    Have you spoken with a real estate attorney in your state?
    Have you reviewed resources available from places like youwalkaway?

    • Dan

      I live in Illinois which is a recourse state.  I have talked with a real estate attorney.  She recommended a short sale.  She warned me about being sued for deficiency judements. Here is the problem with that, should i even get accepted for a short sale the 2nd mortgage holder will get absolutley nothing and will most likely come after us for the differece after the sale.  I’ve spoken with 3 bankruptcy lawyers who’ve advised me to file for chapter 13 to either strip the 2nd loan and or enter a debt consolidation plan.  Due to our income, we would likely have to pay 100% of our credit card debt including the 2nd mortgage of 58k set up for a 5 year plan.  Well, this isn’t worth filing for bankrutcy to me.  We don’t qualify for chapter 7 due to our income.  We would definitley trip the means test.  Some Law firms charge 1000 dollars just to see if you can qualify!  Sorry, I’ll keep my money. 

      The first loan is the one that adjusts in 4 years with an increase of 400 dollars so I’m not interested in stripping the second loan with a chapter 13.  Bankrutcy isn’t an option for me.

      We are perfectly fine with renting for the forseeable future.  We’ve found numerous property’s in our area equal to the home we’re living in for less than half of what we are paying monthly.

      We expect to be sued for deficiency judegments.  I still see it as a better situation than to keep burning money each month in this losing property.

      We applied for the loan mod. about a year ago and was declined due to sufficeint income.  We then threw another 30,000+ away in mortgage payments into a black hole and have now again revisited our situation.  We both turned 40 this year and had a miracle baby….our first child that we were told wasnt likely to happen.  I couldn’t care less about losing this money pit of a home.  I want to improve my familiy’s financial situation and see that abandoning this mortgage is my first step.  I will add that I don’t fault the banking industry, I fault my own stupid decision to sign such a risky loan back in 2006.  We did 100% financing on an interest only loan.  It’s my fault for signing the papers, the banks were lucky enough to find my wife and I who threw caution to the wind and signed the papers.  I want out now, it’s  a complete losing property in which we have no equity and are 100k underwater with no sign of refinancing in the near future.

      Thanks for your reply.

      • http://www.consumerrecoverynetwork.com/ Michael

        Thanks for the additional detail Dan and congrats on the baby!!

        You have researched this and thought it through fully.

        You may already be aware of this but settlements on the deficiency balances after deed in lieu/foreclosure are a frequent occurrence these days. Yes, you could be targeted for suit by the use of sophisticated collection software that may suggest suing you will provide for a full dollar recovery. In my experience, you will still be able to settle the balances if timed correctly and provided you have funds available to take advantage of any deal made.

        Who are the loans with? I ask because each bank/servicer has SOP for handling a situation like this.

      • Dan

        1st loan is GMAC and 2nd with Chase

      • Dan

        1st loan is GMAC and 2nd with Chase

      • http://www.consumerrecoverynetwork.com/ Michael

        Short sale could work to remove risk on the first.
        Chase will likely look for a few grand and no release on the deficiency in the short sale paperwork. You could negotiate at that point, but it may delay or derail the short from going through. You could later target 20-ish percent on the settlement.

        The whole thing takes time and patience.

        Dan, if you are interested in speaking about this one on one you are welcome to contact me. No charges involved, just the ability to get into details that would be needed to map out a strategy. If you are open to it, email me: michael at consumerrecoverynetwork dot com.

        I may not have much time to commit after the first week of the year, but do have time this week and the first part of next.

      • http://www.consumerrecoverynetwork.com/ Michael

        Short sale could work to remove risk on the first.
        Chase will likely look for a few grand and no release on the deficiency in the short sale paperwork. You could negotiate at that point, but it may delay or derail the short from going through. You could later target 20-ish percent on the settlement.

        The whole thing takes time and patience.

        Dan, if you are interested in speaking about this one on one you are welcome to contact me. No charges involved, just the ability to get into details that would be needed to map out a strategy. If you are open to it, email me: michael at consumerrecoverynetwork dot com.

        I may not have much time to commit after the first week of the year, but do have time this week and the first part of next.

      • http://northeast-properties.com Andy Faria

        Hey guys,
         
        I just read thru and felt like chiming in.
         
        Short sale would probably be a good move here Dan. In approving the short sale GMAC will almost always allow a certain amount to go towards settling the Chase account. Most of the time the 1st will allow between $3k and $6k to be paid to the 2nd (and they will usually cap it at 6% of the 2nd balance, in this case it would likely be $3408) 
         
        In my experience, the bigger lenders as 2nd’s are easier to work with than a small local bank or credit union would be. You may be surprised to find that Chase takes what the 1st is offering and releases you completely… it happens all the time.
         
        Of course, Chase is not REQUIRED to release you from the deficiancy completely. They could opt to just release the lien and allow the short sale to go thru, but reserve the right to come after you for the difference later. Like Michael said though, these debts can be settled down the road, fairly easily and usually at a steep discount.
         
        Keep in mind, short sales are always a negotiation. If you don’t like what Chase (or GMAC for that matter) are offering, you could always refuse to accept it, and negotiate for better terms. Neither lender is hoping to foreclose an my experience is that you can almost always work something out that will satisfy both lenders, and allow you to move on with your life.
         
        Good luck!

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