We Are Underemployed And Stuck in a Million Dollar Home. – ConfusedSD


“Dear Steve,

In 2005 my wife and I were both working and bought a house. The original value of the house was $1mm+, we put over $250k down, and we were both making more than $250k combined. In 2007 we both lost our jobs and were unable to find employment that paid as well as our last jobs.

Last year our house payment nearly doubled (we were in an option arm which reset and in which the minimum payment negatively amortized and reached its maximum, but when we made the decision we could easily afford the most expensive payment)

The house is now worth less than our mortgage. We have accumulated unsecured debt of $50k and are now sinking slowly but surely.

We have about $80k in securities and cash but have been terrified to touch it for obvious reason.

We don’t know what to do. We cannot get ahead and so cannot pay down the debt at any pace. Our house and our mortgage are moving in opposite directions.

We’ve contacted our bank but they’ve not replied to our requests.

We’re simply stuck and don’t know how to proceed. Advice?


Dear ConfusedSD,

First, let me just say how sorry I am that you are having to live through this situation. I know it is painful and stressful.

So what are we going to do?

It was an excellent course of action that you have been attempting to contact your bank for help. If you don’t have proof that they received your requests for help I would suggest that you send your request again by certified mail, FedEx or UPS and get delivery confirmation on that package.

This may be important if bankruptcy judges are given the authority to modify primary mortgages. We’ll have to wait and see if that becomes law soon.

When you write to your lender, along with asking them for help to modify your mortgage, ask them for information on how to do a short sale on your home. A short sale allows you to sell it for less than it is worth.

You are telling me that the house payment is not sustainable, if you can’t afford to pay it, stop paying it. That will get the attention of the lender. Take the money that you could have afforded to send to the lender and put that into a savings account. You may need that money to start making your payment again if the lender agrees to some sort of modification.

The option ARM loans were a nightmare and the next massive wave of foreclosures to hit are going to be as a result of those. You are not alone.

One option to think about is to use 30K or so of your assets on hand to do a lump-sum debt settlement on the credit card debt. If you go the debt settlement route, find a professional company to assist you with the debt settlement. They will know the current best terms the creditors are offering.

Then stay in the home but don’t make the payment as I stated above. If the lender does not agree to give you any sort of lifeline you can use part of your remaining assets to find a new place to live. Renting is a really good idea right now.

If the lender is still being an ass about the old home then you might just have to go bankrupt to end that unsustainable obligation.

Does that make sense?


You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.
Steve Rhode
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