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Dear ROD
Posted by steve on March 26, 2008 at 2:30 PM
In Reply to: Re: Conserve your cash and energy. Dee posted by JK (the other JK) on March 26, 2008 at 1:23 PM
: :
: ROD
Interesting point. I sleep soundly and will continue to do so. If you read the posts leading up to your follow up, you will read:
1. I am current on my loans. So ROD, you can stop worrying about the Bank and the very unreal possibility that they will lose money.
2. I initiated a conversation with the Bank regarding a reasonable solution for both the BANK and me as the entire geographic area where the property is located is depressed,
3. Their response was that they will only talk to me after I am 146 days in arrears, so I am going to suspend payments based on their instructions,
4. I further suggested they allow me to rent the property and the BANK be allowed to take the rents, as is their right per the D of T.
5. The BANK informed me that the property is mine and if I want to rent the property I should, but they expressed no interest in taking the rents. NOW ROD, given that situation, wouldn't you sleep soundly also, or would you, on principle alone, continue to make payments on an upside down property where there is no chance to sell it in the given market?
At what point, ROD, would say enough is enough and stop throwing your money at your Bank? When the there is no equity in the property? When the property is worth 50% of the o/s loan balance? When the property is worth 25% of the loan? When ROD? You obviously are fortunate enough to not have to make that decision or you wouldn't be pestering me with your smug questions. Good for you, ROD. You get a gold star for your investment savvy. AND ROD, have no fear, I'll be penalized for needing to make this decision as my credit will be shot. I hope that's comforting to you. Unfortunately ROD, there are thousands out there that are forced to make that decision. Personally ROD, I've decided to cut the cord at a time when there is still some value in the property, and perhaps enough that the bank gets paid all the o/s loan balance. Does that sound irresponsible to you, ROD? I do this because I value the money in my own bank account more than I value the Banks money. Similarly, the Banks cares as much about my money as I do about theirs, as is obvious by my conversation with them above. Face it ROD, banks take calculated risks when they make loans, all reflected in the interest rates we pay. One major risk component is the risk that the collateral will decline in value. Neither party wants it, but it's a cost of doing business. It happened in the 80's, it's happening now, and it'll happen again. I believe in full disclosure, ROD, so don't worry about my tenants. In fact, I'm doing them a favor as they've fallen on hard times. But I'm sure that they're comforted knowing that you're the bastion of their rights.
TELL me ROD, when would YOU make the prudent financial decision to stop making payments? If you give me some high road blah blah about living up to your financial obligations because you owe it to the bank or you've signed a loan doc and your signature is your word, etc. when your property is upside down, you're either young, you don't own property and mistakenly believe people want to hear what you have to say, extremely wealthy, a liar, or a fool. Somehow ROD, I don't think you're wealthy or you wouldn't be wasting your time on a site where people are trying to get straightforward information about very personal and difficult financial issues. I sleep fine ROD.
Thanks for your concern.
Steve
Steve,
: : How would you sleep at night knowing the bank is losing money because of you but you are collecting rent in the meantime that you have no intention of giving to them. Also consider the hardship to the renter when they have to move on short notice after the bank takes it back or that the bank now may have a hostile occupant to deal with. Now you have given them two messes to clean up. : : Personally, I think if you are going to walk, just walk. : :
: : ROD : :
: : : :Dee
: : : When I spoke to the loss mitigation Bank rep on the phone, I asked her if we could work an arrangement where I put a renter in the home, the bank collects the rents, and the bank discharges us from responsibility on the loan (deed in lieu, etc.), her response was, "If you want to put a renter in the home, that's you're choice." She expressed no interest in the Bank wanting to collect rents. I think that is a foolish thing for a rep to tell a person considering foreclosure. Granted, my initial (and present) gut feeling about the real property sophistication of the rep is that she is not. Also, in the yellow left hand column of the this page are several links, one titled 50 State Foreclosure basics. In the Ca Code section is "rent skimming", which caught my attention. From my initial read through, rent skimming does not apply to me because I've owned RM property for longer than 1 year. (I'd appreciate some input on this matter if anyone knows??!!) So, it APPEARS that I can put a renter in the property and collect rents during the process. CRAZY, I know. Thanks Steve
: : : One more thing, I highly recommend that if you're considering giving your property back to the bank, that you keep detailed records of all your conversations with all Bank reps and send them a copy of your understanding of any conversations. Banks are held to a high standard and misleading information they disseminate could be evidence of dealing in "bad faith", something they will bend over backwards of which not to be accused. : : :
: : : Steve.
: : : : Have you looked into renting and keeping the rental income and what the bank might do because you're not making payments? Is the bank allowed by contract to any rents collected while you're not making payments? Ive seen this asked before and I've never saw an answer so Im just wondering if this is something that you've looked into?
: : : : Dee : : : : : Ward
: : : : : Thanks for the input. I tend to agree with you that foreclosure is a better alternative than SS. Besides, we've contacted the Banks loss mitigation department, explained our situation, and got very little input or energy from them to work out any sort of arrangement. What is unfortunate is that it is in both ours and the banks best interest to work something out NOW before the value of the property drops any further. An economic upside to allowing foreclosure is that we can rent the unit during the foreclosure process and receive rental income. Question:
: : : : : If we do suspend mortgage payments and force foreclosure, what is the effect of a foreclosure on credit scores?
: : : : : Is there any rule of thumb on the credit hit? 15,20,30% decrease in scores? Or a 100, 200, 300 pt drop?
: : : : : Many Thanks Steve : : : : : : Steve, : : : : : : IMHO, I would walk. : : : : : : #1. Your credit report would simply show you were late making X number of payments. : : : : : : #2. No, because the foreclosure of any senior lien wipes off title any junior lien. : : : : : : #3. Intent to occupy is demonstrated by a person’s conduct. So if you changed your voting district, driver’s license, children’s school…all in anticipation of moving and then didn’t at the last minute, I’d say your intent to move to the new locale was genuine. : : : : : :
: : : : : : -------Ward : : : : : : =========== : : : : : : Is it better to walk or attempt to negotiate a SS under the following circumstances:
: : : : : : My wife and I own a property in Rancho Mirage, CA.
: : : : : : Purchase price $385k. 80/10/10 financing. The HELOC second was refinanced into a better interest rate, but the balance was not paid down nor used for anything other than the purchase. The 80 first is original PMM. Both are with the same lender.
: : : : : : Current MV is +/- $350k.
: : : : : : Total P&I and taxes is +/- $2400/mo. including a very expensive HOA.
: : : : : : When we purchased the property in '04, long-term rents were around $2500/mo., so we felt comfortable in case we needed to rent to cover expenses. Since, with the slump in the sales market, there is a glut of rentals on the market and l/t rents have plummeted to $1250/mo.
: : : : : : We no longer want the property. We've actively but unsuccessfully tried to sell the property over the last several months, dropping the price from $439K to $389K.
: : : : : : My questions are:
1) If we negotiate a SS, what are the effects on credit? I understand that it's "bad", more specifics would be appreciated.
2) If the Bank forecloses on the first and uses the "one action", does the Bank have recourse for the HELOC even if the two loans are from the same Bank and were used to fund the same purchase?
3) What determines if the property was purchased as a primary residence? Is it the buyers intent at the time of sale? In other words, we live and have a home in the Bay area that has been our primary residence for tax purposes. Can it successfully be argued that when we purchased the RM home it was our intent to move into the RM home as our primary residence (but were forced to stay in the Bay area for reasons beyond our control), thus preserving the primary residence protections?
4) Under these circumstances, is it more advantages to SS or let the bank foreclose? : Vacant homes are a huge liability and are at risk for vandalism. The moral thing to do would be to #1 disclose to your tenant the situation and put them on a month to month rental and #2) hang on to the rent to give to the bank if they decide they want to take it. If not you should consider donating the funds to a charity. Karma can be a b@#$%.
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