Why shouldn't I walk?

<em>Let's pretend that hypothetically I stop making payments on 2/1. How long can I live there "rent free" before I should consider finding an apartment or other housing?</em>





AV - you would have to miss three consecutive payments before the bank released a Notice of Default, so that is at least three months of free rent (like others mentioned though, once you miss the first payment, that will show up on your credit report and will likely hurt your chances of getting an apt without a co-signer). Then it would be another three months before the bank releases the Notice of Sale (not sure if you can live there during this time though), then shortly after that the auction to sell your place would happen.





If you can get someone to co-sign on the lease (parents?), or take out the lease in their name then you could get your minimum of three months rent for free, that is 6K for your credit cards. NSR is incorrect that you are de-frauding the bank, you are just adhering to the laws of the state of CA.
 
<p><em>NSR is incorrect that you are de-frauding the bank, you are just adhering to the laws of the state of CA.</em> </p>

<p>He is still intentionally squating when he has decided to reliquish the property instead of paying and instead of turning over the property, is forcing the lender to go through legal eviction and foreclosure.</p>

<p>The purpose, or as traffic school says, the spirit of the law, that causes the foreclosure process to take 120 days, on top of the 90 day lag or more that lender will take to even start the process is because the lender DOESN'T WANT YOUR PROPERTY and the state doesn't want lender's grabbing properties for minor delays or oversights on the part of the borrower.</p>

<p>If he chooses to stop paying, not is incapable of paying, he violates the contract his rights are void, if not under the letter of the law to prevent instanteous evictions from lenders, in the spirit of the law.</p>

<p>At best it is unethical to force the lender to enforce the breach contract terms to remove you from the property you don't want and refuse to honor your commitments on. </p>

<p>Let's have some fun, declare bankrptcy and bring this set of forum entries in and see how it affects the judge's interpetation for resolution of the debts.</p>

<p>I don't care what the actual legal terms are, IMHO, as soon as you stop payment with the intent to default, you should forfeit the home. Anything other is stealing from the investors, neighbors and employees of the various financial institutions and States.</p>

<p>If you want hard-ball, I hope the bank plays hard ball and goes through the paper the intent to hang your butt with the debt after seizing your property for omissions, fraud, anything they find they you didn't fulfill your obligations.</p>

<p>If you want out, sell.</p>

<p>If you can't sell for what you owe, work a short sale with the bank.</p>

<p> </p>

<p> </p>

<p> </p>
 
<p>NSR - I have no intention of actually doing this. Or declaring bankruptcy. My whole reason for asking for advice was to evaluate my options. I was just curious as to what happens and how the whole foreclosure process works. If the banks want to go through my records let them, I did not lie on my applications. </p>

<p>I'm going to list right after New Years at $299k, which in my market is a bit of a wish price but a level at which I could cover the shortfall with credit cards, walk away with more CC debt and a tough lesson learned. But if after a month I have no traffic and no interest I'm going to cut the price to what I think would sell it that day. At that point it will be a short sale. And I'll just have to see what happens. As others have said on here, it's not a sure thing that the bank will accept the short sale. What then? Should I just diligently make my payments until my loan resets and then be forced out when I can't afford the reset? I'm not looking for pity or anyone to tell me how stupid my decisions were. I made them and I have to deal with them. I'm looking for a way to exit this as quickly and painlessly as possible.</p>

<p>Rickhunter - </p>

<p><em>Where did you live before? Rented?</em></p>

<p>I rented in Irvine for 2 years before moving to Aliso. </p>

<p><em>Why did you buy? Investment? Better chance with girls? What were you thinking at the time??? </em></p>

<p>I'll cover these 2 together. Lol. Yeah I wasn't getting any sharing a 3 bedroom so I figured what the hell, this has to work.. Honestly though I bought because at the time I was looking at it as $1,400 to rent a one bed (or more, rents still seemed to be climbing at that point in summer/fall 2005) and I mistakenly was thinking of it in terms of mortgage vs. rent, i.e. $1750 mortgage vs. $1,400 in rent, then with the tax savings I'm even. I realize this was extremely naive, but also with prices rising the way they were I figured what the hell even if I can't afford it now I'll refi in 2 years and be fine. And like a lot of others I'm now stuck living with and dealing with that decision.</p>

<p><em>Why did you buy a 1 bedroom instead of a 2 bedroom? Affordability?</em></p>

<p>Exactly. 2 bed condos 2 years ago were well beyond my affordability, heck I was only making $55k and shouldn't have even qualified for the mortgage I got. Plus I was over living with roommates and was looking forward to living alone. </p>

<p><em>What kind of car is it?</em></p>

<p>It's an 01 Honda. Not exactly luxury, gets great mileage, runs great and is cheap to insure.</p>
 
If 299K is a "wish price", why even bother starting at that number ? I wonder if you couldn't call the bank and explain the predicament....and ask them up front about a short sale amount they might consider. Can't hurt. Good luck.
 
<em>I don't care what the actual legal terms are, IMHO, as soon as you stop payment with the intent to default, you should forfeit the home





</em>Not caring what the actual legal terms are is NO_SUCH_REALITY. You have to care what the legal terms are. I see what you are saying, but the law is the law and unfortunately it can be exploited in more ways than one.
 
Paperboy - Thanks for the answers.



Looking at your responses. You made a decision to buy first and then you did your homework.

What I see with all these people trying to give you scenarios on how to handle your situation is this...

You thought it out before buying and the market tanked.

You're thinking it out with these people on what to do next, and what you end up doing will probably NOT be the best way out of it.



Thinking too much got you in trouble wouldn't you say? Forget about how you should have never qualified for the loan.

You knew this going in. Your first thoughts should have been...

I know how much I make. I know I shouldnt buy a 1 bedroom CAUSE I CANT SELL IT!

and FINALLY, I cant afford it!



So, without thinking too much...What's the best way to get out of your mess??? I know you know what to do.

Respond to me on what you're thinking about doing. Save these people their time will ya?
 
<p>"You thought it out before buying and the market tanked"</p>

<p>Sorry RH, the way I read his story, he DIDNT think before buying. But I still agree that there really arent many options here.</p>

<p>AV - If you called the bank and explained to them your situation, I wonder how hard they would try to move you into a fixed product? If they did do that, would you consider it? </p>
 
AV - NSR is talking about a "deed in lieu", which is actually better than a foreclosure on your record. If you do short sale the property talk to a RE attorney as well. FYI - certain banks respond better to a short sale if they can "re-capture" the loan.
 
Zvillegas - i was reading somewhere that the 2008 FICO model will treat a deed in lieu of foreclosure the same as a foreclosure.
 
qwerty,





<em>"i was reading somewhere that the 2008 FICO model will treat a deed in lieu of foreclosure the same as a foreclosure."</em>





Can you find the source of this? It would be interesting fodder for the main blog.
 
This was from Sunday's OC Register. They briefly mention deed in lieu of foreclosures:



Short sale: If the lender won't modify the loan to make it affordable, then the owner should ask for a ?short sale,? which is when a lender agrees to accept less than what's owed on the property, which is sold. The owner will still need to prove financial hardship. And the difference between the sale price and the debt owed may be taxed by the IRS as income. (President Bush has asked Congress to change that provision of the tax code.) If the loan servicer rejects a short sale request, the next option is ?deed in lieu,? which basically means turning the keys over to the bank instead of an official foreclosure process. Short sales and deeds in lieu hurt one's credit but not as much as foreclosure, Der Torossian said.
 
<em>"Short sales and deeds in lieu hurt one's credit but not as much as foreclosure, Der Torossian said."</em>





If the article linked by qwerty is correct, this statement is no longer true.
 
Reason - I'm not subprime, so unless I miss a few credit card payments or something my FICO is above 660. Plus that doesn't address my affordability problem, all that does is lock me in for 5 more years of paying interest only.
 
AV Paperboy,



I think its great that you are trying your best to be responsible about the debtobligation you signed up here but I think you really owe it

to yourself to consider how the decisions you make now may impact your future. As far as the moral aspect, this lender knew or at least should have known that the debt you were taking on was not sustainable and as such I feel they bare some responsibility here. I think in your case I would take the moral considerations off the table and do what is best financially for AV Paperboy. The question I I would be asking the experts would be: in 7 years will I be better off financially having foreclosed and maybe BK'd or will I be in better shape doing whatever I need to in order to avoid foreclosureBK? You need an expert to answer this question for you. Hopefully someone can refer you to an expert for a consulation. Take the moralemotional aspects off the table.
 
<p>Just my two cents... but if this were me.... I'd work a second job and get to it. I'm not above working more to get more. Its not exactly the sublime elegant path.... But it will work. Believe me, this is how i'm paying for Christmas and paying off my credit cards. I been making 2-3K monthly payments. Have I done anything fun for the last few months.... no. I'm in fact spending VERY little in the way of fun nowadays. Its not fun and believe me that 2-3k would easily pay for christmas and then some. But I NEED to do this before it gets too crazy.</p>

<p>-bix</p>
 
AV Paperboy,





You should have never been approved for this loan and you have fessed up to it. IMHO banks have a responsibility of providing financial advice and directing clients into reasonable products and getting a 300K loan with nothing down, only 500 in the bank, and making less than 60K / yr was not a responsible loan on the banks behalf. I am not saying that you are not responsible for signing the docs, understanding the market, making payments...etc. But they are the professionals and this is what they do for a living and make millions doing it.





So if I was you I would first call the bank and attempt to make a short sale. Don't bother listing it for a "wishing price" because you will never get it. If the bank will not approve a short-sale I spend a few hundred bucks to sit down with a tax lawyer and CPA to figure out what the possible impact will be if you go into default. If a default is suggested then immediately find another place to live while your credit is good and can find an apartment you like. Once that happens you should immediately turn in the keys and not live rent free for 3 months or however long the foreclosure takes.
 
AV Paperboy,



As my high science teacher used to say: "if you're going to be dumb, you gotta be tough."



Re-reading your initial post, I see that although you understand the consequences of your actions, you really don't want to accept them. If you did, you wouldn't have asked for advice on how to get out of them. You don't want to accept the hard work and sacrifice that lay ahead of you because of decisions that YOU made. The fact that the value of the condo has declined really shouln't be the major factor in your decision. It just eliminates an option right now (believe it or not, at some point in the future, this condo will be worth more than you paid for it).



As for the condo, you need to do one of two things -



1) Figure out how to pay the mortgage and hold onto the condo. You can make you nut now but it appears you've already given up on paying when the rate changes. Why accept failure three years before anything happens? In that time you can solve this problem by either working with the bank on a better loan, selling the property, adding a room mate, getting a second job, etc. You just might be able to actually afford it if you're willing to put the effort into keeping it.



2) Work with the bank now to get out of it. Short sale, accept the consequences and walk away with a lesson learned. At least you'd be proactive and honest. And yes, that does make things better for you if you choose this route. But, I think that it will be worse than most people are saying. There will be a lot of negative consequences that don't need to happen. Only choose this option as a last resort.



Note I didn't mention foreclosure. You don't need to be foreclosed, so don't do it. In this case its the wrong course of action, immoral and hurts other people.



And pay off your credit cards. It may take getting a second job or a room mate but you spent the money and now you have to pay it back. Oh, and dropping the cable and gym membership will not kill you. Sacrifice is what truely gets people ahead - financially, emotionally and mentally.



2, 5 , 10 years from now, when you've gotten your financial ship back in order, you'll be a better person for it. You'll have a sense of worth and pride that can't be bought. Its definitely worth it. Don't trade your self respect for a few thousand dollars. I don't care what other posters say, its worth a lot more than that ...



Good luck,



FH
 
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