Hindsight

NEW -> Contingent Buyer Assistance Program
Suprimer, you're never going to be able to do a straight-up refi in the next 3 years.



Basically your choice should be to stop making payments and see what Bush's new 30 day moratorium on 90 day late mortgages gets you. If the bank offers a good enough deal, take it. Otherwise accept the foreclosure.



When to do this is an open question. Sooner saves you on the extra payments you skip. But the banks will probably offer better terms later as they become more desperate. I suspect in a year an offer for a 30 year fixed with no principal reduction will cause the relevant bank officer to drop on his knees and sing the praises of the Lord (or whatever his/her equivalent is) although of course they'll still harumph and claim you're squeezing them mercilessly for negotiating purposes.



However, before you accept a 30 year fixed, make sure you can handle it! If you can't survive the loss of one income (you sound like double-income) it's too much. **** happens. And is living in that house worth being house-poor? For me there's no luxury better than not needing to pinch pennies.
 
Man....how can you guys all suggest just walk away first without atleast trying to get a short sell approved? They walk away with no impact to credit and they won't have to pay taxes on any of the losses....according to the bill that just got passed.





I view walking away, especially that they can afford right now, as a last resort method.
 
Odds are we will ride out the 3 years, we are not strapped and eating cat food or anything, just a MAJOR kink in our plan has us looking at future options. The broker that did our loan had the b@lls to call unsolicited to offer help with any short sale or lender negotiations like he knew the loans he did were bad, I said sure come on over and i will activate your dental plan. He never showed. We have good income good credit bad LTV. How short? Places around here are on the market for 100k less than I owe and not selling. Is a bank willing to eat that much? I suppose the already got almost 80k out of us in interest only payments so they are looking at a 20k loss. Am I right or way off?
 
<p>"<strong><em>Am I right or way off?</em></strong> "</p>

<p>You are way off. You owe $100K more than what the property is worth.</p>

<p>If I was you, I'd gamble and wait it out. You might get lucky and, in the best case senario, you get the bank to take a cramdown at a future date and get to stay.</p>

<p>Worst case senario you walk. What's the difference between now and later?</p>

<p>Time is on your side IMO.</p>
 
<p>"I said sure come on over and i will activate your dental plan." - LOL!!!</p>

<p>I gotta believe there are brokers out there who are constantly watching their backs now. I imagine in the next few years some of these folks will "disappear" on their own or by other means.</p>
 
Short sales are a big ding on your credit too. I can't say whether it's better to accept the larger ding of a foreclosure in return for 4 or more months free rent and the vastly lower hassle of a foreclosure. The big advantage to risking foreclosure is that's the way you get cramdowns/refi opportunities/etc. in the current system. Banks are overwhelmed and they're not going to do workouts unless they *have* to. What subprimer thinks he wants (a 30 year fixed on more or less the current balance) he'll only get from a workout.



It' a big moral hazard issue, but that's the way it is.
 
<p>If I had to lay odds on OP getting a workout today, I'd put it at worse than 100 to 1.</p>

<p>If I had to lay odds of OP getting a workout sometime in the next 30 months, I'd lay around 1 in 15.</p>

<p>This isn't a moral hazard issue anymore. It's a straight up trap.</p>
 
Mino, You CANNOT do a short sale unless you are already in arrears on your payment. They will not even look at an offer if the borrower is current on the mortgage. Plan on not making your payments and then try a short sale in say 3 months when you are 90 days late. Secondly, nowhere on a credit report does it say "short sale." A short sale does not affect you, the late payments do.





Money saved in your checking, savings, retirement acct, etc. is more important than credit. Would you rather have 10k in savings and 1,000 owed on a credit card, or a higher house payment, 1,000 in savings and 10k on a credit card? It sounds like you doubled your rental payments. If you go back to renting you can probably save close to $1,000 a month! That's after-tax money as well. Even if you saved half that every month for the next three years, you'd have $18,000.





I wouldn't be surprised if there were even more lenient guidelines for FHA loans in 3 years. You don't even need credit scores, and you can even have open collections. You just need to not have late payments. So you get a foreclosure on your record, big deal. Nobody is going to say anything. Wait 3 years and apply for a new purchase. You should be able to save up a down payment.





The banks cannot come after you for the purchase money AND the governmentt just gave you a freakin' freebie by waiving the debt forgiveness tax! You have nothing to lose except a stupid 3 digit number created by the Fair & Isaac Company. Go back to renting, and start saving as much as you can. You can start over.
 
I am speculating that the only "workouts" will be those for which the lender can charge more fees, and cover their rear with absolutely no stated income mistakes on the original loan. This time around they will not be able to get away with saying, "But we didn't know."
 
Any congressional or executive decision to freeze the foreclosure process any period of time is beyond lunacy. What a joke is all I can say. You cannot just "freeze" a mortgage note. The loan was underwritten and sold with the intention of generating timely cash flow payments. The servicing bank is still going to have to pay the actual brokerage firm that wrote the subsequent mortgage-backed security. The servicing company/bank will lose money and so will everyone else who is downstream.



This is just the Bush Administration and our mentally challenged Congress's way of saying...."we care about you Americans. We may be stupid, but we care about you."



Let's trade one problem for another problem. What a joke.
 
First of all, I must say that I do support President Bush (this is a general statement not directed to any policies related to the housing mess)





Secondly, I must state that I believe that the vast majority of "slippery slope" arguments are an expression of intellectual laziness.





That having been said, the precedence this would set is unthinkable. When the government can step in and invalidate perfectly legal contracts that people/organizations entered into freely, capitalism is dead.
 
A cramdown is when a lender is forced to take a lower interest rate or a reduction in principal in exchange for the borrower not defaulting. If the lender knows the collateral securing the loan is worth far less than the loan itself, they are better off negotiating more favorable terms with the borrower rather than taking the less valuable collateral. It is kind of like the Godfather's deal you can't refuse.
 
They have a point about waiting and positioning yourself for a cramdown with your lender. If you can afford a 30 year fixed with no principal reduction, and if you want to stay in the home, there will come a time when the lender will kiss your a$$ to stop you from defaulting. I agree with Fair Economist, about a year from now, you will have the power. If you meet with your lender and tell them you both know the property is worth significantly less than the loan balance, and if they don't work with you, they can have the house. The next words out of their mouth will be "What can we do for you?" Tell them you want to renegotiate your loan terms into a 30 year fixed, no points, with a low interest rate that will allow you to afford the payments. Don't ask for principal reduction (well, you can always ask) because this is the area where they will have the least flexibility. If you tell them in no uncertain terms they must do this for you or take a huge loss on this loan, they will make a deal. Also, and you may need an attorney for this one, make sure this is not a refinance, but a renegotiation of your original purchase money loan. You don't want to give up your non-recourse protections.
 
<p>The big question is "How low will the lender go?" </p>

<p>At what point, if at all, will the lender say, "Okay, I've had it with these turkeys who want to pay much less than they originally promised for their house. I would rather get new people in this house even if it means losing money."</p>

<p>I would not want to see someone who had been paying just the interest portion (or a low teaser rate) of their loan for 5 years then essentially get a "new loan" based on the current, greatly reduced price, by threatening to walk away. There must be a penalty for breaking one's word.</p>
 
<p><strong><em>The big question is "How low will the lender go?"</em></strong> </p>

<p>The house next to me sold 24 months ago for $650K. Today? I doubt they could get $450K and they've made meaningful improvments to it (new roof, ect).</p>

<p>If the lender has any brains, they'll start taking the cramdowns now. But hey, they don't, so my best guess is they'll resist as long as they can, and then they'll give in and take anything from anyone so long as they don't default.</p>

<p>It is possible to get another 15-20% off of todays prices by mid summer. The shape of the bubble on the way up will more than likely mirror itself on the downslope. It usually does in a bubble.</p>
 
I can afford a conventional 30 yr. fixed my payment wont increase that much as I do NOT have the low teaser rate loan.

my loan is as I have been told "The best of the bad loans" 80/20 the 20 being high interest with the payment being interest only. The 80 is 6.5 interest & principal, both fixed for 5 then go adj. Who wouldnt want to knock $80- 100k off their home loan but as I stated before and agree that I bought the house for the contracted amount and I will pay it just defuse the bomb and get me into a conventional mortgage at a reasonable rate. Seems like the LTV is the only problem for me and I really want to take advantage of the low rates that are being offered these days.
 
<p><strong><em>"Seems like the LTV is the only problem for me and I really want to take advantage of the low rates that are being offered these days. "</em></strong></p>

<p>Well, you have your eyes wide open kid. That's exactly the situation.</p>

<p>I have (since 2003) been telling anyone who would listen that at some point these ARM's were going to bite the lenders and borrowers in the ass. The conversation several million homeowners will have will go something like this:</p>

<p><em>"Mr. Customer, you've been a great client of XYZ bank. You've made every payment on time, and we certainly appreciate your business. However, since we made your loan a couple years ago, things have changed in the market, and we no longer offer a product like that. Further, your home has lost value and now has negative equity. So, if you could just write us a check for 20% down we'll need as paid in owner's equity to proceed, and bring in your tax returns for the last five years, we'll get started and see if we can help you with your refi.</em></p>

<p><em>Oh, and by the way, we'll need another check to cover the negative equity today, as your loan is in violation of our loan covenants covered in our original agreement."</em></p>

<p>Ok, maybe it won't go exactly like that but you get the idea. I knew lots of folks who did residental workouts in 1993 who had exactly this conversation a couple of times a day with customers.</p>
 
<dt>A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain. </dt><dt>-Mart Twain</dt>
 
<p>Is the same bank holding the 80 and the 20? If not maybe you will find bargaining with the 20 easier, and I'm sure they live in fear of being totally wiped out. Sometimes the 80 and the 20 will be in different departments, which never speak to each other.</p>
 
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