Why shouldn't I walk?

NEW -> Contingent Buyer Assistance Program
<p>2 of our greatest presidents--Lincoln and Truman borrowed money to start businesses that failed. They spent the rest of their lives trying to repay people. I think Truman succeeded after his presidency because he made a lot of money giving speeches and such.</p>

<p>If it ever occurred to them to welch, I don't know about it.</p>

<p>Character. . .priceless.</p>

<p>However I admit to being somewhat inconsistant. If it's hopeless, well, it's hopeless.</p>

<p> </p>

<p>See the new thread of ISM's friend. I advise to abandon Cape Coral property because hell will freeze over before anybody makes any money on that puppy.</p>

<p> </p>
 
LawyerLiz, it is rare that I find myself agreeing with the moral stance of a lawyer. I think that i find myself agreeing with you says a lot about your character. And while I agree that, by definition, something that is hopeless is hopeless, that doesn't seem to be the case with AV Paperboy.





Let's review the facts:





He bought a condo for $290k.





His estimate of the value of that condo is $260k to $270k.





Living up to his word will cost $20k to 30k.





There is no hardship here. He hasn't lost a job or come down with a terminal illness. He simply realized that he paid too much for his condo and wants to avoid future losses.





If I recall correctly, Casey Serin signed a promisory note with Countrywide for 50k over 10 years at 0% interest. (I am positive about the dollar amount, and the 0% interest rate. I am not certain about the 10 year duraton) Should AV Paperboy work out a similar deal, we are talking $2k to $3k a year for the next 10 years. Personally my integrity is worth far more than $250 a month. Apparently the same concept doesn't apply to everyone.
 
<p>I dont understand why everyone hear thinks its so hard to save $40K. The guy makes $75,000 a year. Setting aside $40K over 2-3 years should be quite easy and he wouldnt have to sacrifice his life. You guys make it sound like he would live miserably for the next 10 years. Give me a break! </p>

<p>My inlaws sponsored their cousin's family 4 years ago (5 people). The father and mother took on 2 jobs each and the 2 older daughters took 1 job each while the youngest went to school. These jobs weren't high paying skilled work - think gas station, etc. Fast foward to present day. The father and mother both work only 1 job only now. They live in a 2 bedroom apartment in Orange. They own 2 cars outright (used of course). The oldest daughter just finished schooling to be an xray tech and the second oldest is in nursing school. And the last daughter, she is sophomore in a cal state! Things are slowly coming up for them and 4 years from now, few people will realize that they had $0 in the bank just 8 years ago.</p>

<p>My point is that saving isn't hard and one doesn't need to live miserably to do so. If this guy wants to absorb the difference and not ruin his credit, more power to him. </p>
 
<p>I did see the thread on the Florida properties, fortunately I don't think hell needs to freeze over for prices in So Cal to recover, however realistically if it's 10 years before I'm even back to even and I can't refi...</p>

<p>I understand the moral argument, and if I didn't have some moral issues with this I wouldn't 1) be looking for other options or 2) doing everything I can to avoid bankruptcy. I know that's the easy way out and ultimately without paying off my credit cards I can see the foreclosure pushing me into bankruptcy, I don't see any other way out.</p>

<p>Rents in my area have begun to slip, assuming for a minute I could rent my place today at $1,295, which my neighbor gets and found a good tenant pretty quickly, and I move into a place paying $700 a month, I'm paying $1,355 between rent and the shortfall on the condo. If I use the $655 I'm saving a month and even if I scrape together another $300 or so a month and pay $1k in principle on the 2nd in 2 years, I'm looking at owing $265k on a place that is valued at $225k and still having $20k in credit card debt. I still won't be able to refi, the best I can hope for is to restructure my loan. </p>
 
<p>Sorry was typing while others replied...</p>

<p>My place isn't on the market yet so I don't have a true idea of it's value, however a neighbor with a place that isn't quite as nice as mine, mine is an end unit with a lot more windows but otherwise similar sat on the market for 90+ days at $279k. I notice that the for sale signs are gone this morning, not sure if she rented or sold, will try and find out over the weekend. I'm being very optimistic assuming a $20k loss, if I get a final selling price of even $279k, I'm looking at a $36k loss with 6% commission. </p>

<p>Again all this will be sorted out once I list.</p>
 
<p>AV - what is your monthly spend outside of the housing? I don't want to keep saying this but I spend a lot less than $2200 a month which is what you are left with after the mortgage. You said you might be able to scrape together another $300 or so. You spend $1900 a month? I am NOT suggesting you live a life of ramen noodles but I am sure you can spend a lot less and live a very comfortable lifestyle. </p>
 
<p>This is per month:</p>

<p>Take home - $4,100</p>

<p>House/HOA - $1950</p>

<p>Utilities - $180</p>

<p>Gym - $30</p>

<p>Cell - $40</p>

<p>Credit cards - $600 (this is more/less min pmts)</p>

<p>Savings - $250</p>

<p>Car Ins - $110</p>

<p>Student Loans - $225</p>

<p>Gas - $150</p>

<p>Groceries - $200</p>

<p>Other - $200 (I take $50 or so out of ATM per week) </p>

<p>I own my car outright.</p>

<p>Other includes Target, occasional (very) dinners out, haircuts, lunchs, things like that. The remaining $150 I keep as extra "float" in my checking to cover things like dentist, eye doctor, clothes, etc. I have no extra money to pay more than the mins on my credit cards, and if god forbid I have some kind of emergency it's all going on the credit cards because I have no emergency cash. If I really needed to I could get rid of internet, the gym and all but the min cable at home and save an extra ~$100/month. </p>

<p>I don't use my cards to cover any expenses I pay cash/debit card for everything I buy now, as I've mentioned the main reason I'm concerned right now is my reset in Jan 2011, with $20k on credit cards that isn't going away and a potential jump in my min payments I want to deal with this before values fall even further and I'm more screwed. </p>
 
Putting the balance from a sale shortfall on your credit cards isn't workable. Your payments would go up as much as you'd save from not owning. Don't do it.



Looking at your budget, you're not in a tenable situation - $3000/year in savings to pay off $20K in credit card debt and $20K (and increasing!) in negative equity - with no emergency reserve! - is a no-go. The only thing I could see that would make a real dent in your debt would be to move from your own place to a roommate situation - I don't think a $1300 condo rental makes sense for you now. I rescind my suggestion to tough it out until you know what to do because that just looks too tough to me.



I'm not sure what your savings are going into (retirement fund?) but if you're paying like that for your credit cards you'd probably be better off paying down your balance (assuming you don't intend BK).



If I were in your situation I'd walk from the house, rent a room, and use the $1000/month saved to pay off the credit cards. That's based on both ethics and practicality. Your homeownership is pretty intolerable and the loan is secured so I wouldn't feel bad about walking from that. The credit cards, however, aren't secured, and without the millstone of your living situation, they're manageable if tough, so I would feel obligated to pay them. There's also the issue that BK is tougher than foreclosure since you'll have to hire a lawyer and justify your financial situation to a court. There's even a possibility that the judge might tell you to pound sand on the grounds that you *could* pay off those credit cards once you're out of the condo.
 
I am not so sure that promising to pay back money borrowed is the same as promising to pay back money borrowed with collateral pledged. I don't know exactly how to express this, but if the lender receives an attachment of collateral it seems that is what the lender wants and that is the contracted obligation. If the lender wants a promise it seems that is what is contractually obligated. If you say the lender gets both, it seems the lender is getting more than a this for that. It seems out of balance.<p>


If I put myself in the lenders shoes, what am I contracting for and what do I expect? Personally, I expect either the borrower to pay the money back or to receive the home. It is an either - or, not both. Kind of like a "you can't have your cake and eat it too." If I contract without collateral, I expect the borrower to pay the money back, with almost no exceptions.<p>


I am not so sure there is a moral breach if the borrower does not pay the money back if fair collateral is included in the agreement.<p>


Anyways, it is just a thought. I don't have any particular attachment to the position.
 
<p>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? </p>

<p>Note - I'll post later about what I've decided to do, I'm just curious how the foreclosure process works.</p>

<p> </p>
 
You need to find an apartment first so that when they run your credit you get qualified for the place you want to live. Other than that I believe it is roughly 4mths
 
<p><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> </p>

<p>Now your talking about defrauding the holder. If you want to walk away, walk in to the bank and give them the keys and title.</p>

<p>If you want to unjustly profit from your bad decision, try an figure out how long you can ride for free.</p>

<p>As for Awgee's opinion "Personally, I expect either the borrower to pay the money back or to receive the home." I disagree. I expect borrower to repay the money. Not repay the money if they want to. The collateral isn't in case they decide it's bad, it's in case they turn out to be incapable of repaying the money, not just unwilling to repay the money. Job loss happens. Illness happens. </p>

<p>As others have said, bankruptcy is made for when you've made a mistake. If you want lenders to take the risk of not only YOU, but also the market and value of what you do with the money, I'd suggest you'll see an additional 5% risk premium in your mortgages going forward. Probably higher.</p>

<p> </p>
 
<p>My two cents:</p>

<p>One, this isn't a moral issue. There are laws in place covering these circumstances for a reason: to allow relief from unbearable debt. While it would have been ideal for you to be responsible before the debt was incurred, it doesn't preclude responsible action now. The banks have laws on their side, and so do you, so if the subjective measure of "unbearable" has been met in your situation, then now is an excellent time to start being responsible about your options.</p>

<p>Two, like other have mentioned, I strongly urge you to have a complete plan not just for the near term, but for 10 years down the road... and beyond. Cut every expense and hammer down those CC balances to zero ASAP, find a priavte landlord that will give you a chance regardless of your credit and put down a deposit, call your bank and advise them that you won't be able to meet the reset payments and see what options they have but be prepared to mail in the keys immediately, and find a good person to help guide you through the tax jungle. You don't need a gym when you live in the land of bike paths, swimming pools, public beaches and parks; unless you really get off on looking at yourself sweat, that's $30 you can save every month. Books are free from the library and endlessly more entertaining than most TV (I'd eat ramen before giving up the Discovery Channel, but I'm wierd like that) and I hear tell they got some libraries with internet access these days.</p>

<p>Three, Karma is a bitch. Keep that in mind when trying to minimize your pain while maximizing the losses for others. While the banks are going to get their own dose of it based on their own misdeeds, I'd suggest taking this opportunity to escape with as much of your self-respect intact as possible. While there are mechanisms in place to relieve the burden of unbearable debt, how you comport yourself throughout the process will go a long way to determining how things look on the other side. Sleeping easy at night is better than a fat bank balance, if you have to choose between the two.</p>
 
Paperboy - Everybody's helping you here so I have a few questions.



Where did you live before? Rented?

Why did you buy? Investment? Better chance with girls?

Why did you buy a 1 bedroom instead of a 2 bedroom? Affordability?

What were you thinking at the time???
 
<p>AV - I honestly thought you were wasting away your money but from your breakdown, you aren't exactly living a lavish lifestyle. </p>

<p>If you are going to end up foreclosing, I recommend setting up a new living situation before your credit goes down the drain. Instead of renting your own apt, check out the craigslist housing section and find a room. I have friends who are paying $700-800 total including utils for their bedroom in a 2 or 3 bedroom apt. </p>

<p>Also, I disagree with NSR. Living in the house while going through foreclosure isn't any worse than foreclosing. If you are going down that path anyway, why not live there until the bank demands the keys back? If you set up a new living arrangement correctly, you should be able to request a move in date 30-60 days from now give you at least $2000 extra to put towards your CC debt. </p>

<p>Your new budget can look something like this:</p>

<p>Take home - $4,100


----------------------------


Room - $800


Utilities - $0 - the $800 rent should cover it if you are just renting a room.


Gym - $0 - Nude is right, get rid of this


Cell - $40


Credit cards - $2125 (this is more/less min pmts)


Savings - $250


Car Ins - $110 - see if you can get this down with


Student Loans - $225


Gas - $150


Groceries - $200


Other - $200 (I take $50 or so out of ATM per week) </p>

<p>This would put you out of CC debt within a year even if your interest rate is 20%. Once that year passes, you should have a plan for next 10 years and try to save a big chunk of that and not go back to spending it all as you will need to develop a healthy down payment if you are going to try to buy a house again in the next 10 years. </p>
 
Also, what kind of car do you own outright. If it is a luxury car that gets terrible gas mileage, you can sell it and downgrade to something getting better gas mileage. Your monthly gas expense would go down, your insurance would go down, and you would have extra cash to put towards that CC.
 
<p>In Florida, and I think, everywhere, the note is the primary instrument. So the IOU is what you live and die on.</p>

<p>The mtg is merely collateral for the debt. Now we come to the recourse, non-recourse part of it. In Florida, theoretically, the lenders have the right to deficiency judgments, if the house does not suffice to cover the debt. In recent years, no institutional lenders have chosen to go for the deficiency. I don't know why. The same lenders will go after upsidedown car loan debtors in a heartbeat. </p>

<p>The rule is, if you can prove a deficiency you are supposed to get the judgment. I gather this doesn't apply to at least first mtg loans in California.</p>

<p>So why not? Bad publicity? Knowing if they do, the debtors will merely file bankruptcy, whereas they probably won't just for a car loan?</p>

<p>In the last couple of years, there weren't too many deficiencies anyway. Often there were surpluses. Boy, has that changed.</p>

<p>Anyway, the deficiency is only for the difference between the value of the house and the amount owed, so the lender doesn't get any extra money.</p>

<p>As to surpluses, it is supposed to be that the 2nd mtgee would get it, and then the 3rd if any, etc, and then finally the homeowner. I know for a fact it doesn't happen that way. Whoever applies for the surplus first will get it. In several cases I was involved with the 2nd mtgee never bothered to ask, so the homeowner was given the money by the judge, without scheduling it for hearing or notifying the 2nd or anything. 2nd mtgees typically and incomprehensively refuse to deal, and want all or nothing.</p>

<p>I suspect that will change. I also suspect that lenders are going to go for deficiencies in the near future. But. . . it hasn't happened yet.</p>

<p> </p>
 
<p>What, no chance of finding Mr. or Ms. Right to share expenses with? A second income can be the difference between struggling and living very well. Just don't hit on the one enjoying $11 shots or wearing designer goods. </p>
 
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