Posted on 12/27/2010 12:56:17 PM PST by Atlas Sneezed
I know there are moral issues, and I don't mind if some wish to debate the moral question of whether the bank took the risk of a downturn, or the buyer did. Or if my taxes are bailing out banks that are giving benefits to other borrowers.
The real question is a cold financial or legal one.
We are maybe $500k upside down, but love our house (custom built for us), don't want to risk losing it, and can easily afford the payments, and have never been late (and have stellar credit).
Is there a sensible strategy for getting some financial benefit in terms of renegotiating the amount?
One person told me just to count my blessings, and don't add stress to our lives over losing a house that we have no risk of losing. But I wonder if there is a solid scenario that can put a couple hundred thousand dollars in our pockets.
Incidentally, a hit on our credit would not have a real effect, because we don't need to borrow any money.
You could rob a bank.
Same thing, really.
So let me get this straight: you’re posting on a conservative site about a potential scheme to defraud your bank, the taxpayers, and to evade the obligations that you freely entered into?
Really?
How on earth did you even achieve a $500K upside down mortgage?
What a strange way of framing the issue. Is there a clause in your loan agreement that you don't have to pay back the loan in full if the house's value decreases? Kind of answers the question doesn't it? Nobody forced you to build a custom built home that you love in an over priced market. Shut up and pay for what you are consuming.
So why are you even considering the idea of defaulting?
"But I wonder if there is a solid scenario that can put a couple hundred thousand dollars in our pockets."
Sounds like you are loaded - pay off the mortgage and you won't be $500K upside down...
There is no scenario whatsoever that would make sense. Just enjoy your home and praise God that you are in the position of being able to pay for it without problem. Many cannot do so and are having serious problems.
A good time to count your blessings and enjoy them.
If you are more than 20% upside down, the bank isn’t likely to negotiate much. They now make more money by foreclosing, thanks to BHO & his admin. They not only stand to recoup a good % of their loss, they also get to borrow against it once they take it back.
The magic happens after they buy it back at foreclosure auction & it becomes labeled a “toxic asset.”
http://www.fdic.gov/bank/individual/failed/lossshare/
If you’re $500k upside down where do you plan on pocketing a couple hundred grand?
And are you thinking the lien holder will negotiate the loan amount? That’s not going to happen. What’s their incentive?
Not hard in some areas. In some states housing is down 75% from the high.
No, the real question is what kind of character you have.
If you follow through with this scheme, you can F.O.A.D.!
Oh, wait....!
Talk to a real estate lawyer before you do anything, he’ll tell you what the penalties would be for walking away from your house. Don’t listen to the banks as they will give you the exact opposite of what you should do. Also the mortgage modification programs are a scam and basically nobody has really managed to get this done as the banks are not playing straight with that program.
Basically you probably have two options, keep paying your mortgage and shut your eyes to how much underwater you are or default and live for free in your house for a year or two after which your credit is trashed and the only way you’ll be able to get a house in the next 7-10 years is with cold hard cash.
Robbing a bank is a risky proposition though.
It would be safer to do a controlled default, apply for help from the feds, and steal the $200,000 from other taxpayers.
If you can afford the payments, can you afford more?
No, there’s no deal for you. You bought when prices were inflated and now you face the true actual value of the home. It won’t go up again, not for decades if ever.
However, if you can pay more against principle, you can save a ton of money on interest. Depending on how much you can pay, you may save a hundred grand there.
If I could afford the house the only thing I’d do is pay an extra payment a year, or extra every month. Which cuts down the interest you pay, I think it’s about 5 or more years on your loan. Refinance for a shorter period of time. Say if you have a 30 year mortgage see what a 20 year would cost you in refinance fees and what monthly payments would be. What are you interests rates right now? Could you get a lower interest rate? I would not renegotiate a loan. The bank has no reason to do it. Whatever you paid for it at the time was what you were willing to pay, your problem. If you are planning on staying in the house for years, the price will eventually come back up.
I suppose you could ask for a modification.
When they say no you could stop paying for a few months then ask for a modification again.
If the answer is no, then you better start paying again lest they foreclose.
It would be a game of financial chicken.
Consult with a real estate lawyer (any local real estate agent can recommend a decent one). Before you go the “default” route, you should look into the possibility of short selling your house.
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