Anyone Foreclosing?

[ScubaSteve]

With the real estate market at rock bottom, has anyone had to foreclose? I'm asking because I live in the 3rd highest county in the US for home forclosure, and it's really screwing up my home value. I have to move in 8 months, and it looks like we can't afford to sell....the house is already about $75K-$100K depreciated. There's a bank-owned property 500 ft from my house that is a bigger floorplan and is selling for $233K. We owe $325K Renting might not get us what we need to cover the mortgage either....with prop taxes, HOA, etc. we'll be eating around $1500 a month.

Foreclosure is a possibility for us....after researching it, it's not as bad as it sounds. Lenders 99% of the time aren't suing borrowers to recoup their losses because of the time/cost involved. The other 1% are folks with significant assets, which we don't have It mainly just damages your credit....which we really don't use. It may keep us from buying a home anytime soon, but we plan to save for the next few years to get a huge down payment and just start from scratch.

I just wonder if anyone has any recent first or second hand experience?

 

[Fingers]

That is the saddest thing I've heard in a long time. I can't imagine having to just walk away from a $325k home. Sorry to hear about your troubles. You have no choice but to move? If it's work related, does your work guarantee the value of your home? I know mine does if the move is forced, so you might want to look into that.

 

[Professor Frink]

That really sucks. Hopefully the housing market will correct itself soon and things will turn around. I'm lucky enough to live in one of the few areas where housing prices are still going up, but I don't know for how long.

 

[ScubaSteve]

I'm in the military and have to change duty stations. We are financially stable and both of us are working. We have a good income. The problem arises when I show up at my next command and have to try and afford 2 houses. This was our first home...we knew there was a risk...there always is when buying a home. It's a shame because it's a great little condo (granite, hardwood, etc.) that is going to be a great investment in about 5-7 years. Too bad we can't hang onto it.

Southern California literally collapsed this past year. This is an AWESOME time to buy, though. I'm seeing 6 bedroom bank foreclosures for 200K. Wish I woulda been buying at this time vs. 2 years ago.

 

[ScubaSteve]

That really sucks. Hopefully the housing market will correct itself soon and things will turn around. I'm lucky enough to live in one of the few areas where housing prices are still going up, but I don't know for how long.

You guys are in the bubble. Somehow VA/NC are completely oblivious to the rest of the US....it seems everyone else is hurting. Take a look at this...especially the chart: http://www.realtytrac.com/ContentManagement/pressrelease.aspx?ChannelID=9&ItemID=3609&accnt=64847

 

[Bruscar]

Argh. You honor us by serving your country and this happens. Are there any gov't programs that help?
Being in the car biz (sorta), I've seen people with higher credit scores than me (700-ish) 2 years after BK, foreclosure, etc. It does stay on your credit a long friggin' time, though. And it does affect your costs in more ways than you are aware. Now even insurance companies are basing their rates on your credit score. Obviously you want to foreclose as a last resort, but, meh, who's life is linear anyways?

 

[Fingers]

Is there any way you can soak up the losses into your next mortgage? Maybe the bank will let you do that rather than have you let them foreclose. I'm really surprised the military will let you take a hit like that. I mean, they're forcing you to move and this is definitely a moving expense.

 

[david_42]

I haven't had to, but a couple friends got caught in the 1987 collapse. Two former GF included. One had only been in a condo for 6 months when her husband got laid off, so they walked and lost the $40K she had saved while living with me (that was before she got married).

I was in the Navy in Bremerton, WA, when I got transfered about 5 months after buying. I didn't default, but was forced to re-roof the place when I sold it, so it was a wash.

As far as the future goes, 25% down & no one cares what your credit looks like.

 

[ScubaSteve]

We'd be happy to break even. Unfortunately there's no way we could make what we need from selling (let alone pay a realtor to sell it...FSBO probably wouldn't be good for this delicate situation). To be honest, I'm reluctant about talking with my command....we have a legal department (JAG), but they pretty much just handle wills and courts martials. I have heard rumors of other military people that work on base that are going through foreclosure and nothing has happened to them....but they have kept it pretty hush-hush from the command. Usually these types of things negatively affect you, especially when you have security clearances involved.

 

[ScubaSteve]

Damn. I went over 1,000 posts. Don't worry....I'll leave something nice mod edit-fight club rulesfor my HBT peeps. I'm at work now.

I think being in the military will probably give me more bargaining power with the lender....but part of me doesn't WANT to be tied to the house. I'm all about holding up my end of the bargain, but I can't afford to take a monthly loss for the next few years. We've got our first born due next month, and I really want a clean slate.

I've heard about short sales and deeds-in-lieu where you basically give the house right back to the bank and they recoup their money by selling it. The trouble comes when they don't make back the full amount on the loan, and they try to come after you for it. I've read that this almost never happens in California, as the lender can legally make one course of action (Sue/Not Sue) and 99% of the time they'll choose not to sue because they end up spending more time and money paying lawyers and paying holding costs while in litigation. They'd rather take the loss at sale and get it over with. I imagine that suing people causes them to go bankrupt, and the bank will never see their money if that happens.

I guess I've read all these things on my own, I'm just looking for someone who has actually seen them take place recently. I would hate to get thrown for a loop.

 

[ScubaSteve]

Is there any way you can soak up the losses into your next mortgage? Maybe the bank will let you do that rather than have you let them foreclose. I'm really surprised the military will let you take a hit like that. I mean, they're forcing you to move and this is definitely a moving expense.

I'd happily rent and pay someone else's mortgage (and be able to save around $1500/ a month) than tack approx $75K onto another house that isn't guaranteed to gain equity in the near future. That'd be putting myself upside down from the get-go. I guess the military's stance (at least my immediate supervisor's) point of view is that they didn't MAKE me buy a house. I signed a contract with an outside party, and as such, I should assume the risks that come with it.

 

[WBC]

Could you not rent it? The value will go back up as it always fluctuates.

 

[ScubaSteve]

Sure I could. But, in addition to covering the mortgage, we would pay:

$260/mo HOA
$500/mo for Property tax
$200/mo for a property manager
+whatever the difference is between the rent and mortgage, if we don't get enough rent
+whatever the ARM loan increases to in a year. (Would probably refi, but it would be difficult since lenders are extra cautious now)

I'd rather not eat these costs for the amount of time it would take for the house to bounce back (estimated to be 5 years).

 

[eriktlupus]

holy shiet steve! are thos enumbers right? my total mortgage is less than that per month. guess that's why cali went sky high for all those years with double digit pecentage increases in home values. look into how much the average rent is at your next duty station and try to rent to miltary.

 

[CodeRage]

Is there any way you can sign up for a reverse mortgage? Just thinking outside of the box.


May still loose your ass but it wont be a foreclosure

 

[Yuri_Rage]

Man, Steve, that's terrible. I wish I knew of a way to help, but all I can offer is sympathy from a fellow service member.

To answer some questions from above...

The government has no obligation to help you sell a house or recoup losses should the market falter. They only have an obligation to provide you the means to have a roof over your head. If you decline on-base housing (essentially free) and choose to buy or rent a house, you are given a monthly housing allowance that varies with your rank, time in service, and location.

Many military members choose to live off-base for one of two reasons: they can find a place that will cost them less per month than their housing allowance, giving them a bit of extra cash, or because even short term real estate investments tend to appreciate enough to result in profit.

There are programs to help servicemen get low interest, low down payment loans (i.e., VA loans), and to help defray closing costs. VA loans protect the member and his family against unforeseen problems such as disability or death, but they do not protect against financial loss.

Ultimately, a military member who buys a property is taking a known risk, and the burden of that risk is placed pretty squarely on his shoulders.

If anyone has any ideas about how to help Steve, please offer them up. I'm by no means an authority on financial options in the event of impending foreclosure, and it is possible that there's a government program that can help. I just wish I knew of a solution.

With regard to your security clearance, Steve, I wouldn't get too excited. These are clearly circumstances beyond your control. Credit is looked upon as a measure of trustworthiness. If you were to continually miss payments, max out credit cards, and/or declare bankruptcy as a result of poor decisions on your part, your clearance would be at risk. In your case, if things do turn out badly, just make the circumstances VERY clear during your next investigation. Any investigating officer should be able to understand that it wasn't irresponsibility on your part that led to a bad situation.

 

[ScubaSteve]

Yuri-

Thanks, man. Kinda sucks when you're just trying to get your foot in the door and it gets slammed on you. We all know senior enlisted/officer types who have been fortunate to acquire property at each duty station and retire with 4 or more rental properties under their belts. That's kinda what I was hoping for....but not this time around. I pay all my bills on time, my credit score is 760, etc., etc. but sometimes the cards are stacked against you. I just wanna start fresh at my next duty station, and save my a$$ off....and hopefully get enough cash in hand to get financing in spite of damaged credit from a (potential) foreclosure.

 

[ScubaSteve]

Yuri-

Buy my house...and I'll throw in a free PS3

 

[Dude]

I hope to hell we don't have your same problem here in a few months. An identical house right across from mine has been on the market for 3 months. If we can't sell ours when we move--we'll be screwed too.

We don't live in the "prettiest" neighborhood either--so that is 1 strike against us.

Let us know what you end up doing Steve. We are pulling for the best, obviously. It is bad enough all of our military benefits are getting taken away, then we have to deal with crap like this, eh?

 

[ScubaSteve]

I'll definitely keep y'all posted. I've been wringing my hands over this for at least 6 months, but it was way too early to do anything about it. Now that I'm closing on being 6 months out, I'm gonna talk with both a realtor and my lender to get the straight scoop.

 

[Gnome]

You could check into Deed in lue. You just sign the house over to the mortgage co. and walk away. beats foreclosure

 

[the_bird]

This is tough. The person who suggested a reverse mortgage; a few banks have been offering that as an alternative to having the homeowner foreclose, but that's limited to people who are in their 50's or 60's (since, in effect, you're selling the house back to the bank with the bank receiving the house upon your death).

It's really hard to see any recovery in the real estate market - especially CA - for at least the five years mentioned. There's just no way for new buyers to enter the market, since lenders have tightened down so much.

 

[howlinowl]

That really sucks. As far as a reverse mortgage, I don't believe that's an option as it doesn't sound like you have any equity to mortgage back. Whatever equity you may have had has been eaten away by the falling prices.

I've so far been pretty lucky. Purchased my house for 74,900 here in Port St Lucie in 2000. I remember a couple years later, when new comperable homes in my area were selling for 159,000, I told a friend to hurry up and buy before they go up more and out of his price range. In 2005, a new comprable home to mine, 3 bedroom, 2 bath, 2 car garage, no pool or fence right across the street went for a quarter million.... I told another friend not to buy 'cause this was nuts, and jobs around here can't support quarter million dollar houses... Sure enough, things went to crap shortly thereafter.

Dunno about CA, but here a lot of the demand for homes were from investment "flippers". Can't tell you how many houses sold to flippers before they were even finished, only to go back on the market at a higher price. That, and the sub-prime ARM mortgages they were handing out to everybody, including people who probably shouldn't have even qualified for a mortgage. And I'm sure a lot of those folks getting ARMs were told that "they'd be able to refinance before the ARM adjusted when the price goes up"....nobody told them what to do if it went into the tank.

 

[Ryan_PA]

I would do whatever you can not to foreclose. It will haunt you.

I imagine if you choose to live off base within the next 6-7 years, or get a morgage, you will likely get declined or pay even more of a premium when they run the credit check.

I know lenders are doing everything they can now to prevent you from foreclosing, and there are a ton of programs out there to support situations like yours.

My wife and I are in the Philly burbs, and started kicking around the idea of selling our place we have been in for about 3 years to actually take advantage of the market. Take less of a profit on the current diggs and more than compensate by the savings on the new (to be identifed) place in the better school district.

 

[Chriso]

Really sorry to hear about this, Steve. I wish I could give you advice, but it looks like the cards are stacked pretty high, being in CA and all, and I don't have anything to offer but my condolences and hopes.

I was lucky enough to get into a cheap house, lots of SF, fixed rate, in a pretty "vanilla" neighborhood for under $1000/mo. In our neighborhood it's mostly 2-br "bread box" houses from the late 50's, and ours is a 1925 3+ br, so our value only stands to increase. We were starting to worry about foreclosing since SWMBO lost her job 1 month after buying, and still hadn't found a new one at Thanksgiving time, and we were running out of money in a bad way. Since then, she's employed again, and I interview tomorrow for a better job, so things are ironing out.

Maybe the bank has some sort of counselor or something that could help investigate creative solutions? Or maybe get hold of the realtor you purchased from to see if he/she has any advice? (In So. CA, the answer might be "WTF No!?", I guess.)

 

[jdoiv]

I would try renting it. Even if you break even on the rent or take a slight loss, it's better than going the foreclosure route. I lived in SoCal and know that the rents for a decent place can be pretty steep, but some people would rather rent than own.

Once the market starts to rebound (which it will) then you can sell and break even.

 

[WOP31]

Steve sorry about the situation, that is a rough one. I was in the Navy for quite some time and one thing i learned while i was there was to never be the highest ranking person to know something. In other words always tell your supervisor. What I am getting at is that no matter the trouble it is always better to inform your chain what is happening rather then them find out on their own. I had found that most senior enlisted personnel are really down to earth and willing to help. I would have never made it through some of my stupider airman, days had it not been for the help of some really great master chiefs. (and grow up to be the well adjusted PO2 that i was. )

I did think of one thing that hasn't been mentioned yet. Is there absolutely no possibility of you staying there. I know that it may not be your first choice of duty stations but if you can get orders in the area then you wouldn't have to worry about selling the house. If you are stationed down in the south end i.e. San Diego area, then you should have plenty of choices for orders. I have known a couple of guys that lived about 2 hours away from the base and would rent a room at the BOQ or BEQ if there was one available (usually there is) during the week and go home on the weekends, or if you are going to sea duty then you are going to have a rack on the boat. But of course i don't know your specific situation, just trying to throw out a couple of suggestions.

If you don't have to move I think that would be the best option for avoiding some pretty substantial damage to your credit and facing the possibility of not being able to provide your family with a safe, comfortable environment to grow up in. I mean it sounds like you have a pretty good situation, with your housing right now going on there. If it were me I would be fighting to stay there so I wouldn't have to worry about it.

I hope it all works out man, I hate to hear about other service members in distress, good luck.

Oh yeah your CO is going to have a lot more pull with the detailer then you are. It is a sad realization, but it is all about who you know when it comes to orders, i was passed over on a set of orders that i wanted (i even had a chief at the receiving command call the detailer and request me) for someone who had never worked in an Intermediate level electronics shop before. But he knew the right people so he got the orders, worked out though i am still working out here on the same base as a civilian and make bout 2x what i did in the nav.

 

[howlinowl]

I just thought of something, my brother had a house in Daytona Beach years ago and his job closed down and they transfered him to Savannah, Georgia. He contacted HUD and they paid him to rent his house. He was able to move, rent a place in Savannah and still make payments on his house until it sold. Not sure if they paid him the total amount of the payment, or whether he had to pony up any difference. He also didn't have a HOA payment either.....so that wasn't an issue. Also, the market wasn't quite like it is now, and he probably had some equity.

Not sure if it's an option, but might be something for you to look into.

Allan

 

[cheezydemon]

With the current mortgage crunch, more people are having to rent. Do you have any idea how rentals are in your area? In some areas rentals are sitting vacant too, but most places they are up.

Reverse mortgages are for people 62 and older. They are incredibly good, but you have to be old enough. That is what I do.

Also arms are getting more and more help every day. Hopefully in a year you would be able to just freeze it with the first adjustment, or maybe even with no adjustment at all.