Mortgage Finance Guys Please Help

TurtleJeJus · December 16, 2014

[quote name='tekin112000' timestamp='1418739256' post='10600303']
[quote name='gwchem' timestamp='1418730567' post='10599901']
You won't lose clearance over a short sale. We're buying a short sale from a dod employee right now.

That said, because you've been making payments, its going to be very difficult to prove your hardship to the bank. They're likely to force a promissory note on you for the remainder of your loan. This is making our short sale take forever to go through. You might lose some buyers if it takes more than a couple of months. It sucks to be punished for paying, but delinquent houses are easier to buy.
[/quote]

This seems correct. I probably won't lose my clearance is I try to do a short sale.

Unfortunately I will have a difficult time convincing the bank to accept the short sale. They seem to do it if there is a death in the family or medical emergency but probably not for someome like me, drowning in debt but still alive.

It also seems like in some circumstance even after the short sale goes through the lender does not give up it's right to sue for the loss they take on the short sale.
[/quote]

Unfortunately Virginia is a recourse state so I don't think it would be worth it to just walk away from your mortgage. You could always just ask your lender about a short sale or deed in lieu if you really want to get out from under your current mortgage.

The most important thing is to keep your security manager in the loop and seek their advice before proceeding.

gwchem · December 16, 2014

BTW, if you go for a short sale, make sure your realtor specializes in them. Having an expert makes all the difference.

tekin112000 · December 16, 2014

[quote name='gwchem' timestamp='1418774407' post='10603121']
BTW, if you go for a short sale, make sure your realtor specializes in them. Having an expert makes all the difference.
[/quote]

Yes they can be very complicated.

I did not know that in some cases even if the short sale goes through the lender can reserve the right to sue for the deficiency.

In some cases borrower will have to pay taxes on the foregiven debt amount, as though it is income

gwchem · December 16, 2014

The government just passed another law forgiving that as taxable income.

And the sale might be easier if you agree up front to take on the note. Since that debt is no longer tied to the house, most people declare bankruptcy right after the sale, or pay for a year before settling on a smaller amount in a lump sum.

onafriday · December 18, 2014

I'm a cpa, for what it's worth.

Couple things jump out to me-

4.5% seems pretty steep! That could be brought down a ton, but might be a little tricky to do depending on the true debt to fair value and if your underwater. I didn't read the thread in great detail, but I am not sure if you have 18% equity, or, owe more than it's worth.

With that in mind, being early in the note life has a lot of tax advantages given mortgage interest is deductible. A lot of folks are in a hurry to pay the note off on the back end, but at a good rate that doesn't make a lot of sense because the backend of the note is mostly principle.

I agree with the earlier guys that simply walking away doesn't make sense. You'll ruin your credit and won't get another mortgage easily.

I tend to think the underfunded 401k is the bigger risk- similarly because of the tax advantages.

Whether you sell for a loss or not, I'd meet with a realtor and maybe a lender (referrals only- there are lots of awful ones) and try to rain in that rate first. At $200k ish that rate should be 1/2 what it is. That's free money that would allow you to defer more monthly.

The last thing you'd want to do is voluntarily default- it's not a get off of jail free approach.

tekin112000 · December 18, 2014

[quote name='onafriday' timestamp='1418912317' post='10611399']
I'm a cpa, for what it's worth.

Couple things jump out to me-

4.5% seems pretty steep! That could be brought down a ton, but might be a little tricky to do depending on the true debt to fair value and if your underwater. I didn't read the thread in great detail, but I am not sure if you have 18% equity, or, owe more than it's worth.

With that in mind, being early in the note life has a lot of tax advantages given mortgage interest is deductible. A lot of folks are in a hurry to pay the note off on the back end, but at a good rate that doesn't make a lot of sense because the backend of the note is mostly principle.

I agree with the earlier guys that simply walking away doesn't make sense. You'll ruin your credit and won't get another mortgage easily.

I tend to think the underfunded 401k is the bigger risk- similarly because of the tax advantages.

Whether you sell for a loss or not, I'd meet with a realtor and maybe a lender (referrals only- there are lots of awful ones) and try to rain in that rate first. At $200k ish that rate should be 1/2 what it is. That's free money that would allow you to defer more monthly.

The last thing you'd want to do is voluntarily default- it's not a get off of jail free approach.
[/quote]

The 4.5% rate I got through the HARP program is probably the best I can do. Remember I am now WAY under water. I have a loan balance of $287,000 but the condo value is only $210,000, that makes my loan to value ratio (LTV) %130. Hard to get a loan with those numbers.

I am not going to walk away for the loan it would cause too many problems down the road.

For now I will contribute 6% of my paycheck to my employer 401K that allows me to take advantage of their 6% match.

I may start paying extra on the principle, so that in five years I will have a loan balance down to $210,000 then try to sell, take the $80,000 loss and move on and try to forget it ever happened

padget · December 18, 2014

[quote name='tekin112000' timestamp='1418913484' post='10611497']
[quote name='onafriday' timestamp='1418912317' post='10611399']
I'm a cpa, for what it's worth.

Couple things jump out to me-

4.5% seems pretty steep! That could be brought down a ton, but might be a little tricky to do depending on the true debt to fair value and if your underwater. I didn't read the thread in great detail, but I am not sure if you have 18% equity, or, owe more than it's worth.

With that in mind, being early in the note life has a lot of tax advantages given mortgage interest is deductible. A lot of folks are in a hurry to pay the note off on the back end, but at a good rate that doesn't make a lot of sense because the backend of the note is mostly principle.

I agree with the earlier guys that simply walking away doesn't make sense. You'll ruin your credit and won't get another mortgage easily.

I tend to think the underfunded 401k is the bigger risk- similarly because of the tax advantages.

Whether you sell for a loss or not, I'd meet with a realtor and maybe a lender (referrals only- there are lots of awful ones) and try to rain in that rate first. At $200k ish that rate should be 1/2 what it is. That's free money that would allow you to defer more monthly.

The last thing you'd want to do is voluntarily default- it's not a get off of jail free approach.
[/quote]

The 4.5% rate I got through the HARP program is probably the best I can do. Remember I am now WAY under water. I have a loan balance of $287,000 but the condo value is only $210,000, that makes my loan to value ratio (LTV) %130. Hard to get a loan with those numbers.

I am not going to walk away for the loan it would cause too many problems down the road.

For now I will contribute 6% of my paycheck to my employer 401K that allows me to take advantage of their 6% match.

I may start paying extra on the principle, so that in five years I will have a loan balance down to $210,000 then try to sell, take the $80,000 loss and move on and try to forget it ever happened
[/quote]

Good luck to you man, tough situation but you seem to be handling it. Rooting for something good to come your way. Take care.

hebron1427 · December 18, 2014

[quote name='tekin112000' timestamp='1418913484' post='10611497']
[quote name='onafriday' timestamp='1418912317' post='10611399']
I'm a cpa, for what it's worth.

Couple things jump out to me-

4.5% seems pretty steep! That could be brought down a ton, but might be a little tricky to do depending on the true debt to fair value and if your underwater. I didn't read the thread in great detail, but I am not sure if you have 18% equity, or, owe more than it's worth.

With that in mind, being early in the note life has a lot of tax advantages given mortgage interest is deductible. A lot of folks are in a hurry to pay the note off on the back end, but at a good rate that doesn't make a lot of sense because the backend of the note is mostly principle.

I agree with the earlier guys that simply walking away doesn't make sense. You'll ruin your credit and won't get another mortgage easily.

I tend to think the underfunded 401k is the bigger risk- similarly because of the tax advantages.

Whether you sell for a loss or not, I'd meet with a realtor and maybe a lender (referrals only- there are lots of awful ones) and try to rain in that rate first. At $200k ish that rate should be 1/2 what it is. That's free money that would allow you to defer more monthly.

The last thing you'd want to do is voluntarily default- it's not a get off of jail free approach.
[/quote]

The 4.5% rate I got through the HARP program is probably the best I can do. Remember I am now WAY under water. I have a loan balance of $287,000 but the condo value is only $210,000, that makes my loan to value ratio (LTV) %130. Hard to get a loan with those numbers.

I am not going to walk away for the loan it would cause too many problems down the road.

For now I will contribute 6% of my paycheck to my employer 401K that allows me to take advantage of their 6% match.

I may start paying extra on the principle, so that in five years I will have a loan balance down to $210,000 then try to sell, take the $80,000 loss and move on and try to forget it ever happened
[/quote]i can lead you to water, but i can't make you drink it.
short sale is the way to go. good luck with whatever you choose.

drn92 · December 18, 2014

[quote name='tekin112000' timestamp='1418913484' post='10611497']
[quote name='onafriday' timestamp='1418912317' post='10611399']
I'm a cpa, for what it's worth.

Couple things jump out to me-

4.5% seems pretty steep! That could be brought down a ton, but might be a little tricky to do depending on the true debt to fair value and if your underwater. I didn't read the thread in great detail, but I am not sure if you have 18% equity, or, owe more than it's worth.

With that in mind, being early in the note life has a lot of tax advantages given mortgage interest is deductible. A lot of folks are in a hurry to pay the note off on the back end, but at a good rate that doesn't make a lot of sense because the backend of the note is mostly principle.

I agree with the earlier guys that simply walking away doesn't make sense. You'll ruin your credit and won't get another mortgage easily.

I tend to think the underfunded 401k is the bigger risk- similarly because of the tax advantages.

Whether you sell for a loss or not, I'd meet with a realtor and maybe a lender (referrals only- there are lots of awful ones) and try to rain in that rate first. At $200k ish that rate should be 1/2 what it is. That's free money that would allow you to defer more monthly.

The last thing you'd want to do is voluntarily default- it's not a get off of jail free approach.
[/quote]

The 4.5% rate I got through the HARP program is probably the best I can do. Remember I am now WAY under water. I have a loan balance of $287,000 but the condo value is only $210,000, that makes my loan to value ratio (LTV) %130. Hard to get a loan with those numbers.

I am not going to walk away for the loan it would cause too many problems down the road.

For now I will contribute 6% of my paycheck to my employer 401K that allows me to take advantage of their 6% match.

I may start paying extra on the principle, so that in five years I will have a loan balance down to $210,000 then try to sell, take the $80,000 loss and move on and try to forget it ever happened
[/quote]

12% is a nice, solid amount to be putting away. Keep the faith over the next few years, property values may go up and new programs may come along to help you out. You have to live somewhere, and over the long run the incremental difference between where you are and where you could be may not be a huge difference. Plus, through a short sale or through staying put until you can break even, you will end up at about the same "loss" one way or another.

Based on what I've read so far, I would lean towards putting any extra funds into your 401k (or other tax advantaged retirement account) and a rainy day fund and then play more golf!

drn92