Keep our house or give it to bank and take dead uncles

My truck payment is $470 and comprehensive insurance costs me $160 ish a month. My rates are high because of bad credit combined with a few accidents in the past few years. My apr isn't great. I have a diesel excursion I bought used a few years ago for around 20k. its a nice truck. I needed something newer than my old vehicle, which was starting to fall apart. I had an old F250 I used to pull my deckover trailer, and a newer pathfinder I was using to commute in. So I got rid of both of them and got the excursion, sort of killing 2 birds with one stone. I could sell the excursion for more than I owe on it, but it wouldn't leave me enough to get something else reliable, and I do have a 50 mile commute. So I'm kinda stuck with it. If I'd known I'd lose my job not long after buying it, I wouldn't have bought it. But with my current income being what it is, I will not be able to get financed on something else if I give it up. Its purchase really had nothing to do with keeping up with the joneses... and more to do with wanting a vehicle that we could keep for a decade or more as the family truckster but still could tow 12,000 lbs to move my trailer. I also have a '78 F150 off road truck, but use the trailer for picking up scrap and buying and selling cars.

I'm trying to work on refinancing the truck at a lower apr to save myself some money, but as long as we can afford it, the wife and I agree that the truck is staying. I have equity in it.

The issue of conflict within the family probably won't be a big deal, her family all knows the situation we are in and they all have houses of their own and are in better shape than we are. She is the baby, so they are all substantially older than her.

To some extent you are correct that the lender could pursue her for any remaining amount if she defaulted. I say to some extent, because first off, she pays PMI which is insurance that makes sure they get paid if they default, which leaves them with nothing to pursue her for, and second off, even if she didn't have PMI, its basically unheard of for lenders to pursue those type of cases except in exceptional circumstances (and if they did, we could easily discharge the liability in a bankruptcy, if it came to that).

As for the mortgage, since the home has equity finding a lender shouldn't be too difficult, but even if there is difficulty there, if we just continued to make the payments in her uncles name then the property would pass to his estate, which could then deed it to us.

And finally, the deed in lieu of foreclosure would likely be the route we would choose, thats also the route that the attorney general's office recommended. Some lenders actually have offered cash for keys bonuses here to discourage delinquent borrowers from trashing the houses, but again, freddie mac apparently isn't participating in any of that stuff. Which stinks. I think our first choice would just be a principal reduction and keeping our current mortgage and current home.

I think the problem everyone seems to be having is that we don't "need" to give up the house. But like the ag said, just because we can make the payments doesn't make it a smart decision to keep writing checks.

andrave wrote: The issue of conflict within the family probably won't be a big deal, her family all knows the situation we are in and they all have houses of their own and are in better shape than we are. She is the baby, so they are all substantially older than her.

Money does funny things to people. Even (and often especially) people who are fairly comfortably off.

andrave wrote: To some extent you are correct that the lender could pursue her for any remaining amount if she defaulted. I say to some extent, because first off, she pays PMI which is insurance that makes sure they get paid if they default, which leaves them with nothing to pursue her for, and second off, even if she didn't have PMI, its basically unheard of for lenders to pursue those type of cases except in exceptional circumstances (and if they did, we could easily discharge the liability in a bankruptcy, if it came to that).

Just keep in mind that the PMI company might well come after you, too.

andrave wrote: As for the mortgage, since the home has equity finding a lender shouldn't be too difficult, but even if there is difficulty there, if we just continued to make the payments in her uncles name then the property would pass to his estate, which could then deed it to us.

The latter sounds a little iffy, at some point you'll have to tell the lender that the uncle is deceased. The problem by way isn't necessarily if the house as equity in it or not, but if the lender considers the amount being lent worth their while or not. Therein lies the potential issue.

andrave wrote: And finally, the deed in lieu of foreclosure would likely be the route we would choose, thats also the route that the attorney general's office recommended. Some lenders actually have offered cash for keys bonuses here to discourage delinquent borrowers from trashing the houses, but again, freddie mac apparently isn't participating in any of that stuff. Which stinks. I think our first choice would just be a principal reduction and keeping our current mortgage and current home.

BTW, who gave you all the information as to what Freddie Mac does and doesn't allow? Your servicer? You know that the servicer tends to profit from foreclosure more than from working out a deal (even when the deal would be more beneficial to the holder of the mortgage), simply by virtue of the fees etc they can charge for it? You might have to push a lot harder on this than you might already have pushed, and also do some research on exactly what Freddie allows in this case.

SVreX wrote: I have never suggested someone walk away from a loan. You might be the first. It's not a terrible strategy, given the specifics of your story, HOWEVER (and this is really big) you are NOT READY FOR IT. As others have noted, you've got to get on top of your budget. You are not prepared to handle the windfall of the uncle's equity. As is, you will continue down the rabbit hole. Couple of questions I don't think you have addressed: - How does your wife feel? Is it all about the money, or will she be really unhappy in the uncle's house? - Are you inheriting the uncle's house completely, or are there family complications? - As Datsun 1500 noted, does the loan contract obligate you to paying the balance? You are lawyers- can you get out of this? If you own the uncle's house, I would suggest defaulting on the current house, tanking her credit, and selling the uncle's house, and using the equity for a 20% down payment on a house you like (which should involve minimal documentation, or can run on your credit and her income). If there are family complications, no can do. This assumes you can walk from the existing loan. If you cannot, the ONLY answer is to rent the current place. But before ANYTHING, you've GOT to work on budgeting. I am a budget coach. Find one.

I agree... sometimes its hard at the end of the month to pinpoint where the money goes. We just got married and we have been working on a million other things the past month, but establishing a budget is on our priority list.

I do not think there would be any family complications in taking over uncle's house, but if we were to do what you say and basically just sell the equity out of it to get another place, I really don't know if that would be all kosher. I would have to ask. Uncle's only surviving relatives are his mom, who is senile and in a nursing home (and has been for years), and his sister, who is obviously my mother in law. She is quite set in her finances.

I don't know if I could qualify for a loan with my credit mainly because I have such huge student loan debt hovering over me, with only 25k gross a year income. So I would have a huge concern as to whether or not we would be able to qualify for a mortgage if we were to sell uncle's house for the equity.

Even if we can do keys in lieu of foreclosure, I think we would have additional tax liability, as any amount over the market value of the house is treated as income.

Gives me a lot to think about though.

I didn't know a "budget coach" was a real thing. Is that your job? are you independent, or do you work for a company?

Quick aside, if you can push through a short sale, there is currently tax relief in place that was extended for 2013 which IIRC means that you wouldn't have to pay income tax on the forgiven debt.

A mortgage lender will pretty much by default look at both partners' credit if you are married so trying to get by on your credit alone might not fly for that reason.

The Excursion is negative equity in my opinion.

My wife and I use Mint.com for an easy budget tool. Works very well.

I'm gonna push back a little just one more time.

andrave wrote: I could sell the excursion for more than I owe on it, but it wouldn't leave me enough to get something else reliable, and I do have a 50 mile commute.

^^This really isn't true. It is a misnomer that cars have to cost $15K or more to be reliable. Many people on this board have bought perfectly reliable vehicles for $1000 or less. They are listed on this site regularly.

andrave wrote: But as long as we can afford it, the wife and I agree that the truck is staying. I have equity in it.

Maybe I can't change your mind, but I hope you will reconsider.

If you'd like, I can show the math to prove it is cheaper to get rid of the financing, even in a vehicle that is grossly upside down.

BoxheadTim wrote:

andrave wrote: The issue of conflict within the family probably won't be a big deal, her family all knows the situation we are in and they all have houses of their own and are in better shape than we are. She is the baby, so they are all substantially older than her.

Money does funny things to people. Even (and often especially) people who are fairly comfortably off.

andrave wrote: To some extent you are correct that the lender could pursue her for any remaining amount if she defaulted. I say to some extent, because first off, she pays PMI which is insurance that makes sure they get paid if they default, which leaves them with nothing to pursue her for, and second off, even if she didn't have PMI, its basically unheard of for lenders to pursue those type of cases except in exceptional circumstances (and if they did, we could easily discharge the liability in a bankruptcy, if it came to that).

Just keep in mind that the PMI company might well come after you, too.

andrave wrote: As for the mortgage, since the home has equity finding a lender shouldn't be too difficult, but even if there is difficulty there, if we just continued to make the payments in her uncles name then the property would pass to his estate, which could then deed it to us.

The latter sounds a little iffy, at some point you'll have to tell the lender that the uncle is deceased. The problem by way isn't necessarily if the house as equity in it or not, but if the lender considers the amount being lent worth their while or not. Therein lies the potential issue.

andrave wrote: And finally, the deed in lieu of foreclosure would likely be the route we would choose, thats also the route that the attorney general's office recommended. Some lenders actually have offered cash for keys bonuses here to discourage delinquent borrowers from trashing the houses, but again, freddie mac apparently isn't participating in any of that stuff. Which stinks. I think our first choice would just be a principal reduction and keeping our current mortgage and current home.

BTW, who gave you all the information as to what Freddie Mac does and doesn't allow? Your servicer? You know that the servicer tends to profit from foreclosure more than from working out a deal (even when the deal would be more beneficial to the holder of the mortgage), simply by virtue of the fees etc they can charge for it? You might have to push a *lot* harder on this than you might already have pushed, and also do some research on exactly what Freddie allows in this case.

well, we submitted a modification and it was denied, and the AG's office has an attorney in a new office in our area who deal exclusively with foreclosures and loan modifications. She went to lawschool with my wife. And she is the one who told us that freddie mac has a blanket policy of no principal reductions.

She said the only way to get them to budge might be to miss a few payments and see if that puts them in a bargaining mood, when they realize there is a real chance they will be eating 80k if we default.

But I don't know... there is a lot of information our there to digest from a lot of different sources as to who is doing what and the best methods to get the best results.

As for whether we would be liable to PMI in the event of a default, legally I'm not sure. I'd have to do some research on the question. My thinking is that its insurance we pay for to insure the debt in the event that we DO default, so I'm not sure they could sue us for using the insurance that we pay for that they have priced to make them a profit.

Sort of like life insurance suing your estate after paying out if you killed yourself.

andrave wrote: ...I think the problem everyone seems to be having is that we don't "need" to give up the house...

You are correct.

Rent it or whatever, but the wife gave her word she would pay off. What's her word worth?

Mine is worth a good bit more than a couple of grand a month.

If you are paying $630 a month to drive a 15mpg diesel Excursion 100 miles a day, and you think that's saving you money, then I can see where your money problems stem from.

Agreed!
I am not hearing difficulty. I hear wants, I hear preferences, I hear conveniences but I am not really hearing changes that have been made to adapt to the changes around.

Meet a friend. He's a pretty good guy.

SVreX wrote: I'm gonna push back a little just one more time.

andrave wrote: I could sell the excursion for more than I owe on it, but it wouldn't leave me enough to get something else reliable, and I do have a 50 mile commute.

^^This really isn't true. It is a misnomer that cars have to cost $15K or more to be reliable. Many people on this board have bought perfectly reliable vehicles for $1000 or less. They are listed on this site regularly.

andrave wrote: But as long as we can afford it, the wife and I agree that the truck is staying. I have equity in it.

Maybe I can't change your mind, but I hope you will reconsider. If you'd like, I can show the math to prove it is cheaper to get rid of the financing, even in a vehicle that is grossly upside down.

oh, I understand how it would be cheaper to get rid of financing if I were upside down. I'm not sure how its cheaper if I have equity in it. So I guess I'm saying yes, please show me the math. And while I am aware that I could drive a E36 M3 bucket, and in fact am working on my '88 festiva to commute with, that wouldn't leave me a reliable vehicle to tow my trailer long distances, or visit my mother who lives 5 hours away. Those things are all important to me.

And to the above poster who said in their opinion its negative equity, I'm not sure you understand what equity is. Negative equity means you owe more than its worth. I currently owe 14k on the excursion and could sell it for a few grand more than that.

That means I have equity in it.

andrave wrote: I didn't know a "budget coach" was a real thing. Is that your job? are you independent, or do you work for a company?

I have been professionally trained, but I only do it voluntarily. I make nothing off it. None of the coaches working for the organization I work for profit from financial coaching.

There are lots of people like me.

You have shared a lot of information in this thread. Enough to convince me that you are a PRIME candidate with great possibility of success, and that without it you could very likely get in a much worse situation.

Please consider it.

Whatever you end up doing, avoid pursuing the HAMP Loan modification. I know of many people who went through trial loan modifications in good faith for 18+ months only to have their lender say they did not qualify for it in the end. And oh by the way you now owe us $20k in back payments since you don't qualify.

Many banks are using it as a means of stringing along owners who would otherwise default immediately. Approval in my area is less than 25% after a trial.

andrave wrote: So I guess I'm saying yes, please show me the math.

OK. Regarding the Excursion, what is the balance owed, annual interest rate, monthly payment being made, and the # of months left on the loan?

Datsun1500 wrote: PMI is insurance for the bank, not you. If you hit someone's car and have no insurance their company pays them and comes after you. Same with PMI. They would pay the bank, making them whole, and come after her for the payout, trying to recoup their loss. Even with the 20% equity in the other house it will be tough to get a loan with bad credit, and if they find out you already have a house that's going back (and they will since you will have to use her as income) there is zero chance of it. First thing I would make sure is that the uncles loan does not have a due on transfer clause. If you have already decided that keeping a car rates higher than forclosure, bankruptcy, lousy credit, and going back on your obligations, no one here will change your mind. Honestlly all I hear is you trying to justify it instead of figuring out the moral thing to do.

Hey, like I said, we are paying all our bills just fine the way it is. I would like to put more in savings, and we would both really like to have this hugely underwater mortgage off our back. I threw this out there to talk about options. My wife and I are both well aware that if we were to completely change our lifestyle we could either throw more money down the drain trying to pay off her house, or put more into savings, but thats not the aim of this thread. I'm not saying I'm closed to feedback on saving money, but at the same time I'm not trying to invite insults from people who don't like my attitude and think my priorities aren't important just because they have different priorities... fair enough?

I realize some of you believe a contract is a promise you could never go back on. When it comes to a mortgage, I don't look at it the same way, so thats not really helpful criticism.

JohnRW1621 wrote: Meet a friend. He's a pretty good guy.

PM me your address. I will have Amazon drop ship you a copy of his book. It's not like I'm rolling in money however it really appears you and your wife need this. Following these steps did wonders for my wife and I financially.

andrave wrote: And to the above poster who said in their opinion its negative equity, I'm not sure you understand what equity is. Negative equity means you owe more than its worth. I currently owe 14k on the excursion and could sell it for a few grand more than that. That means I have equity in it.

Equity is complicated when it's an item that costs you money every time you use it.

Let's say you drive about 1600 miles a month in it. Sounds like you drive more, but let's say that's it. At a generous 15mpg and $4 a gallon of diesel, that's $426 in gas a month. Your car payment is $470, which means in gas and payment alone you are paying about $896 every month to drive that Excursion.

A reliable 30mpg car would cost you $202 in regular gas. If you bought it outright, no car payment. But let's say you want something nice and your payment is $150 a month. That's $350 a month total.

That's a difference of about $550 a month. In a year's time you save $6500. How much equity do you have in the Excursion?

andrave wrote: I realize some of you believe a contract is a promise you could never go back on. When it comes to a mortgage, I don't look at it the same way, so thats not really helpful criticism.

Fair enough.

What if you could be shown an option that would enable you to honor your obligations AND save and invest for the future?

I think what people are trying to tell you (some nicer than others), is that you are exhibiting classic signs of financial problems that go way beyond the mortgage, and we are trying to help alert you to some things you may not be aware of.

I think you could be debt free in less than 5 years. Maybe that doesn't interest you.

But I think it would free you to grow enough wealth to then be able to do EXACTLY what is MOST important to you and your wife.

It's really freeing.

SVreX wrote:

andrave wrote: So I guess I'm saying yes, please show me the math.

OK. Regarding the Excursion, what is the balance owed, annual interest rate, monthly payment being made, and the # of months left on the loan?

I emailed you through the board.

In reply to andrave:

No problem. I'll get back to you in a few.

Good work SVreX!

bastomatic wrote:

andrave wrote: And to the above poster who said in their opinion its negative equity, I'm not sure you understand what equity is. Negative equity means you owe more than its worth. I currently owe 14k on the excursion and could sell it for a few grand more than that. That means I have equity in it.

Equity is complicated when it's an item that costs you money every time you use it. Let's say you drive about 1600 miles a month in it. Sounds like you drive more, but let's say that's it. At a generous 15mpg and $4 a gallon of diesel, that's $426 in gas a month. Your car payment is $470, which means in gas and payment alone you are paying about $896 every month to drive that Excursion. A reliable 30mpg car would cost you $202 in regular gas. If you bought it outright, no car payment. But let's say you want something nice and your payment is $150 a month. That's $350 a month total. That's a difference of about $550 a month. In a year's time you save $6500. How much equity do you have in the Excursion?

I 100% agree with that having a truck is more expensive than having a small car. Its more expensive to buy, more expensive to put fuel in, and more expensive to maintain. But on the other hand, I use my truck for tasks that a small car is incapable of. If i were to get rid of it, I'd be looking at buying something else that could haul heavy loads reliably over long distances. You can't replace a truck with a small car, so that throws a wrench in the math. Getting the festiva running will save me a couple hundred bucks a month in fuel costs. But it won't tow 12k lbs.

bastomatic wrote:

andrave wrote: And to the above poster who said in their opinion its negative equity, I'm not sure you understand what equity is. Negative equity means you owe more than its worth. I currently owe 14k on the excursion and could sell it for a few grand more than that. That means I have equity in it.

Equity is complicated when it's an item that costs you money every time you use it. Let's say you drive about 1600 miles a month in it. Sounds like you drive more, but let's say that's it. At a generous 15mpg and $4 a gallon of diesel, that's $426 in gas a month. Your car payment is $470, which means in gas and payment alone you are paying about $896 every month to drive that Excursion. A reliable 30mpg car would cost you $202 in regular gas. If you bought it outright, no car payment. But let's say you want something nice and your payment is $150 a month. That's $350 a month total. That's a difference of about $550 a month. In a year's time you save $6500. How much equity do you have in the Excursion?

This.

I thought lawyers were suppose to be...... But in the name of civility I'll refrain from letting you have it.

As I said earlier, I drive an old Honda (reliable/cheap to operate) and I drive a quarter of your daily commute. I paid under $2000 for my car and it had a relatively new motor and new clutch.

If you need to pull a trailer once in a while, get an older truck, you can find decent ones again for under $2k. Drive it only when needed and save the giant monthly fuel bills.

I didn't need my college degree though to come to this conclusion.

Datsun1500 wrote: How much would it cost you to rent something else in the area? Is it substantially cheaper than the mortgage? You seem to be stuck on the fact you are under water, when you really need to look at it monthly. If walking away and renting something else is close to the same amount monthly, why bother? Why go through it? Just act like you are renting fom yourself. Even though you seem to think you can walk away and no one will come looking for their money, you are wrong. It might be the bank, it might be the insurer, it might be a collection agency, it might be the IRS, but rest assured, someone will come looking.

We could have rented the neighbors nearly identical house for $900. But as someone said earlier, maybe the market will pick up and we will get equity sooner. If we rent, and the market picks up, then rent would go up too.

You think the IRS will come looking if we default on our mortgage? are you just saying stuff to say stuff right now??????

If we decided to walk away from the house, we would work with our lender to try and avoid a straight default. The ideal arrangement would be a deed in lieu of foreclosure type deal. We would probably consult with the attorney general further for advice on how to proceed, and in fact, we will probably be doing that soon regardless of what we decide to do.

It seems to me you are choosing a truck over accommodations. To me, there is no such thing as equity when it comes to items that depreciate, as evidenced by your current mortgage situation.

What Kind of attorney are you?