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

drainoil wrote:

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.

awesome. high five?

Since you are apparently sparing me your barest criticism I will do the same for you and just say that I don't know anyone that would try and drag a 10k trailer behind a $2k truck on a 10 hour round trip out I-68 and expect to make it home under their own power. And as I've mentioned a couple times now, the truck won't be the DD much longer.

In reply to Datsun1500: Ok, well we already talked about that. Not sure if its been extended, though another forum member commented and said he thinks it has, but for a while there was a "forgiveness" on that "income" when a mortgage was reduced. Its another thing on my list of questions to talk to the AG about.

Datsun1500 wrote: Again,I'm saying there is no way you can walk out and not have someone come looking for the money you walked away from, it does not just disappear because you think it should.

It only disappears if your like me and Owned a house you bought in Mar 2006 Outright and sold it in Mar. 2011. That is the way you make $35K disappear. Oh well we bought the new one with no mortgage so if it's value drops and I sell it I'll lose money again. Them's the breaks.

Guess you all owe me $35K. Pay up.

In reply to nocones: I practiced family law and worked as a prosecutor.
I'm not currently practicing though.

nocones wrote: It only disappears if your like me and Owned a house you bought in Mar 2006 Outright and sold it in Mar. 2011. That is the way you make $35K disappear. Oh well we bought the new one with no mortgage so if it's value drops and I sell it I'll lose money again. Them's the breaks. Guess you all owe me $35K. Pay up.

Apparently you should have just rented it until the market improved. And sold your truck.
But once you own something outright at least you have the option to sell at a loss without worrying what that would do to your credit or who would come after you. In some ways its better than being underwater.

What do you do that requires hauling a 10Klb trailer. I'm guessing it's some hobby that you really can't afford since you are openly talking about walking away from a home and how bankruptcy would be an option if someone comes after you to pay back the MONEY you borrowed. Your BANK paid someone ~160K for your house because you said your good for it. This is in no way affected by what happens next. Just because your house dropped in value does not negate the fact that your Bank spotted you that money and you need to pay them back.

I think people are upset by this because your behavior/attitude is one that really drives those of us who play by the rules insane. Your decision to default on your mortgage is going to cost ME money. Someone will have to shoulder that loss. It will be the rest of us. You are in a situation that is entirely self constructed that you have the means to pull yourself out of if you just behave responsibly and fulfill promises you have made. So forgive people if they come at you with attitude and want to help you avoid this situation as a good majority of people would want to avoid it.

andrave wrote: Apparently you should have just rented it until the market improved. And sold your truck. But once you own something outright at least you have the option to sell at a loss without worrying what that would do to your credit or who would come after you. In some ways its better than being underwater.

I think the big difference when you own outright is that if you sell for a loss due to a market downturn, and buy in the same market, you aren't really losing any money unless the market never recovers. Perhaps that's stating the obvious.

Anyway, I really think your best bet here is to rent out your current house, live in the uncle's, and sell both if/when the market recovers.

andrave wrote:

nocones wrote: It only disappears if your like me and Owned a house you bought in Mar 2006 Outright and sold it in Mar. 2011. That is the way you make $35K disappear. Oh well we bought the new one with no mortgage so if it's value drops and I sell it I'll lose money again. Them's the breaks. Guess you all owe me $35K. Pay up.

Apparently you should have just rented it until the market improved. And sold your truck. But once you own something outright at least you have the option to sell at a loss without worrying what that would do to your credit or who would come after you. In some ways its better than being underwater.

I did sell my Truck (Well GTI at the time, and my Wifes 2006 Miata, and started making meals at home, and lived frugally for a few years). Our house was $154K and we payed it off by living WELL within our Means. No one owed us anything.

nocones wrote: Your decision to default on your mortgage is going to cost ME money. Someone will have to shoulder that loss. It will be the rest of us. You are in a situation that is entirely self constructed that you have the means to pull yourself out of if you just behave responsibly and fulfill promises you have made. So forgive people if they come at you with attitude and want to help you avoid this situation as a good majority of people would want to avoid it.

This. My next door neighbor went into foreclosure last year. Doesn't do wonders for the value of my home certainly. But I can forgive her - she is in her 70s, works at a day care, and fell down some stairs, breaking her hip. During recovery she got two pulmonary embolisms. Couldn't make ends meet so she's living with her sister. I can understand letting a house go into foreclosure in that circumstance.

You just want to offload debt onto "the system" as painlessly as possible because your wife bought at the top of the market. You can afford your mortgage.

Law school is what you do when you suck at math and your undergrad degree is useless. Too bad there are too many useless lawyers now and the market is saturated.

bastomatic wrote:

nocones wrote: Your decision to default on your mortgage is going to cost ME money. Someone will have to shoulder that loss. It will be the rest of us. You are in a situation that is entirely self constructed that you have the means to pull yourself out of if you just behave responsibly and fulfill promises you have made. So forgive people if they come at you with attitude and want to help you avoid this situation as a good majority of people would want to avoid it.

You just want to offload debt onto "the system" as painlessly as possible because your wife bought at the top of the market. You can afford your mortgage.

Thats the other part of this that gets to me, the "system". The big banks got bailed out but yet we hear so many stories of folks that want to try to restructure a mortgage and the lenders either make them jump through some difficult/impossible hoops or say no altogether.

Although its common sense to practice financial discipline and live within our means as averages Joes, it seams undermining in a sense when the corporate world in which we rely on, doesn't play by the same concept.

Maybe it's already been mentioned, but is the uncles house owned outright? If so, you could take out a mortgage on it (assiming it's been/being willed to you) and pay down/off the 1/2 duplex loan to where it wouldn't put a foreclosure or short sale on your credit.

If you walk I think you might have some I intended consequences, lots of people and companies look at your credit, from car insurance to potential employers. Can you live with the credit stigma till it drops off your report? Maybe, maybe not.

Edit, just looked again and the uncles place owes 50k, what would it be worth if sold? Also you could sell that place and put the proceeds towards paying down your loan.

There's a lot of speculation about what you think you can do and what actually might be possible. I don't see how you can make a reasoned decision based upon the lack of real information as to the consequences of your perceived alternatives.

I see you've already rationalized away any moral obligation to repay a debt, so it isn't worth arguing with some of the stilted logic you've used to do that. So here are the unresolved financial and legal issues as I see them. Before making a decision I think you should thoroughly understand these issues:

1) Deed in lieu is a negotiated agreement. If you are lucky, you can negotiate away a deficiency payment for the difference between the mortgage and the house value. However, you may not be able to negotiate it all away and therefore may end up making payments on the debt principal, which is what you are trying to avoid in the first place. Sometimes you can avoid a credit hit on a DIL, as well, if that is part of the agreement. Regardless, DIL is almost always preferable to foreclosure because it reduces the costs that might come back to bite you.

2) Regardless, you WILL pay taxes on any amount of debt that is forgiven in the process. The lender will report it to the IRS. Given your overall income, I guess it would be between 20% and 30% of the amount forgiven. That could considerably reduce the financial benefit of a DIL. If you just default and walk away, then you'll owe taxes on a deficiency, too. I think that's what the poster above meant. Although you've rationalized the loan loss away as the bank just made a business decision and lost, the reality is that your wife received money she wouldn't be paying back. The IRS considers that as taxable income if it doesn't get paid back, regardless of the fact that she lost it on a bad investment.

3) I'm really not seeing how you have the ability to take over your uncle's house. It isn't clear from your posts who are the actual beneficiaries of his estate. While executors are given the responsibility of liquidating an estate, they cannot just give assets to whomever they please. An executor has a fiduciary and legal duty to liquidate the estate according to the will. Violating that fiduciary duty can be a felony in some states and in some instances. The beneficiaries of the will can, of course, gift property after they obtain possession, but then there might have to be taxes paid in that transaction, as well.

4) PMI was insurance that allowed your wife to avoid putting much equity into the house in the first instance. Yes, it does reduce the amount of the bank's loss, but perhaps not all of it. I think you need to do a lot more research before concluding that the PMI provider won't/can't come after you. Or that you won't still have a deficiency and taxes to pay.

Believe me, I'm sorry you are in this position. There are many that have gone through this over the past few years. Many in much worse conditions than you are experiencing. I just lost a bunch of money on a house sale that I had to do in order to cross half the country to find another job. I've owned five houses over the years and lost money on most of them and about broke even on a couple. I hate real estate.

I emailed you back about the truck. I see a lot goes on while I am away.

It's really not about the truck, or the house. The root problems are deeper, and I don't want to see a train wreck.

On a somewhat related topic;

You are a lawyer not currently practicing, and seeking better employment.

As an HR guy, I can tell you, most firms (any, law or other) that deal with even slightly sensitive matters are probably going to run a credit report as part of a background check.

We get that you understand a contract is a negotiation, but firms do deal in reputations and part of that is is the integrity of their human capital. You do understand the reaction of the populace of this board is not unusual and you can expect a similar reaction from those who would seek to hire you in the future.

Any company that touts integrity as part of their business model (real integrity of perceived) will be highly sensitive to this.

So you are potentially limiting yourself in your future job searches, in a market you have already admitted is very competitive.

You are looking to better your future, and that is valid. But as we are all (including you) seeing, this is not a black and white issue, and I don’t think you have considered the potential impact this will have on both of your careers for the duration this stays on your credit report.

Which is 7 to 10 years. Now, you are an attorney who has not practiced law in almost a decade looking for a better job in a competitive market.

Something else to consider.

Svrex. Thank God you are here and doing what you do. Without you here I would have most certainly said some very counterproductive things.

Ditch the "toys" and spend less.
In the last 5 years, I went from a net income of 42k down to 4k......those were dark times for me, but it forced me to budget things for the first time in my life and put aside my wants and toys. I sold off most of the firearms I had purchased to simply survive, got rid of a few other things(snowmobile, 4wheeler, and such), and thankfully was able to rent from my parents for exchanging work. I still make nothing close to what I did before(low 20's net), but because I was forced to restructure my spending habits, I now am debt free and have a better standard of living than I did before.

Also note, even through those hard times, I never considered defaulting on any financial obligations I had signed for. So if you can afford it, and you evidently can, suck it up and stick to the obligations. Start wholesale with devoting most of what's left over after mortgage to her CC's and your auto loan. Those two should be your highest interest losses. After that, tackle student loans in a big way....focusing on the private ones first. Then, both of you should be in a good standing to either work to pay the property off, or have high enough credit scores to refinance the property away from Freddie Mac.

Either way, stick with the obligations. I know for a fact I wouldn't hire a lawyer who didn't. That alone makes you appear untrustworthy. Please take this with a grain of salt for what it was, level headed advice.

You default on your mortgage, and it becomes harder for honest folks to get one in the first place*. Don't be a schmuck. Please.

If I remember your first post correctly .... you said you'd be "right side up" in about 11 yrs, at current income and market pricing ... what's the problem with sucking it up and doing just that ?

yeah I understand that you WANT things to be better RIGHT now ... and if you don't feel any moral obligation to do what you said you'd do ( repayment of loan) then there's not any advice any of us can give you that'll cause you to do anything different .... you're going to do what you want regardless of what any of us say ....

which begs the question .... why'd you post in the first place ? did you think we were going to rubber stamp your decision to walk away from your legal obligation ?

sounds like my brothers logic, you know the one who changed his name and moved to canada....

On the truck, with payment and insurance at $630, and gas for 100 mile daily commute at $400+ per month, you're paying $1000+ for a truck! That's ridiculous! I know people with porsche/ferarris that cost less to own! If you got rid of the truck and drove the Festiva, which is paid for, and your fuel bill dropped accordingly, you could pay for this house just off the vehicle savings alone! You have no equity in the truck, you're just ahead in paying it off, it will continue to depreciate. Maybe it's a status symbol to you, but honestly these days, pretty much no one cares.

So you pull a 10K lb trailer a couple times a year and go visit relatives 5 hours away. Big deal, rent a car/truck for those circumstances. Enterprise will rent a truck with hitch for $50/day. Even if you have a trip like that once a month, AND include a Fri/Sat/Sun/Mon rental, you're saving $600+ dollars a month. It will never break, and if it does, you just call them and they come pick it up and give you a new one. No insurance, maintenance, registration or taxes to worry about. If you're just going to visit relatives and don't need to tow, rent a nice toyota/lexus for the weekend and treat yourself to a nice highway car! It's still cheaper! I've done this before just to keep miles off a daily driver I like.

Apply that mentality to all of these big ticket items in your life and I bet you and your wife will consider yourselves rich in just a year or two, and you won't even need raises to get there.

EDIT: If the tone is harsh, it's only because I am trying to emphasize how much of a spending emergency you are in, in the hopes of getting through.

I will refrain from commenting other than to say what I would do.

First, ditch the Excursion and whatever you have to tow with it. Buy a used 4Runner etc, something that's paid for.

Second, rent out the uncle's house. If you can rent it for a positive cash flow, this is a good thing. Remember that you need to put some money aside for emergency repairs etc. You can't just assume the existing mortgage, BTW. You will need to form an LLC or some other type of holding company then have it qualify for a mortgage (just did this with some of my dad's property). In most cases this is only a formality but it's an essential one. The LLC will insulate you from problems conected to the property and also insulate the property from any legal problems you may have.

Third, see if you can refi the townhouse for a shorter period. Here's why: the interest is lower for short term loans and you can build equity much faster. It might cost you $2k to refi, but that's cheap compared to wrecking your credit for 7 years. In fact, do the short term on the rental too.

Deed in lieu of foreclosure is a very last resort because not only does it booger your credit up but any amount you have 'forgiven' can most definitely be counted as income. http://www.duncanlawonline.com/bankruptcy-v-deed-in-lieu-of-foreclosure/ That happened to the last owners of the house I live in now. The LAST thing you need is the IRS on your ass along with everything else.

OK, so as I understand the situation: - Owe $154k, 11yrs to go, $1.1k/mo
- got free $75k house but it's not what/where you want to be

Why wouldn't you just sell the free house and put the $75k down on the principal of your current loan OR rent/sell both out and get to where you do want to be? That way you get to keep your credit in tact and especially in the case of renting - improve your position to paying very little out of your normal take-home for the "new" place?

Since you have no real financial hardship keeping you from fulfilling your end - is there any reason the bank can't expect to take the house and then sue you for the balance due? Financially speaking - they wouldn't waste the money to do that if you couldn't pay the loan you have - but you can. So it might be worth their while.

Giant Purple Snorklewacker wrote: Since you have no real financial hardship keeping you from fulfilling your end - is there any reason the bank can't expect to take the house and then sue you for the balance due? Financially speaking - they wouldn't waste the money to do that if you couldn't pay the loan you have - but you can. So it might be worth their while.

This is a good point. I work in collections--auto side, not foreclosure--so take this with a grain of salt. On the auto side what happens (unless there is a Bankruptcy) if you stop paying is the following: Car gets repoed. Car gets sold at auction. If the sale price is greater than the balance, the debtor gets the difference. If it is not (and it almost never is), then the sale price less the auction and repo fees gets applied to the loan. And you are still on the hook for it, and the bank will still get it.

I love how despite being a community of folks who on average have race cars costing less than $5000, we still have members who have daily drivers that cost as much as some other member's mortgages.

You'd think we'd all be car-poor and garage rich.