My Intenional Foreclosure

[Chaserjim 0]

My current home I bought in 2006 for 236,000.00.I got an adjustable rate mortgage (arm)When I first bought it my total payments were 1550.00 and 270.00 (the second mortgage)This house is only 1800 sqft.Since july 2008 - my rates increased from 7 percent to 9 percent on my first loan , and 8 to 10 percent.I am now paying more than 2200 a month for a small house. I just had it re-appraised. Its only worth 211,000.00 now. I am engaged but haven't filed joint taxes. She was approved for a 30 year fixed loan at 4.8 percent on a 320,000.00 loan.If we stop making house payments, we can save over 18 thousand for a downpayment for her purchase, and deed me in after we are married. Meanwhile my credit goes to shit from foreclosing or a possible short sell, but we essentially move into a 3500 sqft home, at a fixed payment paying 500ish less a month.Discuss.....P.s - I forgot to mention that we can totally afford the increase in rates and monthly payments...but the value has dropped a lot and I now owe more than want its worth by 20k.I also an expect some sort of loan modifcation plan from the lender...where they mod the loan to a fixed and change my rates. I'm kinda strong arming them into that because I've tried to refi through a fed program but I would have had to been 3 months into foreclosing before those options came available to me.

[bigcoled 1]

You've found a way around a credit related issue, relating to the biggest purchase most people make in a life... I believe this means you win at life... seriously though, stick it to the man... They're trying to hold us down with bs credit scores, credit reporting, etc... **** that life is survival, and anyone that impedes you from getting what you need to live, **** 'em, because everyone has a right to life as much as the next person... if i killed someone and they tried to lock me away, **** that, I'd start blasting mother ****ers left and right if they tried to bring me down...

[Zach6668 513]

P.s - I forgot to mention that we can totally afford the increase in rates and monthly payments...but the value has dropped a lot and I now owe more than want its worth by 20k.I also an expect some sort of loan modifcation plan from the lender...where they mod the loan to a fixed and change my rates. I'm kinda strong arming them into that because I've tried to refi through a fed program but I would have had to been 3 months into foreclosing before those options came available to me.

You understand real estate is a long-term investment, right?Of course your house is going to be worth less in the middle of one of the worst depressions in quite a while.

[Solar 0]

In a way the current value of your home doesn't matter at all unless you are going to sell it in the near future. It's not like the value is going to keep dropping until it is worthless. It's still the same house.Like Zach said, long term investment. Right now you're in a 3 buy in downswing, but by the sounds of things you are still well rolled. Don't quit based on a little variance. Everything is relative. If your home has dropped 40k in the last 2 years and the one you want to buy has dropped 60k (could be same percentage drop), you could say that buying it means that you're up 20k.

[Chaserjim 0]

Here's the thing. I fully understand that I purchased this house to be a home, and an investment. I bought it when I was 25 years old. That might be considered pretty young to buy a house - to others maybe not. With that said, I didnt do my homework on interest rates and loans. At the closing table, I was forcefed a 6 inch stack of papers to either initial or sign , and if I asked questions it seemed as it I was being a major annoyance....Plus I got into this house with 0 money down and actually received a 2500 check at closing because I made the sellers pay commision and fee's. So for the last 2 1/2 years, I have paid my mortgage on time , never been late. I pay my taxes like a good citizen. Then the adjustment to my interest rate kicks in. Ok no worries, Yes im paying 400 a month extra for the mortgage which is 4800$ more a year - i can handle that. Then it again it adjusts this time around in december, only adjusts maybe 100 more across the board. So now im paying 6k more , out of pocket , for the same ****ing house. I can easily justify paying 1500-1700 a month for an 1800 sq ft home ... However, I cannot justify paying 2200 a month plus utilities/water blah blah for the same square footage.Now - I try to refiance the bastard. Apparently my home is now only worth 211k , now the 230+ i purchased it for. Infact, Ive paid big money to have a deck installed in the backyard hoping that we could enjoy it and it would bring the value of my home up (nope). So now, in order for me to refiance to a fixed 5% rate (which would be nice since my payment monthly would be around 1500ish) is to come up with 15% down (on the appraisal figure) plus any negative equity which is around 20 thousand. Do the math. So - now, since I have this interesting situation where my fiance has been locked in at a 5% 30 year fixed, single mortgage for 330,000 thousand .. we could save what we would pay towards this mortgage , and enter forclosure (which happens to be around a 7-9 month process before eviction). So if I save our mortgage money and enter foreclosure, around september I will have saved nearly 20 thousand. All the while my sub prime peice of shit lender is working thier butts off to lower my rate and payments because a foreclosure costs them more money than a straight up loan modification. And if they happen to come up with a deal where they lock my rate in and lower the payments , great! I just saved how many thousands of dollars while Forcing them to refiance my loan.There happens to be a Consumer credit law that states once I enter into loan modification talks or refinancing, that all credit inquiries and comments are blocked to that specific lender.Meanwhile , lets say if they decide they arent going to work with my loan and just let me foreclose. Still got all that money we've been saving - so we slap adownpayment on her guarantee'd offer and move into a house thats much better, much bigger in so many ways. Remember home values are dropping like prom dresses , so a 330,000 home (while very nice) is usually around 3000 square foot , in a decent neighborhood. But now, those former valued 330,000 dollar homes are selling for 280-300 .... I get even more for my dollar. Especially since half of the nice ones are actually foreclosed properties.The only downside to this plan : 1, my credit is going to be horribad for 7 years. No new auto loans, nothing. And there is that guilt factor I could expirience thinking I just added to the nations economic crisis.....Or I can be happy with the fact that I went from a 2 car garage to a 3 car garage ... from buy 3 bedrooms to 5. From 2 1/2 baths to 3 1/2 baths. Oh yea, and since only her credit will be used on the new house, mines about to go to garbage. So time to go buy a new vehicle before I can't anymore.Whoever said that this should be an investment - Your abso-fruitly correct. I invested, I lost , time to hedge my bet.I also want to point out the fact, that the loan they put me into was called a "stated assets/state income" . Which meant, they took my 401k and pension as an asset and placed it into my earnings. I could have never ever ever afforded this ****ing home in the first place. It's a good thing I am engaged and we share in the bills. If I were alone - i would have not been able to stay above water. These stated loans, are now illegal.

[Chaserjim 0]

You understand real estate is a long-term investment, right?Of course your house is going to be worth less in the middle of one of the worst depressions in quite a while.

In real-estate , nothing relative. That's why small communities and some cities are called bubbles. It's because while some lose value , some dont. Why? Location location location. Which is where we would be picking.

[ziioo 0]

Right now you're in a 3 buy in downswing, but by the sounds of things you are still well rolled. Don't quit based on a little variance.

I'd love to have friends - even one friend - who would understand what that meant. Life would be so much better if I could use more poker analogies in everyday speech.

[MadKennedy420 0]

How much do you owe on the house now?FHA loans will do the trick for you if you are at or below 100% l.t.v.(loan to value)If you can refi it, keep it and rent it out as an investment property, then get your wife to get her loan.Are you using any of your income information to get her loan?

[chgocubs99 0]

This entire situation pretty much sums up the housing crisis.There is no right answer or solution.To answer the original question, it is both unethical and financially correct. I could never do it. But I would never sign an ARM to put myself in this position, either.

[MadKennedy420 0]

This entire situation pretty much sums up the housing crisis.There is no right answer or solution.To answer the original question, it is both unethical and financially correct. I could never do it. But I would never sign an ARM to put myself in this position, either.

All around greed made arms very attactive bunch of years back, i sold them.i was wondering if OPs was an IO or not.

[mrpaddyx 13]

At the closing table, I was forcefed a 6 inch stack of papers to either initial or sign , and if I asked questions it seemed as it I was being a major annoyance....

This. I'm not trying to be unkind or wise after the fact but its probably here where the problems started. The mortgage market in the UK is a bit different from the US but when I signed my mortgage agreement (roughly worth about $150,000 at the time) on my flat (appartment) I made sure I read every last piece of documentation before signing on the dotted line. You don't need some random guy in a forum to tell you this. In the current market you really have to do what you have to do survive. No-one really knows how long the global recession is going to last so it maybe foreclosure is the right solution in your circumstance.

[chgocubs99 0]

All around greed made arms very attactive bunch of years back, i sold them.i was wondering if OPs was an IO or not.

Don't blame anyone for selling them. I bought my house at the end of 07, when the market was flattening, and my bank was trying to talk me into doing it every chance they got. Problem is, if you can't afford a fixed, you shouldn't be buying a house at that price to begin with...but the market values were so inflated...Sigh.

[PokerFan 0]

I bought my first home 25 years ago...The rules/requirements then and now(the last 2-4 years) is unreal....Instead of going on and on about the changes..I'll put it this way. Do what is in your best interest now and long term. I'd pull the trigger on your new plan. Having a forclosure on your credit report will be a short term set back....and when the smoke clears it will be looked at as a small bump in your credit history..

[mmsdan 0]

Some random thoughts.Just curious, what index is being used to base the rate on your loans that hasn't gone down since Jul 08? Is another change date coming up soon?If you save 18k by not paying the loans on your current home to buy a 280-300 house and borrow the balance of the purchase price, what's to stop you from being in the same boat when the new home value drops 10% like your current home has? An 18k down payment is 6% of a 300k home. And, if you have additional cash saved to bump up the down payment on a new home (in addition to the 18k that you wouldn't be paying) then you might be able to paydown on your current debt where you wouldn't have a loan/value issue and refinance the home your in. It would take away from your saved nest egg but you would be able to replenish the fund with the money you save by lowering the interest rates (and the payments) on your current loans. A 211k loan @ 4.8% is $1100 if you go 30 year which is half of what you're paying now.I understand your line of thinking and have seen it occur in commercial properties over the years when there has been other liens against the property.Sounds like you have great credit. Foreclosure, in my opinion, should be the last thing being considered. Talking with someone in the business where you're at is a good place to start. A mortgage broker, CPA... Someone needs to know your financial situation to really be able to help you out.

[llou 0]

My take:1. OP was a stupid kid who bought a house he couldn't afford -- didn't read all the paperwork and seriously consider all the possible downsides of his loan2. His original loan company was stupid and unethical is hustling him into a loan he couldn't afford and didn't fully understand.3. Now ... all the chickens have come home to roost ... which negative outcomes for both the OP and his lending company4. OP has matured a bit and gotten a little smarter about personal finance. He now sees that by screwing his lender, he has a way out of an unpleasant situation. That way out has both some advantages and disadvantages. It's not totally ethical -- but the lender was not ethical with him to begin with.5. Key question #1: What is the OP's moral obligation to his lender and to society? Both his lender and society helped him get into the bad loan in the first place -- but he also needs to take some responsibility for his poor decision to buy the house with that loan. All 3 parties (OP, loan company, and society are to blame.)6. Key question #2: Will the OP regret it if he trashes his credit? What if the relationship with the fiance doesn't work out? He'll then be without a "Sugar Mommy" to cover him and his bad credit rating. Will he regret it if his fiance's credit rating slips -- which it might if she has to carry all the credit for the couple by herself?7. Key question #3: Will starting their marriage with the fiance/wife having to bear the burden for the OP's youthful foolish mistake be good for their marriage? Does he really want to be the anchor on their finances for the next several years? Will they have a baby -- which will require the wife to take at least some time off from work, giving her less income and lowering her ability to maintain a high credit score by herself?8. Key question #4: What if the housing market continues to go down and the new house becomes a financial burden? Is the OP 100% they could/would be able to wait it out? -- even if the wife were not working full time because of any children? -- or if they were paying childcare costs for her to keep working full time? What if either one of them lost their job? etc.I can understand the appeal of the OP's proposed solution. But I would recommend it only as a last resort. I would do everything I could to work with the mortgage company to refinance -- and preserve my credit worthiness. There are no guarantees that the proposal will work out well in the long run. It's like the original loan that the OP got for his house. It sounds good on the front end, but there are a lot of things that can go horribly wrong with it. His proposed fancy maneuvering could lead him to become a divorced Dad, living alone, with child care payments to make and a horrible credit rating.

[dreamcrusher28 0]

My friend (a mortgage broker) decided to do this and its worked out in his favor. He hasn't paid a cent in 18 months and has received zero letters in regard to payment/foreclosure. Meanwhile he's doing well at work and saving a bundle towards his next house, which will go under his wifes name/credit, I'm guessing. I laugh about it every time I mail in my mortgage check.

[bigcoled 1]

Am I missing something in terms of the idea of trying to rent the place out and keep the investment invested? Seems like I've tlaked to quite a few people who want nothing to do with having a rental property with their 2nd home and would rather sell outright... seems like the absolute wrong idea to me, buy hi, sell low? So, I mist be missing something there.In terms of the ethics of the situation. I am all for living a good life, being an active contributor to society and being responsible for our social actions, however, recycling, composting, and being energy efficient are one thing, when it comes to money, when it comes to business, things are completely different. When it comes to money, we are dealing in air, we are dealing with notes that claim to be an accurate portrayl of their worth to society in terms of the goods and services it can purchase. Your money becomes too valuable to spend it on an investment that isn't making money, your money has more value elsewhere... so the bank took their gamble, now they have a house and you have your money... and a better house... Only way I see you keeping this house is for rental...PS.. as a kite...

[mtdesmoines 3]

Here's the thing. I fully understand that I purchased this house to be a home, and an investment. I bought it when I was 25 years old. That might be considered pretty

Sell your house. Do the thing with the girlfriend. Get a personal loan to cover the difference or work it out with your mortgager. The benefits of keeping your credit clean are going to FAR outweigh the extra $xx,000 you pocket by going the deadbeat route.

[hank213 1,823]

Seems like a maneuver that sounds good in the short term but it doesn't sound like you're giving enough weight to the long term consequences here.If you foreclose and get married I don't think you can count on your wife's good credit being a buoy for what would be your low credit worthiness. In fact, I would speculate that your score is going to really bring the combined score (after marriage) way down. If you were to proceed and get married things like buying a new car after having a kid all become much more expensive. This seems like -EV play over the long term.

[PokerFan 0]

My take:1. OP was a stupid kid who bought a house he couldn't afford -- didn't read all the paperwork and seriously consider all the possible downsides of his loan2. His original loan company was stupid and unethical is hustling him into a loan he couldn't afford and didn't fully understand.3. Now ... all the chickens have come home to roost ... which negative outcomes for both the OP and his lending company4. OP has matured a bit and gotten a little smarter about personal finance. He now sees that by screwing his lender, he has a way out of an unpleasant situation. That way out has both some advantages and disadvantages. It's not totally ethical -- but the lender was not ethical with him to begin with.5. Key question #1: What is the OP's moral obligation to his lender and to society? Both his lender and society helped him get into the bad loan in the first place -- but he also needs to take some responsibility for his poor decision to buy the house with that loan. All 3 parties (OP, loan company, and society are to blame.)6. Key question #2: Will the OP regret it if he trashes his credit? What if the relationship with the fiance doesn't work out? He'll then be without a "Sugar Mommy" to cover him and his bad credit rating. Will he regret it if his fiance's credit rating slips -- which it might if she has to carry all the credit for the couple by herself?7. Key question #3: Will starting their marriage with the fiance/wife having to bear the burden for the OP's youthful foolish mistake be good for their marriage? Does he really want to be the anchor on their finances for the next several years? Will they have a baby -- which will require the wife to take at least some time off from work, giving her less income and lowering her ability to maintain a high credit score by herself?8. Key question #4: What if the housing market continues to go down and the new house becomes a financial burden? Is the OP 100% they could/would be able to wait it out? -- even if the wife were not working full time because of any children? -- or if they were paying childcare costs for her to keep working full time? What if either one of them lost their job? etc.I can understand the appeal of the OP's proposed solution. But I would recommend it only as a last resort. I would do everything I could to work with the mortgage company to refinance -- and preserve my credit worthiness. There are no guarantees that the proposal will work out well in the long run. It's like the original loan that the OP got for his house. It sounds good on the front end, but there are a lot of things that can go horribly wrong with it. His proposed fancy maneuvering could lead him to become a divorced Dad, living alone, with child care payments to make and a horrible credit rating.

You forgot about the possibility of a lightning bolt hitting and killing him and as a result none of this would matter...

[PokerFan 0]

My take:1. OP was a stupid kid who bought a house he couldn't afford -- didn't read all the paperwork and seriously consider all the possible downsides of his loan2. His original loan company was stupid and unethical is hustling him into a loan he couldn't afford and didn't fully understand.3. Now ... all the chickens have come home to roost ... which negative outcomes for both the OP and his lending company4. OP has matured a bit and gotten a little smarter about personal finance. He now sees that by screwing his lender, he has a way out of an unpleasant situation. That way out has both some advantages and disadvantages. It's not totally ethical -- but the lender was not ethical with him to begin with.5. Key question #1: What is the OP's moral obligation to his lender and to society? Both his lender and society helped him get into the bad loan in the first place -- but he also needs to take some responsibility for his poor decision to buy the house with that loan. All 3 parties (OP, loan company, and society are to blame.)6. Key question #2: Will the OP regret it if he trashes his credit? What if the relationship with the fiance doesn't work out? He'll then be without a "Sugar Mommy" to cover him and his bad credit rating. Will he regret it if his fiance's credit rating slips -- which it might if she has to carry all the credit for the couple by herself?7. Key question #3: Will starting their marriage with the fiance/wife having to bear the burden for the OP's youthful foolish mistake be good for their marriage? Does he really want to be the anchor on their finances for the next several years? Will they have a baby -- which will require the wife to take at least some time off from work, giving her less income and lowering her ability to maintain a high credit score by herself?8. Key question #4: What if the housing market continues to go down and the new house becomes a financial burden? Is the OP 100% they could/would be able to wait it out? -- even if the wife were not working full time because of any children? -- or if they were paying childcare costs for her to keep working full time? What if either one of them lost their job? etc.I can understand the appeal of the OP's proposed solution. But I would recommend it only as a last resort. I would do everything I could to work with the mortgage company to refinance -- and preserve my credit worthiness. There are no guarantees that the proposal will work out well in the long run. It's like the original loan that the OP got for his house. It sounds good on the front end, but there are a lot of things that can go horribly wrong with it. His proposed fancy maneuvering could lead him to become a divorced Dad, living alone, with child care payments to make and a horrible credit rating.

You forgot about the possibility of a lightning bolt hitting and killing him and as a result none of this would matter...

[terradawg 0]

Here's the thing. I fully understand that I purchased this house to be a home, and an investment. I bought it when I was 25 years old. That might be considered pretty young to buy a house - to others maybe not. With that said, I didnt do my homework on interest rates and loans. At the closing table, I was forcefed a 6 inch stack of papers to either initial or sign , and if I asked questions it seemed as it I was being a major annoyance....Plus I got into this house with 0 money down and actually received a 2500 check at closing because I made the sellers pay commision and fee's. So for the last 2 1/2 years, I have paid my mortgage on time , never been late. I pay my taxes like a good citizen. Then the adjustment to my interest rate kicks in. Ok no worries, Yes im paying 400 a month extra for the mortgage which is 4800$ more a year - i can handle that. Then it again it adjusts this time around in december, only adjusts maybe 100 more across the board. So now im paying 6k more , out of pocket , for the same ****ing house. I can easily justify paying 1500-1700 a month for an 1800 sq ft home ... However, I cannot justify paying 2200 a month plus utilities/water blah blah for the same square footage.Now - I try to refiance the bastard. Apparently my home is now only worth 211k , now the 230+ i purchased it for. Infact, Ive paid big money to have a deck installed in the backyard hoping that we could enjoy it and it would bring the value of my home up (nope). So now, in order for me to refiance to a fixed 5% rate (which would be nice since my payment monthly would be around 1500ish) is to come up with 15% down (on the appraisal figure) plus any negative equity which is around 20 thousand. Do the math. So - now, since I have this interesting situation where my fiance has been locked in at a 5% 30 year fixed, single mortgage for 330,000 thousand .. we could save what we would pay towards this mortgage , and enter forclosure (which happens to be around a 7-9 month process before eviction). So if I save our mortgage money and enter foreclosure, around september I will have saved nearly 20 thousand. All the while my sub prime peice of shit lender is working thier butts off to lower my rate and payments because a foreclosure costs them more money than a straight up loan modification. And if they happen to come up with a deal where they lock my rate in and lower the payments , great! I just saved how many thousands of dollars while Forcing them to refiance my loan.There happens to be a Consumer credit law that states once I enter into loan modification talks or refinancing, that all credit inquiries and comments are blocked to that specific lender.Meanwhile , lets say if they decide they arent going to work with my loan and just let me foreclose. Still got all that money we've been saving - so we slap adownpayment on her guarantee'd offer and move into a house thats much better, much bigger in so many ways. Remember home values are dropping like prom dresses , so a 330,000 home (while very nice) is usually around 3000 square foot , in a decent neighborhood. But now, those former valued 330,000 dollar homes are selling for 280-300 .... I get even more for my dollar. Especially since half of the nice ones are actually foreclosed properties.The only downside to this plan : 1, my credit is going to be horribad for 7 years. No new auto loans, nothing. And there is that guilt factor I could expirience thinking I just added to the nations economic crisis.....Or I can be happy with the fact that I went from a 2 car garage to a 3 car garage ... from buy 3 bedrooms to 5. From 2 1/2 baths to 3 1/2 baths. Oh yea, and since only her credit will be used on the new house, mines about to go to garbage. So time to go buy a new vehicle before I can't anymore.Whoever said that this should be an investment - Your abso-fruitly correct. I invested, I lost , time to hedge my bet.I also want to point out the fact, that the loan they put me into was called a "stated assets/state income" . Which meant, they took my 401k and pension as an asset and placed it into my earnings. I could have never ever ever afforded this ****ing home in the first place. It's a good thing I am engaged and we share in the bills. If I were alone - i would have not been able to stay above water. These stated loans, are now illegal.

This is wrong. Stated income/stated assets means that they don't verify anything. They let you do this because you have good credit so you simply state that you make X amount and you have X amount in the bank. You are an adult, you signed up for this. I did a stated income loan for my house and it's not worth less than what I paid for it. I'm not going to stop making payments just because I can let them foreclose on it now. Plus, they can still come after you for any deficit remaining after the house is foreclosed and sold. Not to mention that you just posted your intention to commit fraud in a public forum. NH.

[hank213 1,823]

You forgot about the possibility of a lightning bolt hitting and killing him and as a result none of this would matter...

Poppycock.The OP shouldn't just consider the post flop action here. He needs to give serious consideration to the likely turn and river bets based on higher probability occurences. Getting married and having a kid sound extremely likely in his position.Short sightedness or assuming everything will continue status quo is part of what got him in this situation in the first place.

[tuckermitchell 1]

This is something that is totally an aside, but I'm still quite interested in the answer to. Why do people need 5 bedrooms and 3.5 bathrooms? It just seems completely hate the idea that a person needs 3500 square feet to live with two other people. Maybe I just grew up a little less fortunate than some and don't see the need for 3500 square feet to live comfortably. Although, everyone is different obv, so to each their own I guess. I'm just curious, I guess.

[llou 0]

You forgot about the possibility of a lightning bolt hitting and killing him and as a result none of this would matter...

QFTI was actually trying to help the guy out. I work with a lot of single parents who are struggling to cope with the results of bad decisions they made when they were younger -- and assumed that their relationships (and their jobs) would last forever.