live in California, owe approx $100K more than my house is worth, considering discontinuing payments?

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We have an FHA loan serviced by Chase home mortgage, financed by Ginnie Mae and we owe about $ 100K more than other houses in the neighborhood are going for. We would like to move out of the area at some point and we are considering not making any more payments to the lender. We are not interested in refinancing. We have considered short sale but the process is so long and dragged out and potentially useless in selling the house.

What happens if we do this? What direct costs are associated with going through the foreclosure process?

What effect would it have on my credit vs a short sale?

How long would I be able to stay in the house before they kick me out?

I am not looking for opinions here. I am asking about California specific info. In CA, they passed a law saying that you wont be taxed on the forgiven amount, just like you wont be taxed by the Feds. Although it’s none of your business, my situation has changed.

  1. Reply
    Ryan M
    May 3, 2011 at 1:55 am

    Your credit will be destroyed to the point that you will not be buying anything on credit for the next 5 years. A short sale is still bad, but MUCH better. Don’t forget that depending on where you live and the types of mortgages that you took out, you will STILL legally be on the hook for the negative equity and that can even be taxable income to you. Do you have enough spare cash in the bank to pay the tax bill on an extra $ 100k of income???

  2. Reply
    R P
    May 3, 2011 at 2:04 am

    Can you afford to continue making the payments that you are legally and morally obligated to make? If so and you walk away from your house, you are contributing to the housing problem.
    You gave your word and made a promise to repay the money that the bank loaned you. Does your word not mean anything?

    Your credit will be ruined and you will pay taxes on the amount you defaulted on.

  3. Reply
    the kid
    May 3, 2011 at 2:49 am

    If you owe $ 100K more than the value, you can’t refinance anyway. Not without $ 100K to make up the difference.

    Foreclosure and short sale BOTH negatively affect your credit. Foreclosure more so. Think of it this way: no matter which you do, you won’t be buying again any time soon.

    You will be kicked out the day the home doesn’t belong to you anymore.

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