What should I do about underwater home – mortgages?

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I live in SW Florida where I owe $ 335,000 for a house surrounded by homes forecloure specialists are enjoying profits from selling at $ 125,000 (in much better condition than mine), and at least another thousand brand new unoccupied homes nearby. Flood insurance just became mandatory and rates went up.
I bought in ’06, it was the best I could get then, but in very poor shape compared to the quality of currently available homes. It would take another $ 20,000 just to make it marketable to sell for $ 125,000.
In ’06 I had to have two loans on teacher pay, did not have enough reserves for a down payment, assumed value would continue escalating and would refinance/consolidate both loans, with increased equity in a few years, and live here another ten years, retire and go home and live in Texas in a modest, low cost home, for the rest of my life.
Disaster struck.
I modified loan 1 (SAXON) under HAMP – that one payment is 31% of my gross income – one of my 2 “take home” paychecks a month.
I modified Loan 2 ($ 65,000 balance) directly with OCWEN, who only gave me a reduced rate (14% TO 2%) for 5 years.
My entire 2nd paycheck is that payment, utilities, food, clothes, car, gas, credit cards, student loans, and other living expenses.
I live hand to mouth and see now that I will never be able to retire/sell this house/move home, etc.
I didn’t want to get rich, but I didn’t expect to pay every dime I make for the rest of my life for basic living because of what I perceive as a national financial disaster – obviously not just a “natural real estate cycle” – evolving from poor economic planning and oversight on the part of the politicians who have been paid by my taxes from my hard work for the last 35 years to assure my (at least basic) quality of life – for life.
It is hard to specify ethical boundaries under such extreme, outlying conditions.
I do know one thing about this crisis:
Ethcial boundaries were crossed at every stage, by many people, over many years.
The argument for the end consumer to suffer – in such an exaggerated way – in order to affirm their ethics – seems profoundly hypocritical.
On the other hand, I am still here, paying my mortgage, even though every other homeowner who purchased a home in this HOA between ’05 and ’08 has walked away, so I AM demonstrating ethics.

My question is, “What would you do?”

I wish I could put up a poll and ask every expert what they would do.
Walk away entirely? What then… ? Rent for life…?
Stop paying 2nd lien? What then…? Credit ruined…for how long…? What else….?
Swallow and pay every dime they earn to live a restricted (since ’06: never go out, no travel, no vacations, no gift giving at holidays, drive old cars, buy used clothes, etc.) life for the next ten or fifteen years, fearing job loss or pay cut daily, only to find out at retirement that I have to walk away from it then, can’t sell it, perhaps have to file bankruptcy, then, and live in government housing for my retirement…?
That seems awfully bleak.
I make too much, they say, to file bankruptcy. hmmm…what would you do?
Thanks for any wisdom you could share.

  1. Reply
    Rose Alex
    February 6, 2011 at 1:20 am

    I suggest u to see
    u found your solutions here
    thanks for using answers.yahoo.com

  2. Reply
    Spock (rhp)
    February 6, 2011 at 1:22 am

    vote to get the Democrats and their fool CRA laws, and HUD, out of Congress and our lives.

    after you retire you’ll not have “too much” to go bankrupt.

    or, you could simply tell the second mortgage holder you’re not going to pay any more — they can’t effectively foreclose, so the worst they can do is try to get a judgment and garnishee your wages — BUT the judge in that case may refuse their request since so much of your income goes to pay your first mortgage.

    or, you could simply walk away from the house — mail the keys to the first mortgage holder and tell them you’ll sign a transfer in lieu of foreclosure.

    the ethical thing to do, of course, is to continue paying. you gambled [whether you knew it or not] on the future value of the house with the intent to retire in fairly well to do circumstances back home in Texas. Didn’t work and the apparent penalty is that you’ll not retire well to do at all, ever.

    Gambling is like that — most gamblers end up losing and some end up losing big.

    oops — you can only do what you can do.

  3. Reply
    Cheryl G
    February 6, 2011 at 2:12 am

    There is really no easy answer. You have done all you can possibly do, but the end of this recession and all that it entails may still not be in sight.

    It is probably time to walk away from the mortgage. You could list the house for sale with a Realtor’s help, at a price at which it is likely to sell. Then have the Realtor help you present any offer to the bank as evidence of a short sale.

    The problem with that, of course, is that the bank is likely to try to place a lien against you for the deficit. So, your only option may be to walk away. It will hurt your credit for 7 years, but the options are so limited that there may be no other solution.

    You can stop paying the mortgage and use that money to hire a lawyer to help you sort this thing out. It is such a shame that good people are being financially devastated by the economy’s downturn.

    Frankly, I don’t see any other solution. You truly have done all you can possibly do. Ethics are one thing. Poverty is another. Get a lawyer and start packing.

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