Sorry, but I'm not willing to throw my good money after someone else's bad money. If this was a guy with no income due to a layoff or something and a family about to lose the house they all live in, I'd certainly consider it. At this point, with him being so upside down in the house, and pretty much screwed unless someone just steps up and pays the whole thing off (and if anyone wants to do that, I also have a mortgage I'm sick of paying), it just doesn't make sense for anyone to donate to this. He needs to do like many people suggested, stop making the payments, and start throwing the rent into a savings account, or a shoe box in his closet. He can then start the foreclosure process and work on rebuilding his credit. Obviously you can do what you want with your own money, but I'd be shocked if you found many people interested in this.

Walk, and save your money.  The collapse is coming.

Well, that's one down.  My $10 won't go very far.  I think we need 50 or so generous conservatives.  After all, we are the more generous people by far!

You have been throwing good money after bad money, it is probably a blessing in disguise. Congratulations.

Talk to the bank.  You are not alone, and there are options.  Banks don't want houses they cannot sell either.

I would do everything in my power to keep my good credit, but that's me.

I just hope your current tenants are smokers prone to falling a sleep near oily rags.

The reason Steve is having trouble here - is that he is a responsible adult that feels obligated to meet his obligations. Not the popular choice with some here it would seem but breaking your word (in this case with the bank) is a big deal to some of us and not something to be taken lightly.

Yeah, he may not have a choice in the months to come and let it go but he has done the right thing by at least trying to make it work. He did not take the easy path and walk as soon as the sky turned gray letting someone else take the hit.

One of the reasons he is in the fix he is in is that the rest of the world is ready to walk away for self preservation,(at someone else's expense) on a minutes notice without making a attempt to fix the problem. If, and I know thats a big word here, others in this country/world were more responsible like Steve perhaps we wouldn't be in the fix we are in.  

Could he have made better choices? (hindsight is usually 20/20)  Sure, who doesn't have something they wish they could do differently AFTER the fact? A big "I told you so" may be accurate but it certainly seems un-cool to say. I do not think much of the "everyone else is doing it so you should to" mentality.

Would it be in his best interest to have dumped it? Probably in the short term. Perhaps in the long. Only time will tell.

Any decent man would be obligated to make it work in an honest system.  Banks, in concert with Government, have destroyed the system.  Throw the debt back in their face.  To hell with them.

The bank likely won't talk to him until he defaults.

Sorry OP...at least you're out of Michigan

if the down payment was low enough, just turn in the keys.  they can't foreclose when you have given the keys back.

Thats a damn find idea if he can find that second job.

I appreciate the sentiment, nut I'm not going to rely on charity to help me out of this situation. Give your $10/month to a food bank so that people on foodstamps can get off of the Government tit. I am going to have to face this head on and take what comes.

The banks already received enough of your money to cover their losses on loans that went bad on them.

Off topic: We have jobs?





 

Can anyone comment on what the repercussions are from "walking away"     Can you do it without a bankruptcy?     Does the bank which repossesses get to bill you for the loss it takes on the forclosure sale?

What are the tax implications?

As someone else mentioned.  Stop paying and pocket the cash.  Keep your tenants rent as well and stock pile what you can.  You go into default and the "dealing" begins.

Around 8yrs ago my parents neighbor stopped paying on thier home.  They paid the elec and cable, but no mortgage.  They stayed in that house for another 9mo before they finally left.  I don't think they were even "forced" to leave.

Find out what is envolved with walking away from it properly and try to use the system to your benefit.  You won't make a shit load of money, but at least you will cushion the hit.

Best of luck to ya steve.

I've heard of people I know using this program to help them keep their homes.  Might look into it.
(I have no affiliation with the group/website/etc just heard about it.)

http://www.makinghomeaffordable.gov/

I'm surprised they haven't sent you a letter about renegotiating yet.

Renegotiate.

1) Did you convert your mortgage when you moved out and turned it into a rental property?  



2) Is the homestead exemption status why your taxes jumped?  



3) Call the bank now and re-state what you told us in the first post.  Tell them you wish to do a deed in lieu now instead of taking them through foreclosure.  It's not as bad a hit on your credit.



4) What part of town is the house in?  

What is his word and obligation in this case? It is the contract. What does the contract say? Does it say he must financially ruin himself to keep paying for the loan, or does it say that if he can no longer pay ____ is what happens? The contract specifies a way out, with some consequences, and he's free to take it.

I rarely say this but it looks like it's time to let it go.

You've done more than most at trying to honor your commitment.

Just let the house go man...

As long as he is paying, they are not going to renegotiate jack. They won't even have the time of day for him.

IM Sent

Your mortgage agreement wasn't your solemn vow to the bank, it is a business agreement. If you break it, you won't burn in hell forever.

The longer you wait, the deeper you'll get. Also, the longer you wait now, the longer it will take for your credit to clear up.

So tell us, when is it ok to be irresponsible and dump a bad debt? At what point does it become socially acceptable?

The Bush Tax cut expires at the end of 2010.  The federal income tax rates reset to their higher values on January 1, 2011.

On the house... is Section 8 an option?

You're renting your residence now... are you living alone?  Can you downsize or bring in a rommate?

>>>>>>End Thread<<<<<

What do you owe on the loan?  What's the house worth?

You can't afford to lose $510 per month...can you afford to lose the difference between what's owed and what it's worth?  Can you afford to take ahit on your credit?

When the house was on the market in the past, what were you asking?

Same thing I was going to post.



IIRC some banks are using TARP/Spendulus money to rewrite upside down loans like yours. Go to a local branch of whoever owns your mortage in person, sit down and tell them the situation and see if they will rewrite your loan. If they refuse ask some of the .gov agencies that are involved in this sort of thing.



All else fails, put it on the market for whatever you can get or tell the bank they can have it.



Check this out:

http://www.mortgageloan.com/mortgage-loan-modification
 

It is not irresponsible at all.  He signed a contract with the bank saying he would pay X number of dollars a month and they would loan him money backed by his house.  The contract states that if he fails to pay his X dollars a month, the bank gets to take the house.

It has nothing to do with morals, its just business.  If the situation was reversed, the bank wouldnt be breaking themselves to pay him.

What the OP should do is lower the rent so the tenant stays, and just stop paying the mortgage.

Yes

 

When I saw all the Arfcom patriots telling people to Buy Honda and Toyota cars, I knew the Domestic car manufacturers were toast.

When I see the conventional wisdom here saying that it's OK walk away from an upside down house, I know the banks are going to continue to be in a world of hurt.  

We are still in the early stages of this financial crises.

UPDATE:

Just got off the phone with my lender. What they told me was that I could take advantage of an FHA Streamline Program, which in the end would increase the balance of my loan and probably kill any short sale opportunities (since you can't really justify increasing the balance of the loan and then ask them to do a short sale).

The lender told me that what is killing me is my escrow. I am paying over $5,000/year in property taxes, which compared to the value of the house seemed to be extremely high compared to what they are seeing nationally. Basically, they told me that they really can't do anything. I am guessing that since I'm current I am not a priority for them. They gave me another number to call for the Modification Department, but they were urging me to try and lower my property taxes first. I'm going to call the modification department anyways.

Also, I am afraid to just pocket the rent money from my tenants and not pay on the house. My property manager has told me that they have had a lot of changes to the laws in Michigan and that while he couldn't give me legal advice, it might be a criminal act now to keep the money and not pay the mortgage with it.

I don't know what I am going to do. If I take the money and don't pay the mortgage then I risk breaking the law, the bank doesn't seem willing to help me right now, trying to get my property taxes lowered is probably going to be impossible. I wonder if I can just not let the tenant sign a new lease and make them move out. Either that or I can just pay the bank the amount that my tenant is paying me and see what happens from there.

There is nothing to be afraid of.  You think they are going to hunt down every landlord who collected rent and didnt pay the mortgage?  Whats the point anyways, those people are mostly broke.

Now, if you had 10 or 20 rental properties, and you bought them and never paid any of the mortgages, and just kept the rent money, that is a whole different story, but in your case, nothing is going to happen.

Not to mention, as you said, the rent payments dont cover the mortgage anyways.

Edit:  Generally speaking, getting your property taxes changed is something that you can only do during a few months of the  year.  Then, it takes effect in the new year, and since property tax is paid in arrears (at least in Ohio it is), you really dont have any change in payments for six months or a year after.


The reason the lender is telling you that your problem is property taxes, is because that has nothing to do with them.  They are just passing the buck.

From what you have stated in this thread, unless you win the lottery, you are going to lose that house.  Not to mention, as far as I know, mortgages in Michigan are non-recourse.  That means that if you get foreclosed, they cannot come after you for any additional money, they can just take the house.  

Basically, what this means is that every single penny you send to your lender works out the same as if you drove down the highway and tossed it out the window.

You should call a real estate lawyer who practices in Michigan and confirm that its non recourse, as I said, but really you are just pissing away money for no good reason right now, IMO.

Good luck!

Your PM is an idiot. He just want to keep collecting HIS paycheck from you.

Non-homestead summer taxes in Michigan are a motherfucker. $416 / mo is probably not out of line, unfortunately.

The responsible adult thing is a bitch, lemme tell you. I sold my house at a big loss because, well, its what I felt was the right thing to do.

In hindsight.......

I don't know who is telling you that you can't show the house. What does your lease say about it? You still own the property and generally, if you give notice, can show the property.

Here's a question about this subject very similar to yours.

Sorry to hear about your predicament Steve. This really sucks.

Question: have you broached the subject with the lender, of you walking away from the house...? They have a TON of homes right now and I'm sure they won't want another one on top of it. Not that I expect them to deal with you, but who knows.

The market here is awful. I talked to a mortgage guy with 35+ years in the business, and he has never seen it like this. Even when mortgages were 12%+. Talked to another guy with probably 15 or 20 years, and he said that 2 out of 3 homes for sale in MI right now are bank owned, at least in our area.

This stuff sucks... But again I hope your situation turns around Steve.

Criminal act in what state? surely not Texas...never heard of not paying on a note will land you in jail...cut your  looses and take care of your self....are you planning on moving back to MI if not let the house go...

I know our property taxes went down considerably this year.





You can request an escrow recalc anytime.  Ask.  They might even send you a check - they did for us once.



ETA - with the escrow recalc you have a choice of a different monthly payment or a check for the difference.

UPDATE 2:

Just got off the phone with the Modification Department. They told me flat out that non-owner occupied properties are not candidates for loan modifications. He told me that my only alternatives are to either do a short sale or stop making the mortgage payments and let the place go into foreclosure. He also told me that if I do a short sale then the bank is going to 1099 me for the difference between the loan amount and what the bank gets for the house, so if the bank takes a $20,000 loss on the house they are going to report it to the IRS as a $20,000 payment to me and I am going to have to pay taxes on this. Since this house is no longer a principal residence I am not covered by the Mortgage Forgiveness Debt Relief Act of 2007, so I get stuck with the tax burden on a short sale. I found a quick link which says pretty much my only option would be to let them foreclose and then file for bankruptcy.

I called my PM back, who is also a Real Estate Agent, and he said that right now in my area the market is flooded with foreclosures and you can buy them from the back for $70,000 dollars for a dump to $90,000 for a house with a good roof and nice windows. I currently owe $130,000, so if I got $90,000 for mine then I would get a tax bill from the IRS for $40,000. That would be added to my income, and since I'm single I would be in the highest tax bracket imaginable.

In short, no matter what I do I am going to be seriously fucked.

Let this be a lesson to all of you who talk about honoring your word and all this horseshit about doing whatever you have to do to honor your obligations. The crooked come out ahead and the honest pay through the nose. The government gave these banks $770,000,000,000 of our money and now they aren't interested in lifting a finger to prevent another foreclosure (the loan modification guy at my bank ACTUALLY said that foreclosure was an option!) and I am fucked any way turn. I should have stopped paying on this house the day I moved out.



I need to talk to a lawyer.

If i was you I would find out exactly what the law is about getting the rent and not paying the note. Find out. If its legal do it as long as you can to recoup some of the loss.

You'd have to pay taxes on the 40K not owe the IRS 40K, Big difference. And they are not as a matter of fact going to 1099 you, especially if the house is in good repair and hasn't been trashed in a deliberate manner. You'd owe maybe 18K or so.

See, this is why a dozen underage El Salvadorian hookers isn't such a crazy idea anymore.



Hang in there, this too will pass.



Other successful idea - Grow Homes I hear net a half million a year or more.  J/K.



They say it's only money - but I do share your sense of responsibilty.



Good luck, get a decent lawyer and make decisions that restart your life from here.  Hanging on is obviously killing you - be alive again.

John Adams our first vice President and second President   "The worst form of Tyranny is unjust laws".

Take the rent and keep it

The lender said that my options are:

1. Do a short sale on the house. He said that this is probably my best bet since the banks don't want more foreclosures and that they are usually very happy to do a short sale. The downside is that since this is not an owner occupied property then I am going to get a 1099 on the difference between what I owe and what they take for the house. My PM is also an agent and he told me that comps in my area are going for $70,000 for a dump to $90,000 for a house with a good roof and nice windows. I have new windows and a new roof (1 year old) and a new furnace/AC, so if you figure that I get $90,000 for the place on a short sale and I owe just barely under $130,000 then I would get $40,000 added to my income taxes for the year. Since I am already in a high tax bracket and since I am single, another $40,000 would put me in the highest tax bracket imaginable plus I would have $40,000 to pay on. I'd wind up with an $8,000 - $10,000 tax bill easy.

2. Foreclosure. Yep, the guy from the bank actually told me that I could just stop paying on the house and let it go into foreclosure. He absolutely told me that it is an option. I would never in a million years have imagined that a banker would have even mentioned the word foreclosure other than to try and use it as a scare tactic to push me into another option, but he sure as shit told me that I could consider foreclosure. I guess that $770,000,000,000 has changed their attitudes quite a bit. The problem is that a foreclosure would also probably incur a tax penalty and I would be up shit's creek again, unless I file for bankruptcy, which I may or may not qualify for under the new bankruptcy rules.

Either way I go I am going to have my credit ruined and I am probably going to wind up with the IRS on my back. And fucking with the IRS can absolutely turn into criminal penalties. If I do a short sale and don't pay the tax bill, or a deed in lieu and don't pay the tax bill, then I could find myself a convicted felon sitting in federal prison. The problem is that I don't know where in the hell I would be able to come up with $8,000 to $10,000 to pay off the fucking IRS. I need to call a lawyer.

$18,000 huh? Yeah, that makes me feel better. I have $5,000 and I am going to have to pay for $900 co pay on a surgery and take three weeks of unpaid leave from work in December. Might as well be $18 million.

Sorry to hear about your problems.  Best of luck.  I would say something bad about the Idiot in the White House, but I am tired of talking about him,

Damn. What a shitty situation to be in. Got no advise, just want to wish you some better luck in the future.