If you've already got the mortgage on the new home, I wouldn't be worrying about credit scores too much. While they might have some small influence on non-loan things (such as auto insurance rates), a credit score is only really important if you're trying to obtain loans.

 

I left Michigan for a job in Ohio at a time when the housing market was depressed (1994). We rented our house there for five years and sold it in 1999 for a profit, when prices had recovered. In the meantime we bought another house in the Cincinnati area. Maybe this would work for you. I rent two houses now and at least in my area it is not hard to find good renters.

 

I hope your new job lasts forever. But, that is rarely the case these days. Depending on your industry and job type, some employers factor a credit score into hiring decisions. So, having a damaged report can hurt your chances of getting hired.

 

Rent the house out, find an agent who will take care of it for you for a small fee. Or just drop the price as low as possible to sell it. Some banks will take the house back with no damage to your credit if you turn it over when your payments are current. I forget what this is called though...

 

I am loathe to play landlord from several states away, prop. mgmt company or no. We'd not make a dime above our mortgage, and so any damage etc would come directly from our pockets.

I have been talking with the mortgage company about a deed in lieu, and we'll see. It's up to them to decide if that is an option for us, unfortunately. If I could hand it back and walk away I absolutely would.

I *am* worried about DH's job. Not that he is in any danger of losing it, but security clearances may be a different matter. I need to ask him to talk to his boss about the ramifications, since each company handles these things differently. It should be no problem, considering we moved for this job and he's been with the company for eight years, but.... well, he needs to find out.

I am talking with the bank about a short sale. I'm mostly looking at the deadline they set... after six months, they will reassess and *may* offer a deed in lieu. If they don't, I think we may have to just walk. Gorgeous, well priced homes in the area just do not sell. Folks go for the trailer down the road for 20K less instead.

 

Hard decisions... I would try to keep your credit as clean as possible because it is used for so many things these days.

 

Yep. I think we're pretty much up a creek either way, we just get to choose which fork to take. DH and I talk, decide which way to go, and a week later he apparently remembers none of it and wants to talk about Option Unsustainable one more time. I am so stressed.

I have some pretty rough emotions over it. At this point I'm stuffing them to get done what must be done, but they keep spilling when I'm not watching carefully. I keep telling myself that starting this process is a good thing and I can do so much more for DS when it's over. I know that's true.

 

My daughter lives in Georgia and rents out her home here in Ohio. It was easy to find good renters who take very good care of the place and have never missed a payment. There are ways to work out the repairs/maintenance issues if you're willing. I'd imagine it would be better to try it than jump into something will potentially damage your future.

 

I'll second the rental idea.....I know it sounds like a pain (and can be) but when we couldn't sell the TH in VA back in 97 (had bought a single family home nearby) we turned it into a rental. Sold it 8 yrs later for 3 times what we paid for it, and had bought another rental in the meantime. We now have two rentals in other states, keep the rent low to keep good tenants, both are managed by property managers, repairs and visits are tax deductible and when it becomes a sellers market again we may sell (but most likely won't).

You 'think' you won't need credit again for years, but things happen and you probably don't want to be burning those bridges if you can help it.

 

I dont see myself ever asking for another loan... my repayment ability being somewhat compromised due to permanent disabilities... however I do whatever it takes to keep a good credit score. Not so much for the same reasons most have talked about, but simply because I signed the notes when I borrowed the money. My word counts for something. When you pay your bills in a timely fashion as YOU agreed, your credit score takes care of itself. I own several rental properties, and no, they dont always return a profit. But overall they are pretty much paying for themselves. I strongly recommend renting out the empty house, collecting all it will bring in, and paying that mortgage as you agreed to do. Someday down the road it may even turn a profit for you. In the meantime it should pay most of its own way and be building equity that will be useful in the future.

 

My DD and her husband found the house of their dreams but were stuck with their condo. It was on the market for a while but now they have a company renting out the property for them. The best renters are military because they can't have bad things on their record, so they are careful about paying on time and not trashing the place. You would also have insurance on the property and renters insurance to make sure you are not paying out of pocket for damages by renters. If you talk to a management company they can work something out for you. At least your payments would be paid for.

 

I would rent the place out. Do you have friends (neighbors, people from church, former coworkers) there who can keep an eye on the place? Yes, you'll probably have to pay a property manager but you'll have some income. Even if you must pay for repairs out of your pocket, your pocket won't have as many holes in it if you're getting some help paying the mortgage. Make sure you have a really strict lease, require references, make tenants pay first and last month's rent along with a hefty deposit.

I would put the house on the market. Even if you get it out by the skin of your teeth or lose money you won't have that hanging over your head. Do you have any equity?

Sounds like you're in a stinky position. Hope things get better quickly.

 

Have you got a lot of equity built up in home A? I'm like YH, I agreed to pay the note and wouldn't want to go back on that and lose what I've paid into it.

I have my property in WV that I had to leave(dh committed suicide there). I had a 1/2 dozen people that wanted to buy it, but couldn't get a loan. A couple came along that had 20% down and I agreed to do a land contract. It gave me some income and I had someone in the house so I didn't have to worry about vandalism. I just got back from having to start the eviction process, which I expected would have to be done from the beginning. It kept me from having to worry about it for 2 years though and what they paid will more than take care of any damages they may have caused. They're also trying to get the money from family to pay for the house, so it still might work out in the end.

I think renting or land contract would be a much better way to go then what you're considering.

 

Hard decisions... I would try to keep your credit as clean as possible because it is used for so many things these days.

Yes, clean credit is always a good thing. But with the huge number of people who have had their credit trashed in this recession, I suspect that credit ratings will mean less over the next 5 years that they have in the past. Creditors will have to change their policies to do business.

 

Yes, clean credit is always a good thing. But with the huge number of people who have had their credit trashed in this recession, I suspect that credit ratings will mean less over the next 5 years that they have in the past. Creditors will have to change their policies to do business.

Yep, and now that the government has allowed them to do so they are stiffening up credibility requirements before they will loan money. Gone are the days of being able to borrow money based upon ones ability to "fog a mirror". Banks are now wanting to see some real pay back ability (stable income), willingness to pay back (credit rating), and actual value in the collateral offered to secure the note before they hand out loans.

 

Yep, and now that the government has allowed them to do so they are stiffening up credibility requirements before they will loan money. Gone are the days of being able to borrow money based upon ones ability to "fog a mirror". Banks are now wanting to see some real pay back ability (stable income), willingness to pay back (credit rating), and actual value in the collateral offered to secure the note before they hand out loans.

Banks aren't loaning right now, and won't be for another 5 years. Don't expect things to go back to the way they were either. Credit cards will be replaced with debit cards for the most part.

 

Banks aren't loaning right now, and won't be for another 5 years. Don't expect things to go back to the way they were either. Credit cards will be replaced with debit cards for the most part.

Actually banks are loaning.... they are just not making loans to people who cant or wont pay them back. Had a banker call me a while back, wanting me to take over a piece of property they had loaned against... could have gotten it for the amount due with a 100 percent loan. He sounded heart broken when I told him I wasnt interested in borrowing any more money.

 

Actually banks are loaning....

That's not the reality. Here is a Wall Street Journal article from just 6 days ago.

How Bernanke Can Get Banks Lending Again

As you can see by the article, congress is holding hearings about the fact that banks aren't lending.

 

That's not the reality. Here is a Wall Street Journal article from just 6 days ago.

How Bernanke Can Get Banks Lending Again

As you can see by the article, congress is holding hearings about the fact that banks aren't lending.

Since I cant read the article without subscribing (which I am not about to do) I am going to have to simply take your word that you believe banks arent lending..... however please forgive me for not believing that when I have bankers calling me wanting to lend!

 

Jen it sounds like none of your options are stellar but you do at least have options. The deed in lieu would be great way to get out from under so hopefully that will work out for you. Short sale might work but could take a very long time. Walking obviously isn't the best option but if you have no choice you just have to do what you must.

For the rest of us here is a good lesson. DO NOT BUY A NEW HOUSE UNTIL THE OLD IS SOLD!

 

Remember that if you walk away and the lender forecloses, their will be a Deficiency Judgment against you. For instance, if the house ends up selling at auction for $20,000 and you owe $80,000 on it, the court will enter a judgment against you for $60,000. In a judgment, it can be collected by any means necessary allowed under your state. For most that mean garnishments, seizing bank accounts, liens on your current property, or taking any property that is yours free and clear including vehicles, farm equipment, etc.

Only 12 states have no Deficiency Judgments; all others do: Alaska, Arizona, California, Connecticut, Idaho, Minnesota, North Carolina, North Dakota, Oregon, Texas, Utah, and Washington.

So if your property is in one of these states, it might be to your advantage to just walk away and start over. Just remember that it's going to take a good 7-10 years to rebuild your credit. Foreclosures stay on your credit report for 7 years. If you're not in one of these states, bankruptcy might be your course of action. A bankruptcy will stay on your credit report for 10 years after your final discharge. Either way, you need to immediately talk to an attorney.

Personally, I'd still take the rental approach. If you're just going to walk away anyway, what does it matter about what they do the property? On the other hand, you may get some great tenants and find the value of your property increasing -- plus you get a lot of tax benefits.

I don't mean it judgmental, but you do owe it to yourself do whatever you have to do to make this right and attempt to maintain your obligation until all efforts and options are exhausted.

 

The other thing to remember, even in states where you are protected from a deficiency judgement, is you will owe taxes on the forgiven amount. Most banks will 1099 you the year they write off the debt. This may be several years later. The IRS considers the amount forgiven income and you will be taxed on it. If you owe 80,000. and the bank sells it for 20,000. and has foreclosing costs of 25,000., you will owe taxes on 85,000. plus your regular income. Keep this in mind when you think about just walking away. There is no way to get out of paying the IRS either.

 

The other thing to remember, even in states where you are protected from a deficiency judgement, is you will owe taxes on the forgiven amount. Most banks will 1099 you the year they write off the debt. This may be several years later. The IRS considers the amount forgiven income and you will be taxed on it. If you owe 80,000. and the bank sells it for 20,000. and has foreclosing costs of 25,000., you will owe taxes on 85,000. plus your regular income. Keep this in mind when you think about just walking away. There is no way to get out of paying the IRS either.

Yes, you will get 1099ed by the bank, but the Mortgage Debt Relief Act of 2007 provides an exclusion for a primary residence, which that was. Even if the home was an vacation home or an investment property, most people will not have to pay taxes on the difference due to insolvency.

Deficiency judgements are rare. Considering the times, judges are reluctant to rule against an already damaged family. There is also little sympathy for banks, since judges consider it a bad investment on their part too. Lawsuits are also expensive, so the bank needs to decide if it's worth sinking another $10K into legal fees. The judgment might also be discharged in bankruptcy, due to judge sympathy for upside-down mortgage owners.

But it all a moot point anyway, since most short-sale agreements with banks include a non-recourse provision, where the bank agrees to not go for a deficiency judgement if you agree to cooperate with a short sale.

I live in a recourse state, but deficiency judgements are almost never done here. The law was also amended last year to favor homeowners.

 

Yes, you will get 1099ed by the bank, but the Mortgage Debt Relief Act of 2007 provides an exclusion for a primary residence, which that was. Even if the home was an vacation home or an investment property, most people will not have to pay taxes on the difference due to insolvency.

Deficiency judgements are rare. Considering the times, judges are reluctant to rule against an already damaged family. There is also little sympathy for banks, since judges consider it a bad investment on their part too. Lawsuits are also expensive, so the bank needs to decide if it's worth sinking another $10K into legal fees. The judgment might also be discharged in bankruptcy, due to judge sympathy for upside-down mortgage owners.

But it all a moot point anyway, since most short-sale agreements with banks include a non-recourse provision, where the bank agrees to not go for a deficiency judgment if you agree to cooperate with a short sale.

I live in a recourse state, but deficiency judgments are almost never done here. The law was also amended last year to favor homeowners.

In theory that may sound right and you may have had people tell you that, but legally, financially, and statistically that simply is not true. The bank doesn't care about the legal fees since that is recovered in the judgment amount; plus the bank only pays for court courts out-of-pocket because the attorneys work for them in-house. All judgments are recoverable by many means in every state.

Additionally, it doesn't matter when or if this was homestead property. Is is not longer homestead property at this time and that's what the law goes by.

BTW, I don't know what judge you know, but after 30 years in law, I've never seen a sympathetic judge rule on his sympathy in matters of judgments. They can't rule by sympathy, they are required to rule by law. The laws are VERY specific in matters of foreclosure, bankruptcy (especially) and judgments so there is no sympathy factor unless there is a law in place to use it (usually giving someone more time due to a technicality); but not in matters of judgments. A judge has no recourse in matters of judgment. A judgment means you already lost the lawsuit, the case is over, the amount proven, ruled on -- and now it's time to do what the law says can be done to collect on it and it has to be the amount it that was proven to be owed. A foreclosure is a lawsuit and when it's over the judge issues an Order giving the house back to the lender along with the amount owed, further costs, attorney's fees, etc. (in some states even interest). There is no factors or sympathy in changing that amount - it's all in the original Order. A judgment is just the 'legal' means of collecting what was decided at the foreclosure hearing.

I'm curious, how was the law in your state amended to favor the homeowners?

 

I'm curious, how was the law in your state amended to favor the homeowners?

The law was overturned for loans made after October 1, 2009.

Change to Nevada Law prohibits deficiency judgments for loans made after October 1, 2009 to purchase primary residences | Las Vegas Short Sales