Hello everyone,

I'll try to keep this as short as possible, so here it i without all the details...

I got morbidly behind on everything last year, worst of all, my mortgage. It started when I got taken by a dishonest contractor... I gave him $8,000 to fix some pressing issues in the house... In desperation, I borrowed the money from my Dad... The jerk turned out to be an alcoholic and basically tore the house apart and more or less stole the money, leaving me with damaged cabinets, dangerous wiring hanging out of the walls, crooked walls, rotten floors, etc. Anyway, the guy is nowhere to be found, and I heard he actually went to jail for other reasons. In other words, there is no recourse.

Anyway, the house is literally falling apart. I estimate that it would cost around $30-40,000 to address all the issues. I owe $120,000, and the inflated appraisal before the damage was $155,000. I estimate that the house is probably only worth about $100,000 at the most, in it's current condition.

I talked to the mortgage company (Countrywide) and explained my situation, and that I was involved in a new business that was making good money. I explained that if I could just roll over the back payments, I was sure I could keep it current.

At that time, they wanted to know what I could offer as good faith money, so I told them I had $2,500. It took them 4 months to reply with the answer of "NO". and that I was officially in foreclosure. I then offered them $5,700 if we could re-negotiate, and it is now being "reviewed", and the foreclosure status is on hold.

I don't know what to do! It would take about $13,000 to bring the account current, and I only have about half of that. All the while, my rate is due to increase in September, and the house is a shambles. In the meantime, my wife is devastated and we are both humiliated by our circumstances.

I would think that the mortgage company would be glad to work with us given the overall state of the market and the state of our house. Is there anything we can do? Every time I call, I wind up talking to someone in India which is MADDENING! I can't seem to ever talk to the people who can offer help.

What to do?

First I would tighten up your budget and sell off anything you can. Make the payments you have now on time. Save every penny you can, while you are talking to countrywide everyday trying to get them to agree to a payment restructure( I forget the name of it, but it is where you can make the the payments you have on time and add additional money to catch up on the behind payments) with giving them as much money up front as you can.

Explain your situation to them, by phone, everyday until they agree to this IN WRITING.

I don't know the particulars of your situation, but in general, your payment should not be more than 28% of your take home pay. You should not be carrying any credit card balances that you do not pay in full every month. And, you should be on a budget that allows you to pay your bills and save at least 10% of your income. If you are like most people, you are living paycheck to paycheck and it is not worth it.

Get out of debt as quickly as you can first, then save an emergency fund. Learn to pay cash for everything but your house, and it should be on no more than a 20 year fixed rate. If you can't afford that you have to much house. If you have any cars with you owe more than 10,000 on, sell it and buy a cheap car.

I know this sounds harsh to you, but this is the best way to get back on track quickly and find true financial peace. I recommend you read financial books like The Total Money Makeover by Dave Ramsey and The Millionaire Next Door, The Wealthy Barber and Rich Dad Poor Dad. You have no financial path to follow, these books will change your life. Good Luck.

Overall: You are $13k behind on a house that is worth $100k with a mortgage of $120k. $35k is needed to bring it to livable conditions.

Essentially, you need $48k to remain in your $100k home.

Get out of the house.

Deed in lieu of foreclosure without recourse.

Call your loss mitigation department at Countrywide yesterday. See if they would do a shortsale. Cut this off while you are behind, rather than run down in the street.

Find out where Countrywide's numbers are in the US. Call them there. Someone in the continental US has to have a phone on his desk.

Rent for at least two years, then begin again.

With a new business, you don't need this too. New enterprises are stressful enough on families.

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The problem is they are not accepting payments from me. They said they would return any payments i make... So I have just been saving it up. My hopes rest on their willingness to do a "loan modification" whereby back payments are rolled over and I can start making an adjusted payment based on the modified balance, which includes tax escrow from last year and late fees.

Do you suppose there is any chance I could get a no doc. loan from a new lender in my situation? On paper, the house appraised at $155,000 two years ago, and the new tax assessment is $202,000.

A no doc. loan for you would put your interest rate up in the rafters with the rate that you are likely to experience when your loan adjusts in September.

Do not concern yourself with the tax assessment. It has nothing to do with the value or the price of your home.

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Would it make sense to accept the high rate for the time being, rebuild, then get a better loan down the road in a couple years?

No.

Do not become too attached to the house. You are also attached to your sense of self-identity.

If you move out now, you are afraid that your brain will say that you failed. This is a financial place that you're at, not an emotional one. Remember, it's just a house. One that you don't even like right now. You are trying to save this particular house so that you'll feel better about yourself.

What about feeling better about yourself because you dumped a mistake?

Do what you think is best for your family.

Again, I think that you should get out of your house. Look for an investor club in your area. You need $48k to make a $100k home livable. See if someone there might be interested. You are only prolonging the inevitable.

What you are asking about by agreeing to paying the higher interest rate for some time on your loan is "can I take it on the chin just long enough to get things turned around?"

I am never a fan of this when I have less painful options.

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Damage control is your best option, if you can't settle with them, then as stated above, try the short sale. Also stated above, houses under distress are not homes.

Get out the best way you can, then find a cheap place to rent and save money. You may need it later for a settlement. Read books on personal finance before you rack up debt in the future. I recommend Financial Peace by Dave Ramsey.

Tighten up that budget and try to save a ton to offer more money once they reject your offer of $5,700.

Keep stringing it out until you can offer an amount they will accept.

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-Jesse

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