rock and a hard place

je04 · #1 (**permalink**) 12-05-2008, 04:34 AM

Greetings,

Need some advice on the best route (or least worst route).

Some history:
Purchased a home 3 years ago with the market peak at $213K. Within one year got a second to pay off credit card debt, now 80/20 mortgage total is $240K. Got divorced. My support payment and ex's student loan was covering the payment while she resided in the home. Intent to sell, but market began sliding. Shared credit card debt became excessive at $35K, so we filed chapter 7. I was laid off from my job due to downturn in economy and her loan company tightened their belt giving her no money for living expenses while she completes school. In June '09 she will have her RN license and can get back on her feet again.

I have been fulfilling my part of the divorce agreement, but she can not take care of herself. She told me that the payments on the primary were 2 months behind, I call and in actuality, they are 4 months behind. I am a prospective student and can't work just to pay for her existence.

My options and questions are related to the path with the least affect to future credit rating (the easiest to rebound from):
1. Drain my savings to catch up the payments and hope she continues to pay them on time (I can read your minds on this one)
2. Walk away, foreclose, and take it in the shorts knowing not to bother with any loans for 10 years.
3. Work with mortgage companies to try and lower the payments until she graduates.
4. Put house up for sale and attempt the short sale.
5. Relinquish my opportunity and become employed until she graduates just to make the payments.

If my name wasn't on the house as well, I wouldn't care.

MoneyTrev · #2 (**permalink**) 12-06-2008, 03:39 PM

3 and 5 are the best options. Go to work, get your finance straight and talk with the mortgage companies and lower your rates. They are willing as long as you have a good history.

impact · #3 (**permalink**) 12-09-2008, 08:16 PM

You are not alone, we are taking in 20+ files a day with people in the same situation as you. You can try us if you like, we are the most respected loan modification firm since we are the only firm who does not take upfront fee's. Over 80% of people who do their own loan mods are not successful. The banks bully borrowers who do not have representation and do not offer them the same deals. Best case scenarios: I have seen 2nd mortgage holders take 5-10 cents on the dollar fror a payoff when the value is gone, they do not have any security, they are happy to take it in some cases. Also, rates as low as 3% fixed is possible. If a bank takes the home back in foreclosure they lose approx 50% of the original loan amount, they would rather deal with you and keep you in the home and paying something. Every loan mod is different, it depends on your situation and your lender. I

BWare · #4 (**permalink**) 12-10-2008, 05:31 PM

je04:

In giving you affirmative feedback, I am going to be brutally honest with you. If I were a loss mitigator with the lender responsible for your loan, and you presented the facts as described in your post, I would proceed to foreclosure.

Your information presents a best-case scenario of a performance restoration date of June 2009, a full six months from now -- and that's the best case. Of course, it is possible that you could return to work sooner and/or bleed your savings to support the loan, but the fact that you divorced, took out a second and subsequently filed Chapter 7 doesn't speak well of you or your ex-wife as people who are likely to perform on the loan.

While the data is premature, the Office of the Comptroller of the Currency recently came out with a report that indicates over 50% of loan modifications redefault within six months of the modification date. As a loss mitigator, I think your profile represents an extraordinarily high redefault risk.

Having said the above, I agree with MoneyTrev regarding your best options. Your divorce and job loss can form the basis for a compelling loan modification request, PROVIDED that you express a profound willingness to deplete your savings and find work to support the loan until your ex gets back on her feet. Contrary to impact, though, I am a strong proponent of the do-it-yourself loan modification approach. There are a number of good people out there who will give you great service and really go to bat for you, but beware of the scam artist trying to make a quick buck off of you.

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