Wife and I disagree - Your advice requested

[PdxDavid]

Excellent points! Plus, one must consider the utility costs of a property double in size.

I may be incorrect; although, I sense the OP's concerns are not exclusively tied to monthly housing costs. Depreciation, size, quality, and (lack of) personal attachment appear to be major concerns as well.

With a pending BK, credit card costs are eliminated from the bottom line potentially expanding housing funds.

Personally, I wouldn't reaffirm a loan on a property that lacks attachment and grossly fails to satisfy the needs of my family. Sure, we all need to make concessions and residing in less than ideal space/environment may be factors. In this scenario, loan commitment has become a choice. While not an easy decision as there are plenty of factors to consider, I'd likely either ride-through on a modified loan or save during foreclosure. In the meantime, I'd continue to search for rental properties that satisfy my financial criteria and needs of my family. Of course, my opinion stems from my "we're all proverbial renters until this housing crisis is rectified and we realize true values of properties" stance.

It is like we are twins. This is exactly my thinking. I sure hope we are right. and there is no way that we will reaffirm even if we do take the mod. If that is a deal breaker for them it just makes my decision easier.

[PdxDavid]

$1675 is a pretty large housing expense increase, compared to $182K @5% for 30 years, even with taxes, insurance, and HOA fees added in. Unless I am misunderstanding? I thought you were trying to decrease your monthly housing expenses due to inability to pay back credit card and secured debt?

A family of 7 is tight in 1400 sq. ft, true, but if you can't afford to pay your credit cards, how can you afford a $300 - $500/mth increase in housing costs?

I'm just askin'

What is the foreclosure timeline in your state? If you accept the mod, file BK and then stop paying, or even just file BK and then stop paying you may be able to stay in the house for 6 months, a year, even longer in some areas of the country. That would certainly give an an opportunity to put some $$$ away for a move

I see your points on the amount of money renting this place would cost. the difference is that in the BK we will be freeing up over 2000/mo by giving up CCs and Autos. I will be checking with the home owner about what to expect as far as utility costs. I don't want to be paying $400/mo for heat/electric. I have a feeling it is not going to be much more than what we pay currently because of the way these places are built.

Foreclosure will take many months here in Oregon. After they decide that they are going to foreclose and sell they have to give 120 days notice. There is another property in our area that has been empty for over 2 years. Different bank but still...

Thanks for the input.

[HakunaMatata]

$1675 is a pretty large housing expense increase, compared to $182K @5% for 30 years, even with taxes, insurance, and HOA fees added in. Unless I am misunderstanding? I thought you were trying to decrease your monthly housing expenses due to inability to pay back credit card and secured debt?

A family of 7 is tight in 1400 sq. ft, true, but if you can't afford to pay your credit cards, how can you afford a $300 - $500/mth increase in housing costs?

I'm just askin'

What is the foreclosure timeline in your state? If you accept the mod, file BK and then stop paying, or even just file BK and then stop paying you may be able to stay in the house for 6 months, a year, even longer in some areas of the country. That would certainly give an an opportunity to put some $$$ away for a move

Excellent points! Plus, one must consider the utility costs of a property double in size.

I may be incorrect; although, I sense the OP's concerns are not exclusively tied to monthly housing costs. Depreciation, size, quality, and (lack of) personal attachment appear to be major concerns as well.

With a pending BK, credit card costs are eliminated from the bottom line potentially expanding housing funds.

Personally, I wouldn't reaffirm a loan on a property that lacks attachment and grossly fails to satisfy the needs of my family. Sure, we all need to make concessions and residing in less than ideal space/environment may be factors. In this scenario, loan commitment has become a choice. While not an easy decision as there are plenty of factors to consider, I'd likely either ride-through on a modified loan or save during foreclosure. In the meantime, I'd continue to search for rental properties that satisfy my financial criteria and needs of my family. Of course, my opinion stems from my "we're all proverbial renters until this housing crisis is rectified and we realize true values of properties" stance.

[2Bshinyandnew]

I am trying to think of this as a business decision. We are not attached to this house as it was only a step to the house we want/need. Then the market tanked and here we are. There is no way this place is going to regain 40k+ in value over the next 2 years. I don't think these will regain this value in 5 years. They have built too many and are poorly built to begin with. You add the empty units that will be here soon and we are looking even worse. Plus as units empty the HOA dues will have to increase. One thing goes wrong and we are all screwed.

We have looked at renting. We can get a 5br 2800sq in a much better neighborhood for 1675. There are others that are less but this is ideal for us as a family of 7. We are in a 3br 1400 sq now.

I appreciate your feedback.

$1675 is a pretty large housing expense increase, compared to $182K @5% for 30 years, even with taxes, insurance, and HOA fees added in. Unless I am misunderstanding? I thought you were trying to decrease your monthly housing expenses due to inability to pay back credit card and secured debt?

A family of 7 is tight in 1400 sq. ft, true, but if you can't afford to pay your credit cards, how can you afford a $300 - $500/mth increase in housing costs?

I'm just askin'

What is the foreclosure timeline in your state? If you accept the mod, file BK and then stop paying, or even just file BK and then stop paying you may be able to stay in the house for 6 months, a year, even longer in some areas of the country. That would certainly give an an opportunity to put some $$$ away for a move

[justplaintired]

You should be fine with the modifaction, then the BK. Just make sure you are current going into the BK. Stay current while in the BK. Don't do the reaffirmation if you have doubts in staying in the house. And down the road, if something changes and you can no longer stay in the house, you can walk. I have read other threads where people were doing exactly that, not walking away, but doing a BK after the modifaction. Actually this works out much better for you, you get a lower rate, lower payment, giving you a much better chance of affording your house. Seems this way you and your wife will be happy.

Good luck!

[justplaintired]

You should be fine with the modifaction, then the BK. Just make sure you are current going into the BK. Stay current while in the BK. Don't do the reaffirmation if you have doubts in staying in the house. And down the road, if something changes and you can no longer stay in the house, you can walk. I have read other threads where people were doing exactly that, not walking away, but doing a BK after the modifaction. Actually this works out much better for you, you get a lower rate, lower payment, giving you a much better chance of affording your house. Seems this way you and your wife will be happy.

[LuciluS]

I wanted to thank all that have posted replies. It really helps to look at this from all sides.

You are very welcome and will be here if you have any further questions. It's a tough decision to make and only you and your dear wife can make it.

Keep us posted and Much Luck!

Luci

[PdxDavid]

I wanted to thank all that have posted replies. It really helps to look at this from all sides.

[PdxDavid]

[I]Your wife's opinion appears to stem from a financial framework. Have you explored non-ownership renting options in your area? How do these numbers compare to your current/modified mortgage and current/potentially increasing HOA fees? It's feasible to obtain a mortgage two years following bk. Do you think you can regain equity on your current property within this timeframe? Surrendering your property and renting for a couple of years may actually prove to be a most cost-effective business decision.

I am trying to think of this as a business decision. We are not attached to this house as it was only a step to the house we want/need. Then the market tanked and here we are. There is no way this place is going to regain 40k+ in value over the next 2 years. I don't think these will regain this value in 5 years. They have built too many and are poorly built to begin with. You add the empty units that will be here soon and we are looking even worse. Plus as units empty the HOA dues will have to increase. One thing goes wrong and we are all screwed.

We have looked at renting. We can get a 5br 2800sq in a much better neighborhood for 1675. There are others that are less but this is ideal for us as a family of 7. We are in a 3br 1400 sq now.

I appreciate your feedback.

[nc73]

i'd let the house go and buy another once it's all over

[kenshirley]

There are so many houses out there for sale and so many builders and mortgage companies that need your business that you will be able to buy another home.
Yes you will have to write a letter and tell them how it all happened and such but with some money down they will give you a loan.

[Kpower]

In your case I would probably accept the mod and keep your house for now without reaffirming. My wife and I decided to give up our house though. We were 25k underwater but the mortgage payment was killing us. We already had a 30yr fixed at 6.5%. We refinanced a year ago and basically got the same interest rate but used our equity to help pay down cards and pay off my car.

We recently moved into a townhome with 1800 sq ft compared to our house that was 1500 with only 1200 living space. In our county the deck counts as sq ft. We have had to give up certain amenities that we had grown acustomed to but overall we are getting used to it and getting settled in. Like an attached two car garage. It sucks carrying two babies and groceries in the rain. Our complex has a pool and weight room and playground though. The dishwasher is very small and noisy and the fridge door keeps opening up randomly but we are working on that. Luckily I managed to get my monster fridge in the laundry room so we still have an icemaker and extra storage when needed. There are bonuses and trade offs but we are saving 400 a month which very soon will be going into a savings account. Some for my boys college and some for us.

We know that this is not forever but it is a necessary step in our financial recovery. In a few years we will be in a much better position to buy a home again and we will not make the same mistakes that we did this time. Just my half a cent.

[2Bshinyandnew]

You really have nothing to lose by accepting the modification, and $126/mth to gain. I can't imagine how you could get "in trouble" for accepting a modification while knowing you are planning a future bankruptcy. The counselor I worked with at ACORN Housing said that my future BK plans looked GOOD to my lender/ servicer because it meant I would be wiping out my unsecured debt.

You are not all that upside down and unlike many here who are $100K+++ underwater you have a chance of regaining enough equity to break even eventually. In the meantime you have to live somewhere, unless you can rent for less than the offered modified mortgage payment, I think it makes sense to accept the mod, get current on our mortgage by having the bank add the arrears to the principal and stay put. This may look a whole lot better credit wise than 4 months late and eventual foreclosure.

In this situation I would:
1. Accept and complete the offered mod
2. File for BK once the mod is complete
3. Either ride-through or reaffirm the modified mortgage after you file BK, your choice!

ETA: I would ride-through, personally

[downsized]

I agree with the others. Get the modification done, get current, then file and do a ride thru on the house if you want to stay there. If renting somewhere else is cheaper than the mortgage and HOA fees, then I'd probably give some thought to letting the condo go back.

[HakunaMatata]

My wife is afraid we will never be able to buy again. I tell her that is not true, especially since we are not the only ones this is happening too. She says that we will be throwing away money on rent. I used to agree. Now we would be throwing away mortgage payments until it is worth more than we owe again.

Perhaps you should gently remind your wife the majority of us are "renting" right now. Post housing bubble-burst, many homeowners maintain mortgages on underwater properties creating the proverbial renter. From a business perspective, we're "throwing away money" when equity isn't attainable. Of course, we all need a place to live. For many, property ownership isn't exclusively correlated to equity.

Your wife's opinion appears to stem from a financial framework. Have you explored non-ownership renting options in your area? How do these numbers compare to your current/modified mortgage and current/potentially increasing HOA fees? It's feasible to obtain a mortgage two years following bk. Do you think you can regain equity on your current property within this timeframe? Surrendering your property and renting for a couple of years may actually prove to be a most cost-effective business decision.