03-07-2011 06:48 PM
I'm doing research on the repercussions to our life we're about to experience due to strategic foreclosure, which we know will be serious. First, the back story...
My wife and I bought our first home in April of 2003 located up on a mountain in a neighborhood that has about 600 homes in it. The home is located next to a green belt and there is an infiltration pond behind the home that is generally dry, but sometimes fills with a bit of water. The maintenance and care of the entire greenbelt is left to our county as our homeowners association won't touch it.
In November 2006 our home flooded for the first time as the infiltration pond was overrun with runoff water from a bigger lake and water coming down the side of the mountain above us. We were given some disaster relief from FEMA as the area was declared a federal disaster. This shook us deeply, and we never viewed our home the same way ever since then, beginning to worry every time it would rain for several days in a row (common in our area). We completed the repairs on our home in the middle of 2008, and the out-of-pocket expenses were considerable. In November 2008 another flood event occured and nearly got us, but we just barely missed our own home taking on water. However, in January of 2009 an even larger flood struck us and completely destroyed our lower floor again.
We actually survived two more near flood events in December 2010 and January 2011 that truly left us shaken and in despair. In both cases we had to evacuate our lower floor again, stress out for days at a time, and deal with the realization that we may indeed be facing another huge crisis. Despite working directly with FEMA to successfully enter a buy-back program (still ongoing) we decided that we had to pursue a better alternative for our family. We have little faith in a successful conclusion with FEMA based on their laggy timelines and wishy-washy answers.
We repaired the home again (at great out-of-pocket expense) and have been working with FEMA on the buy-back, which is still going on. However, we also decided to speak with our lender and see what strategies might exist for us to move on with our lives as we literally didn't know what else to do. We found that we could afford to buy another home while keeping our current home (on paper) so began the process of pre-qualifying and moving forward with that. At this point the new home has been selected, offers made and accepted, all substantial debts other than our home have been settled, and we're in the process of closing on the new home. That process was surprisingly easy by the way, much easier than we ever expected considering we still own our first home.
Now for the hard part, which is dealing with the long-term ramifications of what foreclosure or a short sale is going to do to our financial lives. We're aware of the loss of credit, the basics of the foreclosure process itself, and the lasting impact on our lives with regard to being able to get loans and rebuild credit...but I'd like to hear more about specific examples if possible. Although we feel completely justified for doing what we're doing based on our own situation, there is still a feeling of guilt for being ready to give up on our first home and financial obligations that came from it, and we've never been ones to shirk any financial responsibility. We will be preparing hardship letters explaining this situation for any current and future lenders, but I'd like to keep preparing myself for what is to come...and that is why I'm stopping by to post up my story.
Any advice or input for us would be greatly appreciated. Meanwhile I'll keep browsing around to other peoples posts and seeing what I'm in for. Thanks.
03-08-2011 08:40 AM - edited 03-08-2011 08:41 AM
Hello, sft1974, and welcome!
I don't have any experience with foreclosures, strategic or otherwise, but I did want to say that I can understand how shaken your family must be from the experiences. The constant imminent risk of losing everything must be... unbearable. I was deeply shaken just reading about it. I hope that you find a workable solution for your current home, as you move on to your new one. And, hopefully some other members will come along with personal experiences to share with you.
Friendly, Supportive & Respectful
"However gradual may be the growth of confidence, that of credit requires still more time to arrive at maturity” ~ Benjamin Disraeli
03-08-2011 08:58 AM
Welcome to the Forums, sft1974, though I wish it could be under better circumstances.
I'm sorry to hear about all the troubles that you've had at your current home, and can understand the difficult course you have ahead of you. It seems clear that you've put a lot of thought into this decision.
The thing most important as move forward with your home purchasing process is that you did not provide misleading information on your application for a new mortgage. In the past, borrowers would attempt to qualify for a new home by claiming that they were planning to rent out their old home (sometimes even presenting a falsified rental agreement), and then would proceed to default on the first mortgage.
This doesn't seem to be the case for you. Based on what you've written, it sounds like you are able to qualify for your new mortgage with your income and your mortgage payments on your first home. But just make sure that there isn't anything that might raise a red flag on your application.
03-08-2011 09:29 AM
Thanks for the kind welcome, I appreciate it.
Yes, we can technically afford both properties on paper, so no lenders have been mis-led about that. The reality of the matter is that we only plan to keep one though, since the current (old) home would prove to be a legal quagmire to attempt to rent out since we'd be responsible for other people facing flooding, which is absolutely beyond our comprehension to even think about.
We do hope to achieve a short sale as the best case scenario (with FEMA funds), but are preparing for the worst. I'll continue to read up on the foreclosure process as well, and appreciate your feedback.