Short sale/ loan modification/ foreclosure?

[iggie394]

Long story but we own 2 houses and live in neither (we rent a house in another part of the state.)  One house is rented out and we get $990 from that to pay toward the $1500 mortgage/tax/insurance.  The other house is empty.  We bought it without having sold our other one, with the sadly mistaken belief that our first would sell easily.  HA!

The house in question, the empty one:  subprime mortgage at 9.9% 2 year fixed, 48 year ARM.  I am not joking.  The rate has stayed pretty much the same (we are in our 5th year.)  Now, I made a mistake and did not pay June on time (just totally spaced it -- no excuse!).  In july I paid online for June and July, or so I thought.  I moved across the country in July and my husband followed in August.  He did not open the mail from Nationpoint so I didn't know that the payment didn't go through until Aug.  I paid June, July and August right then, and we are current.

Now, the job my husband thought he had fell through.  I have yet to find work.  We moved here to be close to his parents, who are failing.  My credit score was not great at about 688, but it is now 577 (though Equifax says the loan is not current -- it is, and Experian reports that it's current.)  To get the empty house ready to rent would cost us about $6k or so, and we have no income (small savings but it's rapidly dwindling.)  In fact, I don't know how we're going to pay the mortgage ($2902) for Oct. 

Since my credit already is tanked, would it make sense to just stop paying, (not that we can pay next month anyway), and try to get a short sale approved?  I have a realtor coming to see about asking price, but I know it's likely at least $75k under water.  We do not ever plan to live there again.  A loan mod might be doable but then again, we need to sell it someday soon as we don't want the house anymore.  If they approve a short sale, can we make a payment plan for the difference?  I live in a recourse state for foreclosure, too. 

Would it be helpful to meet with an RE attorney?

[iggie394]

Another question:  if we did a short sale, do the lenders ever make an arrangement where you can pay off the difference over time so your credit doesn't tkae a huge hit?

[ficonovice]

Not an expert, but a short sale in and of itself will be a huge hit. The remaining balance due

is another separate story, but regardless, the short sale will be a big negative on your reports.

Good luck..

[GregB]

This is a bit confusing since you say you are renting a house in a different part of the state and later say that you have moved across the country, which I assume means a different state. I think with the information of being in a recourse state and different states being involved, you really need to consult an attorney to get more complete information. You are likely to get some information here but it sounds like you need much more complete info from someone that knows the complete picture of your situation.

This sounds like it could be really ugly with credit, taxes, etc.

[Lel]

+1 to GregB.

This a very complicated situation and you need to get some solid advice from a professional.  In my opinion, your credit score is the least of your worries right now.  You need to find the course of action that will minimize your financial pain.  Good luck.

[iggie394]

Thanks to all who replied.

Yes, it is complicated.  We've moved around a lot (too much) the past few years.  We own 2 houses in our current state but spent the last 2 years out of state, one year in this region and one year across the country.  My husband's work has allowed us to carry both mortgages and be able to rent, but as I stated, it will be impossible for a while to pay everything.  We did get a little good news today on the job front, and I am networking and sending out resumes daily. 

I did leave a message for a RE attorney but have not heard back,  I will try some more. 

Thanks again.

[Anonymous]

I don't have any suggestion for you and sympathize with your situation but do have a couple of questions - Why on earth in the recent years of low interest rates would you be paying almost 10% for 50 years. More importantly what was the price you paid for the house, and WHEN DID THEY START GIVING 50 YEAR MORTGAGES? 

 Was this THE HOUSE OF YOUR DREAMS that you just couldn't pass up, or did you think you could flip it for HUGE PROFITS???

[iggie394]

We paid 9.2% for 2 years fixed wth a 28 year ARM and 20 year balloon.  The answer as to why:  my husband has bad credit.  Mine (was) good, but he's the one who makes most of the money.  We were told "just refinance to a conventional after the two years -- it's easy!", never thinkng that the house would be worth less in two years.  I got that mortgage based on my credit as a no-doc loan (I was self-employed and was essentially told in so many words to put down as high a figure for my income as I could -- I refused to lie and told the truth, and we still got $375k).  We are underwater by probably at least $75k and since we don't live in it, we don't qualify for refinancing programs, I don't think.

I meet with a RE attorney tomorrow, and hope to have a good plan come out of this.  I blame no one but ourselves -- we were naive and stupid and I admit that.