Upside down mortgage

[borg_cube]

Greetings,

I am upside down in a mortgage...what a shocker I know. Purchase price was roughly 600K. I did however put 20% down when I bought it (unlike the flippers) and even with that I'm probably upside down by at least 50K right now. This is not my primary home but one I bought (against my better judgment at the time as I could see what was happening two years ago) for a relative to help keep peace in the family.

Anyway, both my wife and I have credit scores between 750-780 in all three bureaus so that's not the problem here. The problem is that the bank is refusing to allow a short sale as we're not behind in payments. The mortgage was broken into a first and HELOC (don't ask me why I did that or why they structured it that way...I really didn't pay very close attention to the details except for the rates as I don't use the HELOC funds anyway).

The bank will not even allow a re-fi as it's upside down now. I have even tried to get them to allow me to carry the HELOC portion (about 50K) as a regular debt that I will just pay down over time. Nope, they will not do that either.

I'm left with taking out a second mortgage on my first home, paying off what I think will be necessary to cover the short sale. Or I could take 50K from about five different credit cards and pay off the HELOC. Or I could just walk away from the thing and let them take it back.

Our scores took a hit with this HELOC loan which shows up as revolving debt instead of a mortgage loan. I NEVER would have done that had I known. Oh well.

I suppose after this long winded story that I'm looking for advice from all of you. How may points would we lose with a foreclosure? I already have a great fixed rate on my primary home and I'm not going anywhere so I will not need to purchase another property. The rest of our credit is spotless.

Any suggestions or comments are welcomed, including any hints on negotiating with lenders in this situation.

Oh, to top it off...my relative who I shall not name here, decided NOT to move into the property after I had closed escrow and because it was in a new development I was threatened with legal action from the builder when I tried to sell it right away. As it stands, I'm renting the thing and losing about 2K per month, not even including property tax (10K per year) and the devaluation. Not good.

Too bad I'm not some big banker in New York who just calls up the Federal Reserve and says, "Hey Bernake, gimme 30 billion today, and tomorrow, and for the next six months for that matter or ELSE! Thanks, see you on the golf course."

Thanks.

[Junejer]

borg, I am sorry to hear about your dilemma. This stinks when you try to do something nice and it backfires.

To answer your question on how many points you are going to get hit for a foreclosure hitting your record--my guess is 100-200 points. You are a FICO high achiever (760 or above), so you get punished more harshly for baddies than others do. I would avoid that route if at all possible. GL

[Anonymous]

even though you may not care about needing to obtain a rate for a major purchase, i think the aa from the issuers you have would be swift and severe.

can you ride out the market, then dump it when it starts to recover?

[borg_cube]

Hi ByrdMan,

Wow, that really doesn't seem right at first glance. Then again, I can understand why they that's done as to make higher FICO scores more attractive to creditors.

Thanks,

Borg_Cube

[borg_cube]

Hi dnm45227,

The market here in So Cal will not recover to the extent that it makes sense for me to keep this in my opinion. Ready for this? How about 600K for a 1400 sq ft condo? Yep. At the time I thought 350K was pushing it, but as I said...to keep some of my in-laws from killing each other... I knew this was going to be trouble when I found out the exact same condos were being built in Arizona for only 189K. I tried to plea with my wife...but...well...uh...well...you understand.

So, to get back my initial investment, some minor improvements, plus all the property taxes, utilities I continue to pay, HOA, etc., this thing would have to get over 700K in the next five years or so. Ain't gonna happen. The best is to hope for a modest recovery so I can pay off the loan without bleeding too much more. I still don't see this happening for at least a few years, which translates to at least a carrying cost of 100K even if the market does improve slightly.

I'm hosed. The only positive is that rents are going much higher now since everyone is getting kicked out of their homes around here. So I might be able to jack up the rent $500-1000, but even that's not going to really make much of a difference.

Looks like it's best for me to just get the money elsewhere to cover the difference and sell it. Of course, the bank knows I can do this...that's why they will not work with me. Some Catch-22 isn't it?

Thanks,

Borg_Cube

[Anonymous]

similiar situation here. no equity, wife hates the home, we're going to move early last year, but had some jerry springer stuff hit and in the dog house!

[Junejer]

Borg, I sent you a PM.