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tabletkin · Joined: 09 Feb 2010 Posts: 5 2.22 Dollars($)

Hello All,

Great forum!

My first post here.

Our California condo is over $120K under water. We bought it in 2007 with 5% down and an interest only mortgage + an interest only home equity line of credit, both from Wells Fargo. We were hoping to refi in a few month, but then market crashed. We were never late in our payments, but since both of our mortgages are interest only, we are basically living in a very overpriced rental.

Now we are getting our documentation ready to send for a loan modification.

My question is: should we even bother? Is it financially reasonable to keep this house even with a modified loan, or is it better to simply walk away and start anew in 4 years?

Thanks for any input! Smile

savior70 · Posted: Wed Feb 10, 2010 6:45 am Post subject:

Hi,

If you walk away from the property the lender will foreclose. It will affect your credit adversely. It'll take you at least 2 years to rebuild your credit and qualify for a new mortgage. Moreover, if your property is underwater by over $120k, chances are that you'll be sued for the deficiency from the foreclosure.

On the other hand, a loan modification will not damage your credit. You can make reduced payments on your loan and stay current on the mortgage. But in case you think the property is not going to appraise for what is owed on it and if you're ready to take a hit on your credit, you can walk away from the property.

tabletkin · Joined: 09 Feb 2010 Posts: 5 2.22 Dollars($)

Thanks Savior!

If we decide to walk away, then get sued for the deficiency, is there any way not to pay it? I heard Chapter 7 bankruptcy can release us from paying the deficiency.

jameshogg · Posted: Thu Feb 11, 2010 12:10 am Post subject:

Hi tabletkin,

It is true that Chapter 7 can help you in avoiding the deficiency judgment. However, filing bankruptcy is not a good option in my opinion. If you want to get rid of the property and avoid deficiency judgment, then you can apply for a deed in lieu of foreclosure with your lender.

Thanks

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