Some Options Are Better Than Others

Do I try to keep the house, let it foreclose or try to sell it with a short sale.   I have a home in the Antelope Valley and have lived here for 11 years. I have a adjustable rate loan with varing payment options.  We are only able to make the payment that leaves us Negaive  amortorization 1100 a month so the balance just keeps going up.

We are at 380,000 now and the home values have crashed here because you have to commute a hour minimum to work in Los Angeles.  Even the new homes are being auctioned off.  We have approx 25.000 in unsecured debt and two car loans. 

We were fine until the gas costs doubled over last year and becuase we commute a 1000 miles a week our gas bill is now $1000.00 a month.  To work in the area is half the pay and in high demand. Adults are working McDonlads, you can’t make a house payment if you don’t commute.

I am 2 months behind in my house payments now.  We have now secured weekend jobs in addition to our full time jobs so we will make a little more money each month now.   I have three daughters going to college and we were going to move back into the LA area in two years anyway because of their schooling, but due to the gas prices I dont know what to do anymore. 

Problems Delinquent on most Credit Cards, keeping my auto loans, And two months behind on the house.   My current plan is to start consumercredit counseling for the unsecured debts and get those under control. Keep my car loans current and try to catch up on the house payments to keep to the original plan of waiting two years to move.  But if the gas prices keep going up I don’t see I have a choice to stay in m house. 

If we move now, I don’t know if I should spend every penny I have catching up the house and rent it out although the balance goes up 1100 a month and is already upside down (it would probably sell for $315,000.  Let the house foreclouse and put all my money into getting someplace to live and paying down my unsecured debt.  Or get the house on the market and hopefully find someone to purchase it short sale.  We have 4 homes for sale in my development for at least a year now where I live and nothing is moving. But our house is upgraded and comps are not. 

I am concerned about being sued for the balance owning after a foreclousure or not being able to sell and if it is sold the effects on us because of a short sale.  Any opinion or advice. I am really feeling lost.

Lori

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Hi Lori,

If you have been unable to make the minimum payment on a negative amortization loan, then on the surface I would say the mortgage is unaffordable. 

Is the loan recourse or non-recourse?  Does your loan contain TILA violations?  In the extreme case, the lien could be stripped and treated as unsecured debt in a bankruptcy filing.  More commonly, the violations could be the impetus behind your lender accepting a much reduced payoff and providing you a full release of liability on a short sale.

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.