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Yep, it's about KPS (it got long, sorry)

This one:
 

In case you can't read it:  I think that people who purposely default on their mortgages should be sent to jail.

I bring this up because... well, we're considering walking away from our house.  And?  Most economists agree that it makes the most sense, but it is a moral grey area.  I agree.  I would feel terrible about it.  BUT- we're underwater on our mortgage by a lot, and the house is worth 40k less than it was when H bought it 7 years ago. 

We can't sell or we'll have to pay at least 20k, which we don't have.  We can't rent because our HOA has rules about what % of places can be rentals, and they'll sue us if we rent it out.  Our neighborhood has gone to crap, because all of our neighbors are renters and the owners are slumlords.  My car almost got stolen, people drive down the alley looking for open garages to steal from and I've seen the coroner's van investigating homicides at least 3 times. 

I can NOT raise a child in this house.  I'm scared to.  I'm scared every night that someone will break in.  I'm worried that our neighbors are making meth and will burn down the whole place (it's a townhouse, attached). 

We're at our wit's end.  The money we are paying towards the mortgage is going into a big black hole, not towards our house anymore.  WWYD?  I don't think I'm a criminal.
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Re: Yep, it's about KPS (it got long, sorry)

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    edited August 2010
    I don't think it's a bad idea or that you're a bad person. Of course, you'll have to deal with the credit consequences and may not be able to buy another house for a long time. Is your name on the deed, or just H's? If your name isn't on it it won't ruin your credit, but it also means that to buy a house in the next 7 years or so, you'd have to qualify on your own.

    I'd also talk to the HOA. Don't tell the head you'll walk away, but tell him that unless you rent it out, you're going into foreclosure. Maybe they won't care, given the property values in the neighborhood, or maybe they'll let you do it.
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    I may be in the same situation as you Kiki.  My house has significantly depreciated in value since I bought it 3 years ago.  The unit above me is forclosed an going for about 50,000 less then I paid.  I don't know what to do but what happens to you if you default?
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    It is a really grey area.

    My best friend and her husband walked away from their house.  Similar to you, they owed way more than they could get from it and would have to pay a LOT of money to sell it.  They had an offer for someone to buy it as a short sale, but the bank wouldn't agree to it, so it ended up being foreclosed on.  Now they rent a condo from my in-laws.  I think they could have done a lot of things differently to avoid getting into the situation they were in, but it wasn't me, I wasn't in their shoes, so I try not to pass judgement.

    The things to consider are how a foreclosure will affect your credit and your ability to buy something else in the future.  You likely would have to rent for a while because I don't think you could get financing if you foreclose.  Can you look into doing a short sale first? 
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    Aw kiki :( I don't know a lot of the terms on the sellers side but is short selling an option or is that the same as defaulting?
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    I just figure people have their reasons for doing things.....I don't judge.  I hope you can find a solution that fits you and your H though.  I can't imagine any decision would feel like the right one at this point.  :(
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    If the pros out weighed the cons, such as what msmerymac mentioned, then no I wouldn't judge you and I would walk away too.  At some point you have to do what's best for you and your family, is it morally a grey area yes, is it illegal, no.
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    It's only in H's name, so I'd still have good credit.  That is our biggest concern though, because it can even make it hard to get a job if your credit is bad.  My parents did say they would co-sign on a mortgage with us if necessary, but we'd probably just rent for a few years.  My income alone wouldn't qualify us for a mortgage. 

    It just sucks.  We're responsible people.  We pay our bills on time.  This is just a hard situation to be in.
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    I would walk away.  Its only going to add to your neighbohood's decline but it seems like its already pretty bad so you and H clinging on for dear life- wasting money on the mortgage- wont really make a difference. 

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    Re: the actual KPS post. Even if you CAN afford it, the end result is that your house is going into foreclosure. I don't see how people who voluntarily walk away are more morally reprehensible than people who buy houses they can't afford or get ARMs to pay for them and then, 5-7 years later, oops, can't pay their mortgage anymore.
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    It's a terrible grey area and I'll start by saying I don't have a reasonable opinion either way because I still rent an apartment and haven't experienced any of this mortgage stuff myself.

    But, my BFF and her soon-to-be ex-husband are considering doing the same thing with a house they moved out of 3 years ago that still hasn't sold. They're doing something called a "short sale" with the bank, and it involves purposely not paying on your mortgage for a certain amount of time. I can't remember how it works exactly, but a financial advisor GAVE them the advice to do it this way.

    But no, I don't think she's a criminal. And I don't think you are either, kiki. The people who got us in to this housing mess to begin with are the ones who ought to be sent to jail. And have their personal assets stripped from them and dumped back in to the market.
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    I am pretty uneducated on this, but how does a short sale work?
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    I don't know much about short sales.  How does that work?  I guess it may be complicated, so I'll probably just google it :) 

    I see where the KPS poster is coming from, I really do.  It's breaking a contract, and it hurts everyone who lives around us.  H thought he was doing the right thing when he bought it.  He was 23 and making good money, which he didn't want to throw away on rent.  It was supposed to be a place to live for a few years as a Bachelor.  He never would have imagined he'd be stuck there after getting married and getting ready to have kids, with a dog and a cat. 
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    I also don't believe people are like "Wee I'm happy and skipping away from this house I've foreclosed on".

    From what I've put together our house was really loved by its former owner. He moved away in 2007 because of a new marriage and put the house on the market. After 3 years he went into foreclosure and now we're in here. From the foreclosures I've seen people are very angry and upset about leaving, not happy or feeling like they got away with something.
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    I'll be honest.  I think that people doing what you're considering doing contributed to the crash of the housing market.

    I'll also be honest and admit that I'm not in this situation and have no idea what I'd do if I were.

    "You can take your etiquette and shove it!" ~misscarolb
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    The thing that you said about your HOA not allowing rentals - I would pursue that and see if you could get an exception because I would bet money they'd prefer you rented rather than have a foreclosure which affects other homes' property values.
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    Short sales are basically when you sell the house for less than what you owe the bank for it. The bank, however, has to agree to take the money. So if you owe $200k, but your house is only worth $175k and someone offers you $160k, the bank decides if they want to accept the offer and lose $40k, or if they want to try to call your bluff and see if you'll keep paying your mortgage or if you'll actually go into foreclosure, at which point the bank could lose even more (if they can't sell the house for what you owe on it).
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    It's a tough situation, Kiki.  My brother is in the same boat and is trying to figure out what to do.

    A short sale is where you get your lender to accept less than what you actually owe.  i.e. you have someone willing to buy for $200 but you owe $250.  The bank settles for the $200 and forgives the rest.  Some lenders will agree, others won't, and it generally takes a lot of time to get through the process.  Also, the forgiven amount can be taxable income to you (if you're not insolvent).
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    In Response to <a href="http://forums.theknot.com/Sites/theknot/Pages/Main.aspx/wedding-boards_etiquette_yep-its-kps-got-long-sorry?plckFindPostKey=Cat:Wedding%20BoardsForum:9Discussion:33d04545-4680-42ad-829a-dfcfa0e10d60Post:01090ac7-3179-4a38-b72b-31ff457c2036">Re: Yep, it's about KPS (it got long, sorry)</a>:
    [QUOTE]I am pretty uneducated on this, but how does a short sale work?
    Posted by jamiefour[/QUOTE]

    You have to prove to the bank that you are not able to pay the mortgage, submit pay stubs and bills, etc.  You have to not pay for a certain amount of time.  The house goes on the market when the bank agrees to let you sell it for less than it's worth.  It takes FOREVER.  We put an offer on a house that was a short sale, meaning the bank had already agreed to let them sell it for less than they owed.  After 2 months of no response from the bank on our offer, we gave up and found another house. 

    Kiki, as far as raising a kid there, you have to remember that you aren't even pregnant yet.  By the time you get pregnant, are pregnant for 10 months, have the baby and it's 2-3 years old, you might be in a different spot.  The value may go up, you might be able to refinance, who knows.  I'm just saying the raising a child thing probably shouldn't be on your list of concerns at this point.  I'd be more concerned about your finances, credit, etc.  I also wouldn't assume that it won't affect your credit because it's not in your name.  You're married now.  I don't know how it works, but I would get real professional advice on that and don't just assume anything.
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    Kiki - there are realtors who specialize in short sale and stuff like that.  My company's residential division does, anyway, and with the economy the way it is I'm sure more companies are branching into that.  I would look for a regional company that really knows the area who have some experts in your situation.
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    Thanks Mery!
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    Vally- that's a good point, and I'll ask H to check with the HOA about it.  Either way though, I think if we could rent it, we'd still be paying a huge chunk towards the mortgage each month.

    I understand the short sale stuff now- makes sense.  But if you have to prove you can't pay... well, we can pay.  But we feel like we're wasting our money.

    Dani- the raising a kid here stuff is just a part of it.  If that was the only thing, I'd probably just worry about it later. 
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    In Response to <a href="http://forums.theknot.com/Sites/theknot/Pages/Main.aspx/wedding-boards_etiquette_yep-its-kps-got-long-sorry?plckFindPostKey=Cat:Wedding%20BoardsForum:9Discussion:33d04545-4680-42ad-829a-dfcfa0e10d60Post:b3aaa839-acac-45ac-8d75-4846c7588b9d">Re: Yep, it's about KPS (it got long, sorry)</a>:
    [QUOTE]I'll be honest.  I think that people doing what you're considering doing contributed to the crash of the housing market.
    Posted by wadingmoose[/QUOTE]

    That is true and that's what I thought when ak said something about how the people that led to the crash should be stripped of assets, etc.  People that got in over their heads and defaulted on mortgages, or people who just feel like they'll never get out from under their mortgage because of declining values, are included in who contributed to the mess we're in.

    Sorry Kiki, I got love for ya but it's true.
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    Walk away.  You have to look out for yourself first. 

    Talk to a lawyer and probably also a CPA and get all your ducks in a row so you know what you're getting into.  The rules about whether your credit is affected might vary by state (or it could be that you're safe anywhere, I honestly don't know.  But if it were me, I would want to know). 

    While I agree that what you are doing is the type of thing that contributed to the housing crash, the main fault lies with the greedy banks that were trading high risk loans to make a quick buck.  They're just getting what's been coming to them. 
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    I can't ever see allowing myself to walk away.  Things crash, but they do come back up again.  I think I would wait it out.  But, I have very limited info on the subject.  I only know one person who allowed their house to into foreclosure... yet went on vacations, had an expensive vehicle, etc.  So, they were an idiot, so I just couldn't help but shake my head at it.

    I think sascha posted something like this quite some time ago.  If you catch her on here she might have some insight :) 

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    In Response to <a href="http://forums.theknot.com/Sites/theknot/Pages/Main.aspx/wedding-boards_etiquette_yep-its-kps-got-long-sorry?plckFindPostKey=Cat:Wedding%20BoardsForum:9Discussion:33d04545-4680-42ad-829a-dfcfa0e10d60Post:e7f4fa72-5f36-4f81-b020-2a8f39ce670d">Re: Yep, it's about KPS (it got long, sorry)</a>:
    [QUOTE]  But if you have to prove you can't pay... well, we can pay.  But we feel like we're wasting our money.
    Posted by kikibaby[/QUOTE]

    I think that changes the picture honestly.

    Have you guys looked into refinancing?
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    Eh, I'm not sure it's worth going into a foreclosure just because you don't feel like the money is worth it. A lot could change in 2 years and it would be horrible if you foreclosed, got the credit shiitstorm rained on you, then looked at your neighborhood 2 years later and it had turned into a really good neighborhood.
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    edited August 2010
    I'm sorry Kiki. I was just having this same conversation with DH the other day. I was laid off for a year, and even if I did find a job I wouldn't have the pay I did before. If I hadn't moved in with him and put my house up for sale I would have lost everything.

    I was lucky to find a buyer, but it was 15k under appraisal value,and I had to pay 2,300 to get out from under it.

    I really don't understand how some people are making it at all. It's very scary.

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    I don't agree about it being a moral grey area.

    You entered into a business agreement. Pay the bank, and you keep the house. Don't pay the bank, and you don't keep the house.

    Period.

    If a business venture becomes unprofitable or does not make financial sense, a bank or large corporation will pull out.

    If leaving your house and all the money you've put into it makes the most financial sense, you are JUST AS ENTITLED to walk away as any party to a business agreement.

    The agreement isn't "Pay the bank, or you're a bad person." It's, "pay the bank, or we take your house." If you're willing to give up the house, the bank gets it. That's fair. That was the agreement.
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    I'm not saying we're going to do it, but we are considering it.  It's a lot to think about, and it's a lose-lose situation. 

    You guys aren't wrong that walking away is BAD.  I know, Moose.  It is bad.  But we didn't do anything wrong, y'know?  It's like we're being punished just for owning a home.  I was actually thinking about this with Amoro's question this morning... some "American Dream", eh?


    I don't know if refinancing would help, Dani. 

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    In Response to <a href="http://forums.theknot.com/Sites/theknot/Pages/Main.aspx/wedding-boards_etiquette_yep-its-kps-got-long-sorry?plckFindPostKey=Cat:Wedding%20BoardsForum:9Discussion:33d04545-4680-42ad-829a-dfcfa0e10d60Post:f342d887-c6cc-4530-8b56-ea80dded2ffa">Re: Yep, it's about KPS (it got long, sorry)</a>:
    [QUOTE]Walk away.  You have to look out for yourself first.  Talk to a lawyer and probably also a CPA and get all your ducks in a row so you know what you're getting into.  The rules about whether your credit is affected might vary by state (or it could be that you're safe anywhere, I honestly don't know.  But if it were me, I would want to know).  While I agree that what you are doing is the type of thing that contributed to the housing crash, the main fault lies with the greedy banks that were trading high risk loans to make a quick buck.  They're just getting what's been coming to them. 
    Posted by goheels05[/QUOTE]


    And they're not the ones paying for it.

    "You can take your etiquette and shove it!" ~misscarolb
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