Three years ago, just as the housing market was beginning its rapid descent, we purchased a perfect three-bedroom home in South Florida for $325,000.
It was in a great neighborhood. Excellent school district. We were set.
At the time it was priced right to sell ($379,000) — other nearby homes were hovering around the low $400′s. So we were thrilled when our “miracle offer” was accepted with no counters or questions asked. We celebrated the “steal of the century.”
Unfortunately, our joy didn’t last long.
Each year we helplessly watched as our home value continued to sink like a rock. We’re still not even sure if it has hit bottom — we’re too scared to look. Last time we checked our home was roughly worth about $250,000, which is about a $75,000 hit.
Many homeowners today are in similar if not worse positions. We understand that. Still, that’s a lot of money.
And even though the value of our house has dropped significantly, our monthly mortgage payments remain the same. So, too, does our interest rate. We’ve tried to refinance, secure a lower interest rate at the very least, but no dice … we are too far upside-down to be considered.
We’ve got great credit. Pay our bills on time. And do all the things we are supposed to do. Yet, when we try and somehow improve our situation to compensate for the lost value in our investment, we hit dead ends.
It’s frustrating, making people think how it’s possible banks, lenders and the federal government are seemingly bending over backwards for those actually deep in (or possibly feigning) distress. Meanwhile, the “good guys” have few if any options available to reward their hard work.
Bloomberg.com explores this issue today, revealing how underwater homeowners have resorted to “strategic default” in response to the current housing crisis. This is when homeowners stop paying their mortgages while remaining current on other debts. It’s a practice that rose 128 percent (588,000 cases) compared to last year and represents a small percentage (4%) of all underwater homeowners.
Of course, there are other options, including selling the home for a huge loss (and paying the difference), staying put until the local market corrects or short-selling the house.
The latter option appears to be the best. Short sales are a great solution when it comes to short circuiting the foreclosure process. It’s typically a win-win all the way around under the circumstances.
We have decided to ride out the storm. It’s certainly not a “strategic” choice, but one that we think is good for us. We are in positions where we can afford our monthly expenses … for now.
But that could all change literally tomorrow. That’s just the nature of today’s complicated real estate beast.
This is a guest column. Therefore, the views expressed in this article do not necessarily reflect the views of Foreclosure.com and/or its partners.
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October 2, 2009 at 7:36 am
Jeff Ragan
Hello Friend;
I’m in the same boat with you. We continue to pay down on our mortgage, extra when we can and plan to ride it out.
If you are not planning to move in the next 10 years, it should be fine.
Best Wishes,
Jeff
November 30, 2009 at 7:01 pm
Debt Cancellation
Misery loves company. You are not alone and there are millions of homes in the same situation. If you can hold tight you will probably fair well in the long run. But dealing with knowing that you are upside down every time you make a mortgage payment can be a drag. Good luck.
February 3, 2010 at 9:02 am
Active Duty Wife
My husband has three years until he can retire as a high ranking Army officer. We bought our (REALLY MODEST BY LOCAL STANDARDS!) home in NoVa in 2004 so he could serve at the Pentagon. Our children were of the age that we dared to “homestead” in NoVa, so he took a follow-on tour at Ft. Belvoir. Since that time, he has been promoted and our home has depreciated SOME, but because we didn’t buy at the TOP of the market here (October 2006), we have not lost “enough” to avail ourselves of the HAP program through the Army Corps of Engineers. We have a $60K 2nd on the house of which we can quantify 93% of it went to capital improvements to the home (inground sprinkler, sod, ADT system, patio and some MUCH NEEDED landscaping which we did ourselves.) No fancy granite countertops, no finished basement, no boob job for me or Harley for him—-conservative, REAL “value” added to the structure. Or so we thought.
We now are told by USAA that property we own in another state (bought as REAL retirement savings in lieu of 401K plans and Wall Street scams—since TSP didn’t come on line until WELL into his career) isn’t worth enough to borrow against (LTV wise) for the purposes of moving the 2nd across our balance sheet. We WANT to sell our NoVa house using HAP and the money trapped in our land to pay off our 2nd>>>AND DO THE RIGHT THING>>>>but no lender will lend us an equity loan on the ASSET (IMPROVED land) that we have because money is SO TIGHT and the SOCIALIST FOOLS (Barney Frank) in D.C. are holding the industry hostage to itself….
WE HAVE MONEY. MY CREDIT SCORE IS 753, MY HUSBAND’S IS 768.
We have mapped out our strategic forclosure that WILL HAPPEN in three years upon his retirement….. ONLY AFTER WE HAVE DONE THE FOLLOWING:
1. Paid off a small amount of revolving credit debt (a painless six months) to shield ourselves from interest rate hikes that will naturally come with the strategic default.
2. Applied for a construction loan (which will be at a higher rate by then, I know, precisely BECAUSE of the mismanaged economy) to build our STOUT and MODEST retirement home on the land I mentioned before.
3. Closed said home with a year +/- left until retirement—or stay on Active Duty at his full salary until it is closed.
4. Buy a stout one-year old off-lease car with MOSTLY cash (as has always been our policy).
5. Stash $20K in gold coins under the bed…..
6. Call USAA and tell them to GOFUCKYOURSELVES and thanks for nothing!
Pardon me if I was sick to death of sacrificing and living a rootless existance to secure everyone ELSE’S “AMERICAN DREAM”!!! This house was the VERY FIRST HOUSE WE EVER BOUGHT in almost 20 years of marriage. Pardon us if we DARED to want to send our oldest to ONE high school, so we made the decision to buy and stay for two tours. And not even the “most house” we could “afford”. NOT BY A LONG SHOT. We didn’t need creative finaincing to afford it…no “ARM”…just a smaller house than our fellow officers were buying because we are CONSERVATIVE SPENDERS.
AND WE STILL GET SCREWED.
The PIGS IN WASHINGTON bend over backwards and sideways to help folks who bought HUUUUUUUUGE plastic McMansions with no proof of citizenship, no proof of ability to pay, BECAUSE THEY WERE THE ONES WHO FORCED BANKS TO GIVE THESE RISKY LOANS IN THE FIRST PLACE because of a LIBERAL PIECE OF SH*T LAW called the Community Reinvestment Act.
I quote a brilliant FORBES online article from July 18, 2008 by Yaron Brook:
“The government has promoted bad loans not just through the stick of the CRA but through the carrot of Fannie Mae and Freddie Mac, which purchase, securitize and guarantee loans made by lenders and whose debt is itself implicitly guaranteed by the federal government. This setup created an easy, artificial profit opportunity for lenders to wrap up bundles of subprime loans and sell them to a government-backed buyer whose primary mandate was to “promote homeownership,” not to apply sound lending standards.”
I have TRIED to do the right thing, but USAA won’t play ball to loan me a crummy $60K to refi my 2nd against my huge FREE AND CLEAR asset (improved land with a market value of $268K)!!!
So when I punt this loan in a few WELL PLANNED years, I am going to REMIND USAA that THEY were the ones so eager to loan us 125% LTV (of which we took only a TINY BITE of the pie they offered us!!!) of an overinflated home price in 2006 for the 2nd that is holding us hostage to the first mortgage>>>>>>>SO THEY GET TO EAT BOTH OF THEM!!!!!!!!!
CAPITALISM IS NOT THE PROBLEM.
THE FREE MARKET IS NOT THE PROBLEM.
LIBERAL, PROGRESSIVE SOCIAL ENGINEERING IN WASHINGTON IS THE PROBLEM.
I have money. I can pay. But my lender, USAA, won’t help me do the “right thing” before we retire and are forced to move.
I am willing to take whatever credit hit may come because THIS monkey will have a FIRM GRIP ON THE NEXT TREE before I swing out of this mess FOR GOOD and the whole system can gofuckitself.
And with the Obamatards at the helm……it SURELY, SURELY will.
***feeling better***
March 21, 2010 at 1:42 pm
loan modification
Unfortunately, a lot of our friends and family in California are in the same predicament as you.
May 13, 2010 at 11:52 am
Greg
How about “doing the right thing” by holding yourself accountable instead of blaming everyone else?
May 28, 2010 at 9:00 am
Ed
To the Editor: Ok, so you thought you “stole” the house at $325,000 and now that it has decreased in value you want to cry foul. If you couldn’t afford it at $325K then why did you buy it in the first place. Stop whining about lost equity and let the crocodile tears flow!!!