Waiting, waiting.

So I know more now. A week or so after my last entry, Lora called and informed us that there is simply no way we will qualify for any kind of bankruptcy. We simply make too much money. Joe scheduled an appointment with a different lawyer--a real estate lawyer this time-referred to us by Youwalkaway.com. Our primary problem is how to make the second lender, Nation Star, go away.

We met with Steve Beede today in Fair Oaks. He was very informative and got right down to business. He wasn't really interested in hearing our story (his website says he's counseled at least 2000 "upside-down" borrowers so I'm sure once you've heard one, you've heard them all), he just wanted to figure out our best course of action. He took a look at the numbers, and kind of went through a "check list:" foreclosure, judgement, credit, and career. With a foreclosure, it's pretty clear that Chase will take the house, and eventually Nation Star will come sniffing around for scraps. Often the lender will wait a couple of years until we are more solvent, and force a settlement because neither us nor they really wants a judgement. Steve felt strongly that a short sale would be worth the effort. He seemed surprised that we were not considering it and emphasized that it's much better to get everything cleared, rather than waiting around for several more years wondering when Nation Star will make its move. A recent law passed in CA in July, SB 458, prohibits the lender(s) from demanding any payment from the borrower during a short sale. The second lender usually gets a token $3000 from the "senior" lender, and often they will scuttle the whole process over such a measly sum. To salvage it, we can "volunteer" some amount of money, possibly 10% which would be $5,700. But they cannot demand $25,000 or something as a precondition, which was one of our fears. Sometimes, the senior lender will scuttle the deal because if there is any money going to anyone, they want it for themselves. Steve says an experienced realtor will know tricks to get them both to agree. When they do, proper documents will release us from any future liability or judgements.

We had two main reasons for our reluctance to short sell. For one thing, given our income, we just figured they would deny it in any case. The lawyer didn't seem concerned that our income would preclude the deal, and insinuated that the hardship letter (part of a short sale package presented to the lender) is just a formality. "Tell them whatever, retirement, whatever." The second is the sheer hassle of showing the place and getting a buyer. Joe thinks hordes will be lining up to buy this place, but I'm not sure I agree. And keeping the damned house clean all the time, in case a potential buyer wants to be shown the joint at a moment's notice...God we are the most slovenly people on the planet. The bathroom hasn't been cleaned in over a month. We are definitely going to clear shit out and hire a cleaning crew. One of the harder things about this process is the uncertainty. You know they will happen, but when? How soon should I pack the blender? My kung fu video collection and Godzilla action figures? I feel impatient and want to do something. So in November, or possibly December, we are going to rent a storage shed and start moving stuff there. I think it will be easier to keep the house clean if half our shit is gone, too. And we really have no inkling if we'll have to be gone in 6 months, or 10. So we must operate as if it will be the former. Everything we don't need on a daily basis is going to the shed. That will give me something to do, and I can do it in a leisurely fashion. I'm guessing that with a short sale we probably can't leave a bunch of garbage and crap laying around, like we were going to. I should point out to anyone contemplating "stripping" the house (you, Joe) that this is a crime and the lender can prosecute you for destroying property and ruining its value. I'm glad he said that, because even though I'm pretty sure Joe was just waxing agitated, I'm not so certain he may not have actually torn the toilet out or the air conditioner.

I guess we're headed for an attempt at a short sale. The lawyer is on stand by if the short sale fails and we need to negotiate with the second lender/judgement. I want to fast forward a year in the future. Although, the present is nice because it really is quite agreeable to pay neither rent nor mortgage. I'm looking forward to a different house, too. I like this one, but recently, since I know time is limited, I have thought of plenty of things not to like. I really don't like how our bathroom is right next to our bedroom door, especially if we have visitors and they are coming and going while I'm in my underwear. I don't like how the damn refrigerator is right by the back door in that shanty thing, or whatever the hell it is. How many times do you open the refrigerator per day. Dude, it's like 40. And you always have to go back in that narrow space to gaze upon its contents. Oh, and the closet situation. How could I forget that? Our closet is so miniscule, only Joe is using it and I share the somewhat larger one with Gianna. That works ok now, but I'm not sure how she'd feel about me bursting into the room all the time in 10 years.

That's it for having begun month two of default. Too early for anything to have happened (other than some "we are concerned" letters from Chase and phone calls from NS), but too late to turn back!

Coben law firm

Today we had our long-awaited appointment with the lawyer. Turns out it wasn't with the lawyer himself, but with Lora, probably his paralegal. Not that it matters. I liked her no-nonsense attitude, and she was clearly on our side. Basically what we really needed to know today is what the ramifications would be whether we "strategically defaulted" vs. trying for a short sale. The problem with just walking away is that the second lender can come after us, or a debt collection agency will buy the loan and would certainly try to collect what they could. In a short sale, both lenders would agree to accept an amount much lower than the actual loan. Usually the second lender will not agree unless they get some cash out of the deal. It's not going to come from Chase, as they are unlikely to feel terribly charitable, so it must come from us. There is no way of knowing whether they would accept $5000, $14000, or the full $60,000 to just "go away." And that's only if Chase itself agrees. And after all this, there doesn't seem to be a lot of benefit except perhaps taking less of a hit on one's credit score, from what I have read. Short sales seem more of a option for our unlucky peers who live in shitty states like Florida, which allows BOTH lenders to come after you with a deficiency judgment.

So, foreclosure, then declaring bankruptcy to get rid of Nation Star seems our best bet. As predicted, we earn too much to qualify for a Chapter 7, and Chapter 13 sucks because we'd still have to pay back most or all of the Nation Star debt of 60k. Maybe they'd accept 15 grand or less, but maybe not. But Lora did some trick with the numbers based on if we were in arrears for 7 months, and thought we might qualify after all. There's a lot of things you can count, apparently, that makes you look poorer. Like going to church (and actually giving to the church, unfortunately). Or forking money over to adult wayward children, which Joe does with some regularity. I guess maybe our debt to earnings ratio would be enormous if we simply didn't pay for 6 months. It would look like we owed $20,000. I guess we WOULD owe 20,000. I'm not sure I understand it. It just seems like a judge would know all these tricks, and just roll his/her eyes, and deny the claim. I guess if that happens, we're in no worse place than before. It's still better to settle for $15k or something, than stay in this house.

The advice right now is: do nothing, sit on your ass, save your money (but not too much money or they can take anything that exceeds $22,000. And our Toyota counts as an asset towards that). Kind of difficult advice, because I feel like I should be doing something. So many questions. If we save as we plan to, we will have well in excess of 22k; not sure if we should put it in somebody else's name, or hide it under the mattress or whatever.

I half-heartedly packed up a box of random kitchen shit that has not seen the light of day for years. Will take it to the good will. Or set it out for the cerebral palsy guys to pick up. We sold Joe's 1992 Honda within minutes of posting it on Craigslist. I guess we'll gradually begin the process of our inevitable move.

So it begins

Today our mortgage is due to Chase Bank, and for the first time, we will not be paying it. As we enter the process of "strategic default," nothing has helped me more than reading others' testimonials and experiences. My husband and I got engaged in 2005 and purchased our first home in Sacramento that same year. It is a very modest, 2 bedroom English Tudor in a great neighborhood. Our mortgages (80/20) are for $450k, and the house was recently assessed at 285k. Our payment, including taxes, is $3500 per month. Our neighbor rents out the exact style house next door for $1300 a month. We have known for some time our house would be underwater, we just didn't know how much. For at least 2 years, it was easy to delude ourselves that OUR house probably didn't drop in value as much, or OUR neighborhood is outstanding, and thus at least partially immune. Plus, both of us make excellent incomes in the secondary education and health care sectors, with very little likelihood of layoffs or pay cuts, etc. Frankly, it was easier to just keep paying, and ignore the issue. After all, we do love this house. I'm not sure how we really arrived at the decision to walk way, but once we realized what we needed to do, we proceeded without hesitation. Maybe it's that thing I've felt in the pit of my stomach for the past several years, when I wrote out that check each month, or when lying down to sleep at night. For the last 6 months, I made my husband write that check. Our investment, this little house, was now a bottomless pit, from which we could never expect to emerge. Or even if we did, even if we ENJOYED paying Chase, it would come at the staggering cost of hundreds of thousands of dollars. I just can't do that to our daughter. I just can't do that to my elderly self, whoever she may be. Maybe the last straw came when the neighbors across the street sold their house for exactly $450, a much larger and more up-to-date house; the same price we bought ours for. Or maybe the last straw was that my husband tried to refinance with 2 different Banks this summer with zero success. Or that we can't really save for the future. Whatever it was, we decided to stop paying on this bad investment.

Our first appointment with a real estate lawyer is next week, and we also have a CPA to help out on the tax issues. We haven't even tried for a loan modification, and I don't think we'll try a short sale, either. I just feel too discouraged after reading how impossible these are to obtain for folks with the capacity to pay. Moreover, I really don't feel up to having a realtor show the house, haggle with the Bank, etc. all to save my credit score. I live in a non-recourse state, for which I thank the gods every day. I'm ready to confront any repercussions: Chase will have to be content with the house, but Nation Star, the second lender, might come after our first born child, and in all likelihood we make too much for Chapter 7 bankruptcy. But chances are Nation Star will not come, and if they do, we're still better off negotiating a settlement than throwing $3500 to Chase each month.

We are getting all our ducks in a row in preparation for an unknown period of poor credit. New Subaru Outback is sitting in the driveway mere feet away. My credit score was 784 yesterday. Good bye, credit score. Now that we've got the car, we won't need you anytime soon. I'll see you back in a few years (or even less).