Mortgage Forum

Joel Fraser

First of all, Moe says “No one will be judged or criticized for posting their story”. So let’s all remember that and go easy on me. I have made some stupid mistakes and now I am just trying to figure out what is the best way to move forward. So you might want to grab a cold one, sit back and get comfortable. Here we go… I have a 1st with Wamu with a balance of about $1.5m and a 2nd with Ocwen for about $175K. My house is worth about $1.1 million if that. That puts me about $500K upside down. My Ocwen payment is $1495 at 10% interest. Wamu just sent me a notice that my Option Arm is going from $3800 a month to $9600 a month because I exceeded the neg am cap. I have excellent credit (750) and excellent income, but lots of credit card debt ($300K). I am not late yet, but I will be 30 days date on my house payments on August 1st. (My plan was to refi the house and pay off the credit cards but the value went from $1.8m to $1.1m in 2 years and it is still falling…I know, dumb plan.) Earlier this year I sent loan modification packets to Wamu and Ocwen, because I was borrowing from credit cards to keep up with the payments of $3800 and $1495. After countless calls, “lost” packets, long hold times and “accidental” disconnects, Ocwen finally said I didn’t qualify for a loan mod because I have plenty of $$$ to make their payment (he said they do not count my credit card payments in their equation, nor the fact that my Wamu loan is adjusting). And Wamu said I did not qualify either because I make too much $$$, and I was not late yet. So, here I sit with a house that I am $500K upside down on, and 2 banks that are not concerned, as they look at my good income, good credit, and perfect payment history.That is all about to change as I have stopped making my house payments altogether. I am torn between wanting to keep my house, and becoming attached to an anchor that’s drowning me. But at this point, I think I have no choice but to stay. Here is why I think I am stuck: I can’t sell the house for my mortgage balances, and I can’t make $11,000/mo payments. I can do a short sale, but there have been houses for short sale in my neighborhood for almost a year with no action, except continually dropping prices. By time my deal closed, my credit would be trashed. With bad credit from not making payments for a year and a short sale or foreclosure on my credit, I would not be able to get a loan for a new house. This leaves me with only one option and that is to try to do a miracle loan modification. Please tell me if you think my thinking is flawed. The way I see it is I am now on a road with 2 possible outcomes:*The Likely Scenario and Outcome*1. I stop making payments and it gets both banks attention. 2. We try to negotiate a loan mod, but neither Wamu nor Ocwen will modify the loans enough that it would make sense for me to want to keep a house where I am $500K upside down on. (I needs payments no higher than $5000/mo combined)3. So Wamu forecloses4. I wait until the last day, before my house is sold and then file Chapter 75. I stay in the house as long as I can before they drag me out*Result:* Wamu loses $500K+, plus foreclosure costs, plus 6 months to a year in time Ocwen loses their entire $175K as there is negative equityI file BK and rent, but have no upside down house, and no credit card debt*The Long Shot Scenario and Outcome*1. Wamu doesn’t want to lose $500K and see that they have a borrower who can make lower payments, so they make me an offer I can’t refuse. This offer would probably have to include a significant principle balance reduction, plus a reasonable interest rate for several years. 2. Ocwen does the same as above. (I could probably make a combined $5000/mo house payment at the upper end. Anything above that and I would need to supplement the payment with credit card advances. ) *Result: * Wamu loses a few hundred thousand but not $500K, and there is no foreclosureOcwen loses some $$ but not all of their $175KI stay in the house, make the new payments and don’t need to file BKThose are really the only two ways I see this playing out. Here are some questions I have:1. Does anyone see a different path I should take, or any different options I should consider? Remember, I still have great credit for 2 more weeks. 2. Has anyone seen Wamu do a MAJOR loan modification? Including reducing principle balances, in order to avoid losing $500K? 3. If Wamu plays ball but Ocwen doesn’t, is there any strategies to get Ocwen off the dime?4. Do separate banks (like Wamu and Ocwen) ever work together to solve a problem like this when they both have a vested interest? Or is it every bank to him or her self?5. Assuming no loan mods, and assuming I avoid BK somehow, is there still a path that allows me to get a new mortgage for a new house with trashed credit and a foreclosure on my credit?6. Should I even bother with the hassle of the loan modification route when I think it is highly unlikely that the banks can get the payments down to where I need to be? All help, tips and ideas here would be much appreciated.