Thanks for creating this new forum!

I'm sure my topic will be extremely interesting for many of us. Here is a typical situation. You bought your house, say, 4-5-6 years ago, got a loan, paid $200-300-400 and started living in this house happy of what you've done. A few months later the price went up, you became even happier. But then the price went down so low, that now the market price of your house permanently moved below 40-45% of the original price that you paid. That means that even if you want to sell your house you will still need to pay the bank a very serious amount for actually nothing, just because you got this huge loan and now the price of the house is extremely low, so your real estate investment became your pain.

So what's the next step that you should make in this case? To simply leave the house returning the key of your house to your bank? Foreclosure? Quick Sale? Is there any other way? The loan servicing companies are very stubborn and do not want to change the conditions of your loan giving you a lot of reasons for that. And it looks like they don't worry if you simply leave your house with no payment at all. They don't have the money, never paid the money for your loan; they are simply getting some amount to work with you and to collect your debts. Yes, they will lose, but the strange fact is - nobody wants to correct anything in your contract finding a lot of reason to not do that. It's really very sad that you have already paid tons of money to cover the interest of the first years and now you realize that you're still need to pay twice as much to cover the rest and come closer to the current market price of the house.

So what's next? What are you going to do to save your money, to prevent losing your investments? Any ideas will be appreciated.

Hi and thank you for your very detailed answer!



That's true, at least many of the people that I know are in a similar situation. That's actually why In described this typical picture.



It's not only an investment. The topic is much more complicated than just that. Many people want to get their own roof upon retirement. But they also want a house to be living in right now. And they want to be able to pay acceptable money for the house. If they see that a much better house is much cheaper than they got a few years ago, then something's wrong. Let's do a math. One bought a house 5-6 years ago for $250,000. He got two loans as 80/20. By now he is still above the real market price so he cannot refinance or do anything to improve his situation. The market price of this house became around 112,000-120,000. Which is more than two times lower than he paid 5-6 years ago. Even if this person sales his house for $120,000 he will need to cover the bank a difference and this difference exceeds $100,000. I think basically my calculations are right. The next point is that this person has already paid over $100,000 as the loan interest. And he keeps paying, say, $1600-$1800 every month seeing that if he bought a much better house, but now, he'd probably be paying 3-4 times lower. Yes, I realize, that he'd pay a comparable amount if he spent al these years in a 3b apartments. But he would be a free person without a $100,000 debt to the bank. Is it a correct picture? I guess a lot of people feel this pain now days.



If it was a second house, then yes. But it's also a place to live, not 100% investment, Although it can be considered this way for sure.



I would disagree here with you. The house value IS relevant since you're paying to the bank to live in this house, which is not yours until you pay it off. If you make any mistake the house will be grabbed by your bank with no doubt at all, regardless of the amount that you have already paid. And this amount is huge. For high interest loans one actually pays 2.5 times higher than he borrowed. And, instead of keep paying this terrible amount on a regular basis you could use the same amount and completely pay off for another house, having lower price and lower interest, in just a few years, not in 25 that you're still facing.



Like you said, we all need a place to hook our hat every evening. But the real truth is that we are still paying for someone's dirty tricks and that's extremely painful to realize that.



I know a couple of families invested into second and third house 6 years ago. It is much more painful for them for sure.



We need a place to live anyway. But honestly I don't completely understand the position of my bank. They are at a serious risk to lose me and my payments, but they don't want to decrease a payment, to lower the interest, etc. And the only reason is - I'm still able to pay my monthly payment. If I got a problem they would definitely lower my rate, we have already discussed that. Also a new 125% law doesn't work for me, because in my case that should be a 200% law. To leave the house and move to another location... Maybe it's a good idea. I'd like to discuss that further. There are a few questions that are still unclear for me on this way.



I'd still say - both, not only to live, but to keep something for retirement without being tricked, being having to keep paying until you can or completely lose this house after all these years. So isn't better to reconsider the current situation before it's not too late? Good question.



The state laws are different, that's true. Maybe we could read another opinion here.

I know one family. They bought the house several years ago. They both are still working and can afford the monthly payments. But they both will be retired before the entire loan is paid off. I'm pretty sure that the bank will send them out with no doubt and resell this house to somebody else if they stop their payments. But what else they could do? They wanted to sel this house once they are retured to buy something smaller and cheaper to spend many years in this house. They cannot do that now since the price went down and they still owe money. Can they initiate a foreclosure? I don't think so because they can pay, their income is above the monthly balance. Can they use a short sale? Probably they can. But they are not sure that the bank will follow them for the price difference. A good advice would be great, but I realize that it's hard to give a free and comprehensive advice for such a serious problem. I can understand these people. They can probably come one day to their house that doesn't belong to them anymore. And there is no such a thing as happy end in their situation. If they leave now they cannot buy their new house for a few more years. But their time is their money... and their house. This is not what they were dreaming about for sure.

Have you seen this gov web site: http://www.makinghomeaffordable.gov ?

Hello,

Thank you for your very interesting answer and web site!



You just opened my eyes!



Yes, this is exactly my case. Fanny May is my company and I can probably start negotiating with them in about a month. Great news for me!

Regards,