Mortgage foreclosure: should we just stop paying?

We bought our house in 2006 (it was built in 2005). We presently owe over $260,000 on our mortgage.

Our house is now worth no more that $160,000

Real estate values have collapsed in our neighborhood (there and several vacant houses on our street).

We have an Adjustable Rate Mortgage. Our mortgage payments will increase in Feb., 2010.

We can rent a house on our street for half the cost of our mortgage payment.

We are both employed. We have no credit card debt.

We do not need credit. We do not especially care if our credit report gets clobbered by failure to make mortgage payments.

Our neighbor has failed to make mortgage payments for eleven months. He received a foreclosure notice in the mail. A lawyer told him that he can still live in the house for at least four months longer (without paying anything).

Our State laws prohibit a lender from suing a homeowner who defaults on the mortgage.

If we stop paying our mortgage, we will be able to save at least $20,000 in the next year. Then we can go across the street and rent. Then in three years we can get an FHA loan and re-buy a house at a honest price.

So why not just stop paying our mortgage? What do you reckon?

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Tags: adjustable rate mortgage, credit card debt, credit report, failure, fha loan, FHA Mortgage, foreclosure, four months, just, lawyer, mail, mortgage, mortgage payment, mortgage payments, neighbor, neighborhood, paying, real estate values, should, state laws, stop, vacant houses

This entry was posted on Tuesday, February 9th, 2010 at 1:02 pm and is filed under FHA Mortgage. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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4 Responses to “Mortgage foreclosure: should we just stop paying?”

Lone says:

February 9, 2010 at 1:27 pm

In you position, i would probably do the same thing…Quit paying and save some money for a year til they throw you out.

Of course no one can predict what the real estate market will be like in 4 years…The same house could be worth more than 260k in 4 years….or what the mortgage rules will be at that time.
golferwhoworks says:

February 9, 2010 at 1:40 pm

no 4 years from foreclosure. The fact that you can pay and are willing to do this is an affront to people in your same situation and they pay as they promised. What is to say with all the foreclosures that the rules won’t change and go to 10 years. This says volumes about your character
Simpson G says:

February 9, 2010 at 2:35 pm

If you allow the house to foreclose, you are going to drop your credit score by as much as 300 points and are going to have a hard time getting anyone to give you a loan, including an FHA loan. The foreclosure will stay on your credit for at least 7 years and perhaps longer.

In addition, a landlord is going to run a credit check and see that you are a high risk tenant. I would not rent to someone who doesn’t care about their obligations and is willing to walk away without a second thought.

People like you are a huge part of the problem with the economy. YOU chose to invest in a house. YOU chose to get an ARM. Your investment lost money and now you expect the bank to take the loss for you and your lack of plotting on the ARM.

If you can continue making payments, then you need to. The house will eventually increase in value and you’ll have ruined your credit for no reason.
Max says:

February 9, 2010 at 3:06 pm

Not paying is a viable option. You should also consider negotiating the mortgage with your bank. They certainly don’t want the property.

Consider calling HUD at (800) 569-4287 and take advantage of their free financial counseling services. Another excellent place to start is the website the Federal Government set up to educate homeowners about the loan modification process. See http://www.makinghomesaffordable.gov.

Your goal is to learn as much as you can about the process before you contact your lender so you will be prepared and able to meet their guidelines. Take the time to do your homework and your time and effort will be well spent. Thousands of homeowners have gotten the mortgage loan modification help they needed, you can too!

Homeowners don’t need to pay a company to obtain a loan modification. But, sometimes it can be better to have someone, such as a lawyer or credit counselor, negotiate on your behalf. A excellent strategy is to talk to as many experts as you can prior to contacting your bank. Many of these services will give you a free consultation.

A excellent site I used to start the education process can be found at http://www.credit-hub.net/loan-modification where I entered some details about my current mortgage and the company got back to me multiple loan modification proposals.

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