Short Sale Blues

We put our house up for sale last week in the hopes of selling it as a short sale and avoiding foreclosure. My husband took a new job with a much smaller salary because his former employer laid him off; due to this decrease in salary, we can no longer afford our mortgage payments.

I met with a realtor and a real estate attorney, put the house on the market, cleaned like crazy and had several successful showings. So far so good. Then the first offer arrived. It was for a few thousand above the listed price, and we all felt that it was a good offer that our lender would approve for short sale. Then we were given the credit union’s short sale package.

The lender is asking for an insane amount of personal and financial information in order to determine whether or not we “deserve” to be granted a short sale. Deserve? Wait a minute. What part of this situation do we deserve? The part where my husband worked hard for twenty years in order to work his way up to an excellent salary only to have it snatched away when he was laid off? Maybe the part where we picked out a house and fixed it up in the hopes of living in it for the rest of our lives, only to find that the home value has declined 50% in two years? Or how about the part where we don’t want to spend every last dime of our savings trying to keep a house that may never be worth what we owe? I don’t feel we deserve any of this. We purchased a modest home, spend within our means, pay our bills and save for emergencies. We are not deadbeats.

Here is a summary of the information our lender feels we need to divulge in order to be considered for a short sale:

Tax returns from 2007 and 2008
Checking statements for the past two months
Savings statements for the past two months
401k savings account balance
Pay stubs from hubby’s current employer
Pay stubs from hubby’s previous employer
List of expenses for the past two months (including utilities, groceries, insurance, etc.)
Credit card statements for the past two months
Hardship letter explaining in detail the negative personal changes we have experienced in our lives since buying the house.

Basically they want to know exactly how we spend our money down to the penny. Keep in mind that after we give them this information, they can still say “no” and refuse to grant the short sale anyway (which our lawyer says is a frequent occurrence). Then where would we be? Some unscrupulous person in the lender’s employ could potentially steal our identities with this information and wipe out our life savings with the click of a few computer keys. No thank you. I am not so naïve that I blindly trust the banking institution to protect our information.
After discussing the situation with our attorney, she agreed that we should not hand over this information on a silver platter. The lender has no legal right to this information as they cannot take any of our money whether we wind up with a short sale or a foreclosure. The Anti-Deficiency Law protects us from that. The lender is on a fishing expedition to see how much more money we could potentially spend paying the mortgage before we would be completely broke and have to file for bankruptcy. Bankruptcy would ruin our credit even worse than a short sale or foreclosure, and we refuse to continue throwing good money after bad to try to keep up with our mortgage payments. We could spend every last cent of our savings, wind up broke and still have to foreclose on a house that is worth 50% less than the mortgage balance due.

So we sent the purchase offer to the lender without the rest of the short sale package just to see what would happen. Our realtor was notified that the purchase offer would not be considered because the remainder of the information was missing. When she explained our position, the credit union employee said that they have to follow industry standards and require the personal information before a short sale will even be considered, and it is very unlikely that a high level manager will make an exception for us. Our file basically goes to the bottom of the pile until they have time to rule on the exception, which could take months. Our realtor now has to go back to the potential buyer and explain to her that the process will take longer due to these circumstances and give the buyer a chance to back out of the deal and look elsewhere for a home. Depending on whether this buyer is patient or not, she can withdraw her offer and we will have to start showing the house again.

While all of this was happening during the past week, we had another offer come in from an investor who is willing to pay cash for the home as soon as the short sale gets approved. This may be a more appealing scenario for our credit union, so we plan to present that offer to them as well.

Hubby and I have decided that it doesn’t matter to us whether we wind up with a short sale or a foreclosure because the end result is the same—-we have to leave the home in which we planned to spend the rest of our lives.

Going Postal

While out shopping the other day, I happened upon a cool stuffed dinosaur on the clearance rack at Kohl’s. My four year-old nephew loves dinosaurs and I knew it would make a great addition to his small collection. So, being the cool aunt that I am, I happily took the dinosaur home.

I boxed up the present and went to the post office. The only labels I had at home were USPS Priority Shipping labels I had left over from Christmas. I wasn’t going to ship the gift priority so I simply planned to cut off the top part of the label which identified it as a postal product. When I stepped up to the counter (with label, pen and scissors in hand) I asked the clerk to weigh the package and tell me the parcel post rate. I was still filling out the label and the following conversation occurred:

Postal Clerk: You’re not allowed to do that.
Me: Do what?
PC: That’s a Priority Shipping label and you’re not allowed to use the label if you’re not shipping the package Priority.
Me: Well, I’m going to do it anyway. It’s a label, not a contract.
PC: I’m not going to ship that package parcel post with a Priority label on it.
Me: Fine, then don’t.

I took my package over to the automated postal machine in the lobby, paid for the parcel post stamp ($9) and dropped the package in the box. Problem solved. Or so I thought.

Yesterday my nephew called to thank me for the gift. I was surprised it had arrived so soon; parcel post usually takes all week to travel across the country. I assumed it was a fluke, but then my bother got on the line and told me what really happened. The package arrived Priority Shipping postage due to the tune of $17. There was an official postal form attached to it explaining that the package had been re-routed from parcel post to Priority Shipping due to the fact that the address label was a Priority Shipping label. The mail man who delivered the box to my brother told him he could refuse the package or pay the postage due. So he paid the $17.

I don’t care about the money. What bothers me is the creepy clerk. He felt so strongly about enforcing the postal code that he actually left his counter position, looked for my package, and filled out the form to change the delivery method. I had my first stalker and didn’t even realize it!

Did he do this just for spite? Did he get some perverse pleasure from adhering to the strict letter of postal law? Was he trying to teach me a lesson?

The next time I go to the post office I will be sure to take home a stack of Priority Shipping labels to use as scrap paper at my desk. I have to make up the $17 some how.

House for Sale!

We’ve decided to put our house up for sale and try to get a short-sale approved by our lender. Our house is worth approximately half of what we paid for it just two short years ago. There are two ways for us to get out from under the crushing debt of our mortgage: (1) lender approved short-sale OR (2) foreclosure.

We are trying to avoid a foreclosure (if possible), so we’ve put our house up for sale. The hope is that someone one will make and offer and the lender will approve the short-sale. The lender will lose money but we won’t.

Arizona has an Anti-Deficiency law that protects purchase price mortgage borrowers from having to pay the difference between what they owe on their mortgage and the price their house can actually sell for on the market.

In Arizona (and other states) purchase money first mortgages are non-recourse. That means if we default they can take the house and temporarily ruin our credit - but it ends there. They cannot pursue us beyond foreclosure and reclamation of the house.

They can’t raid our savings account or our 401k, and they can’t garnish our wages. I spoke with a real estate attorney a few days ago and she put all my fears to rest. Our credit score will be affected for the next two or three years, but that’s the worst thing that will happen.

If the realtor markets our house for the next six months and the lender forecloses on the property before she can sell it, she gets nothing for her time and trouble. Many real estate agents will not list short-sales for this reason, but I found an experienced professional who is willing to take the risk now in order to gain us as a client and maybe make money later.

We’ve had four showings so far. Whether we wind up with a short-sale or a foreclosure, we will be out from under this upside-down mortgage in a few months. That will be a weight lifted from my shoulders.

Mortgage Woes

As you know, my husband received a lay-off notice from DHL. He was able to find a new job; which, in this economy is no small feat. However, he now earns 20% less than he did just a few short months ago. I used to work part-time for the Disney store, but during the months leading up the holiday shopping season the store experienced a severe decrease in sales and my hours were cut from 12 hours per week to zero. I have been unsuccessful in finding new employment.

All of our bills are going up due to the current economic crisis—groceries, utilities, health insurance, etc. My father passed away in April and we bore travel expenses related to his funeral.

The housing market in the Phoenix area has been hit hard in recent months, and our home is now worth 40% less than what we paid for it just two years ago. We knew when we bought the home that its value would decrease some; however, we did not predict that its value would fall so far. The phrases “money pit” and “throwing good money after bad” have been mentioned a lot lately.

With the recent change in our financial situation, we find that we can only afford our mortgage payments if we take money out of our savings. We do not believe that using our savings to pay the mortgage is a good investment. My husband has decided that we should stop paying our mortgage. He figures it will be several months until the credit union has us evicted by the sheriff, and before that happens we can save some money toward a rental house to live in after we get the boot.

This will ruin our credit. Hubby is aware of that fact, but thinks that is a temporary situation compared to the permanent situation we would be in if we drain our savings and still can’t afford the mortgage payments. I’m not sure his logic is wrong.

I understand why he doesn’t want to lose every penny he’s worked so hard for to keep a house that may never be worth what we owe.

So why do I feel so sick inside?

I feel sick because we are not the type of people to shun our responsibilities. We pay our bills. The only debt we have is our home and one vehicle. Credit cards are used for convenience, not as a loan to be paid later. Their balances are paid as soon as the bill arrives. We have savings, but that money is supposed to be for emergencies and our retirement. We are unprepared for a long-term decrease in earnings and the severe value loss in our home. Having to deal with a lay-off during the worst economic crisis in our lifetime is not something we ever thought to plan for.

Many thousands of homeowners across the country are in a similar situation. Foreclosure rates have skyrocketed in the past year and are expected to continue to rise. We got caught in a situation we never considered was possible. How do you plan for the unthinkable?

One of my friends suggested taking in a boarder to bring in extra income. Another friend asked me why my husband doesn’t continue to look for a higher paying job. Well, how about because it took six months of stressful job hunting to find this job and now he has the stress of learning the new company’s computer system, working with new people, travelling, and updating his technical certifications to satisfy the new employer’s educational requirements. I think he’s under enough stress already; adding a continued job search might just be too much for his system to handle.

Then she asked why I don’t have a full-time job? One reason is because I lost the ability to force a happy smiley demeanor at will after my son died. So sue me. My work experience is in customer service and retail; and with my back problem, I cannot physically handle a full time retail position. That leaves customer service, which would drive me crazy. I’m already on anti-depressants just to get through the day and I don’t think a little pill can handle the additional stress. I’ve been looking for a part-time position, but the low wages I could earn would not be enough to bridge the gap between what hubby used to earn and what he earns now.

I paid the mortgage on June 1st, but hubby doesn’t think we should pay it next month. So, I’m back to feeling sick and wondering how the hell we’re going to get out of this situation.