The End is Near

After two months of paperwork and phone calls, we finally heard from the credit union regarding our short sale request.

Yesterday the loss mitigation manager advised me that Fannie Mae (our mortgage lender) is requiring a $10,000 note at 0% interest for 60 months be carried by us in order to move forward with the short sale.

Today the loss mitigation manager called again to inform me that the private mortgage insurance company, Genworth Financial, requires a $5,000 note to be carried in order to approve the short sale. So between the two companies they want $15,000 in order to approve the short sale purchase or our house. I thought it was very convenient that we have that exact amount in a savings CD (our emergency fund).

I was also told that even though he stated yesterday that we had five days to decide what we were going to do, pre-foreclosure procedures had already begun. (Whatever that means.)

The loss mitigation manager went on to insist that we are not really a hardship case and that is the reason for the penalty. I was told that according to federal guidelines, my husband’s income is more than sufficient to continue paying the mortgage. I told him it may look that way on paper but in reality we are spending more money every month than we have coming in; thus the need to get out of our mortgage. We can rent an identical house in our neighborhood for 1/3 less than our mortgage; and renters have the added benefit of not spending money on repairs.

He also advised me that the state of Arizona is modifying the anti-deficiency law. (I was already aware of the change and have read the new statute; we are still protected.) He stated that the change places us at risk of being sued by the lender for the full loss amount. He stated that we may also find ourselves with a 1099 for the loss amount as well, meaning that we would be liable to pay federal taxes on the loss.

He continued, saying that if we foreclose it will ruin our credit for 7 years and there is an 8 year statute of limitations on law suits. Since we have no debt and adequate income (according to his guidelines) he urged us to do the moral thing and become current on our loan and continue paying the mortgage for at least 2 years, at which time the situation may look different. He stressed that this advice was coming from him “as a person” and that it was not legal advice. He talked about how foreclosure takes tax dollars away from every American since our lender is Fannie Mae.

If we still want the short sale, he said the only way to avoid being sued and taxed was to carry $15K worth of debt to the lender and private mortgage insurer.

My realtor and her broker, who have been processing short sales for the past year, have never heard of this situation from any lender. They have never before had a client faced with the prospect of carrying a note with their lender in order to be approved for the short sale. She said they are probably trying to scare me and that they were successful in scaring her. (She owns several rental properties and may find herself in a similar situation if the economy continues to slide.)

Like I said, I’ve read the changes to the foreclosure law and we are still protected. I am meeting with our real estate attorney later this week to confirm that I am interpreting the new law correctly.

With every phone call, the loss mitigation manager is sounding less and less like a banking professional and more and more like a debt collector. Foreclosure is something I had hoped to avoid but it is a legally available remedy to our situation. I am not going to let this guy scare me.

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.

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.

And the End is Always Near

The future’s uncertain. It always is, but lately is feels even more so.

My husband works for DHL and is scheduled to be laid off in May 2009 because the company is bailing out of the US domestic shipping market. Since my husband’s salary comprises 99.8% of our household income, this is a serious problem. With so many companies downsizing and very few companies hiring, it is going to be difficult for my husband to find a new job. He is a Cisco certified network administrator with over 10 years of experience; yet, in the past two weeks he has spoken with recruiters who have nothing more to offer him than short-term, low-paying contract positions and their best wishes that he finds a new job soon. That’s cold comfort when your entire financial picture has been scheduled to go down the drain. Sure, we have a few months but what if he can’t find a position in this area at the pay level he has grown to expect?

Since DHL is a global company, hubby and I have discussed the possibility of him seeking out a position in Europe. A few years ago I probably wouldn’t have entertained the notion, but a lot has changed recently. Our home has lost 30% of its value in the year and a half that we’ve owned it and the US economy is now officially in a recession. I always thought we’d be able to afford a European vacation of some sort, but things are not looking good. Maybe the best way to see Europe is to actually live there.

My mother is terrified that we will leave the country and never come back. My brother hopes we exhaust every possibility in the US before considering such a risky move. But what exactly am I risking? My house? It’s worth a fraction of the mortgage amount. My family? I have a guest room that’s never been used and I haven’t travelled to see my family in over two years. My friends? The few friends that I have are busy with their own lives and problems and we mainly stay in touch via email and MySpace. That wouldn’t change very much. My job? I have an unsatisfying part-time retail position and my hours have been reduced to almost nothing because sales are low. Basically I have nothing to lose. There is no obligation large enough to stop us from pursuing a major lifestyle change.

So far, hubby has applied for one position in Prague, the capital of the Czech Republic. It may be weeks before they start sifting through the applicant pool, and I don’t know what criteria he would have to meet or exceed in order to be more qualified than a local applicant. The odds are probably against him, but you don’t know until you try. Currently one other position is available in his field, but it’s in Malaysia and I have no desire to live there. (Too Muslim for my atheist sensibilities.)

Hubby has also been looking into opportunities with DHL’s parent company, Deutsche Post, which is based in Bonn, Germany. Hubby travelled to Germany as a teen and has always wanted to return. We both took German in high school, but our skills have wasted away during 25 years of non-use. But I’m sure we could pick the language up again if properly motivated and immersed in the culture. So this sounds like a viable option, too. What the hell…we’re not getting any younger.

I wonder if I’ll be disappointed if he gets a job offer in Phoenix.

Community Activist

Hubby and I bought our house in May 2007, and I have been attending monthly HOA board meetings since November 2007. For those of you who are unfamiliar with the concept of a home owners association (HOA), our subdivision has, in addition to local and state laws, an additional layer of bureaucracy. The HOA is in charge of landscaping common areas and other useful things; however, they can dictate the color of the homes in the community, they can restrict parking on public streets, they can restrict the type of trees you plant, and dozens of other irritating controls. Unfortunately, if you want a newer home in my town, the only affordable way to do it is to buy in an HOA controlled subdivision.

I remember the good old days when you could buy a house and paint it any color you wanted. You were free to leave your Christmas lights up all year round and leave your trash cans out after they were emptied, and all your neighbors could do was give you dirty looks and bitch behind your back. Nowadays, a person can be fined for any of these actions and if you don’t pay the fine, your home can be foreclosed on. Yikes!

But I knew what I was getting into before I bought this place. I also decided to take a proactive approach to any problems I might have with the board by attending meetings and volunteering on a committee. This way, I know the people in charge and can smooth over any small issues before they become big problems.

There are 1400 homes in my community and there have never been more than 10 people in attendance at a monthly board meeting, and that figure includes the 5 board members! But as long as the annual meeting has 10% attendance (by mail or in person…gee, which one do you think people do?) the board is free to vote how they want to vote without interference. I have disagreed with some of their decisions, as have the few others in attendance, but with such a small number of community members around to complain, the board continues as they always have. The one new member who was elected in May has only attended one out of the three meetings held since he took his seat. The woman who lost to him has not attended a meeting since getting the boot.

I am on the Social Committee, which exists because I suggested a community event. The two other women on the committee were talked into participating by their board-member neighbors. We held a community party in the park in May, and it was a pretty nice event (if I do say so myself!). We had at least 300 attendees, but only two people volunteered to help our committee of three run the event. Since the party, I have been trying to schedule a wrap-up meeting to discuss what we did right and what we can improve upon for next year, but so far no one has been available to meet with me. Nuts!

So I have decided to take community apathy into my own hands and write a newsletter! The community has a quarterly newsletter written by the board and their advisor, but I don’t think it does enough to keep people informed. My newsletter will focus on one parcel of our ten parcel subdivision-—this parcel encompasses the 115 homes that are on the three streets immediately adjacent to mine. I will attempt to keep my neighbors informed about what goes on “behind the scenes” and encourage them to participate in our community. With property values plunging (due to the local housing bubble finally bursting) and the number of bankruptcies skyrocketing, something needs to be done to get people to care a little more about their neighbors and their community. So I will publish a printed newsletter, and I will also post it online. I have set up an email account to (hopefully) accept reader input and content suggestions. I spent a whopping $3 at the copy shop today to prepare the first wave of my newsletter. Now I just have to deliver them.

I don’t know if my venture will be a success but even if it fails, I can hold my head up high and say I tried. That’s more than 1399 other homeowners can say.

Life Goes On

I called the salon to schedule an appointment with my stylist to get a haircut. I’ve been letting my hair grown out, so it’s been a few months since I’ve gone in for a cut. When I asked for an appointment with Mario, the guy who’s been cutting my hair for the past five years, the receptionist told me she had some bad news.

Usually “bad news” in the salon business means the stylist has moved to another salon, so I was not bracing myself for truly bad news. Mario is dead. What? No, he can’t be dead. He has a house and dogs and people who love him! My brain, rational organ that it is, produced these thoughts instantaneously. Alas, giving reasons why something can’t be so doesn’t change reality. Mario committed suicide on Christmas day, two months after breaking up with his fiancée. (Yes, straight men can cut hair.)

I’ve lost three people in my life to suicide. Two relatives and now a guy I would have been happy to have as a family member.

The receptionist gave me an appointment with another stylist, and I was sad to see her working at Mario’s former station. His spot has been filled, but he cannot be replaced. He was a sweet man who deserved more happiness than he found in life. From now on whenever I get a haircut, I will think of him.

RIP, Mario.