It Makes No Sense

This morning my husband received a phone call from a woman who said a package had arrived at her home for him. The box was delivered to our previous address and the delivery information included his phone number, so she called to ask if he wanted to pick up the package.

The woman is the new owner of our previous home; the one we lost to foreclosure. She said she had only been living there for two weeks and had paid $120,000 for the home. We originally paid $212,900 and made several thousand dollars in upgrades to the home before the housing market in Phoenix collapsed. When my husband lost his job and had to settle for a much smaller salary in order to stay employed, we were no longer able to justify the expense of a mortgage that was so far upside down.

You may recall that I tried to negotiate a lower mortgage payment, a lower mortgage principle, or a short-sale; after several months of phone calls and paperwork, none of these options were approved by our lender.

Why was our lender content to sell the home to another party for current market value, but they wouldn’t offer us the same deal to stay in the home? What sense does it make to toss us out after two years of faithful payments simply because our situation had changed? The lender would have lost significantly less money had they negotiated a change in terms with us. That would have allowed us to continue owning the home at a rate that was more in line with the current economy and it would have saved time, effort and money on the part of the lender. Sounds reasonable to me.

I’m sure thousands of foreclosed-upon people are finding themselves in the same situation.

It’s Been a While

I didn’t realize I had been away from my blog for so long. Let’s get caught up, shall we.

Hubby and I refused the credit union’s kind offer to grant us a short sale if we agreed to pay them $15,000 in order to receive said approval. The credit union did not change their stance regarding the denial and we received our notice of trustee’s sale.

A few days ago, we moved out of our house and into a very nice rental home in our neighborhood. The house is bigger than the one we owned, more affordable and repairs don’t come out of our pocket. Sweet!

We are completely protected from any collection attempts on the debt we left behind. The proposed changes to the Arizona Anti-deficiency law (which I referenced in my previous post) were not passed.

We do need to rebuild our credit score, but in a few years it will be like none of this ever happened. We won’t drain our savings in order to hold onto a house that is sadly in need of repair and worth a fraction of the mortgage amount. No, it hasn’t been an easy process; but I see this as a positive resolution to our problem.

Your mileage may vary.

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.

Job Hunt Update

My husband, who was scheduled to be laid off this month from DHL, has found a new full-time job. The pay is 20% lower than what he has been earning and we have to wait two months for the health benefits to begin. And that’s just the beginning of my rant.

DHL was offering a severance package of two months salary and benefits after the separation date. After five years of service, I think that was a terrible offer, but at least we had that much to cushion the blow.

After enduring several frustrating months of hubby’s job search, I was beginning to worry that the current state of the economy was going to be the end of our healthy finances. I calculate that we have three to four months of living expenses saved; that’s more than most people have in the bank, so I’m pretty proud of that emergency fund. Add to that the two months he would receive in severance, and we would be okay until the end of the calendar year. Not too shabby.

The new company interviewed my husband twice over a period of six weeks. They didn’t seem to be in a hurry to fill the position, so I was surprised when they finally offered him the job and said he had to start immediately if he wanted it. Hubby asked if they could wait three weeks so he could finish his time at DHL and receive his severance package. No, he was told, they needed someone on the job immediately and if he wasn’t willing to jump ship now, they would simply call the next guy on the list of candidates.

It took them nearly two months to interview candidates, but all of a sudden there’s a rush to have the new person begin. Just in time to screw us out of nearly 10K of severance compensation.

Add that to the decrease in salary and we are 30K in the hole. Plus, we have to continue our health benefits through COBRA for the next 10 weeks, which will cost us another two grand. Fuck!

I’m glad that my husband did not have to go through the stress of finishing out his time with DHL without a job offer on the horizon. He has been unemployed before, and it’s not easy for him. His sense of self worth is tightly connected to his career (typical guy!) and he so enjoys his line of work.

But why do things never seem to work out in our favor? The randomness of the universe needs to throw us a bone every now and then, damn it! As always, things could be worse but they could definitely be better.

End rant.

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.

Tax Man?

I have a friend, who I'll call Dick. Dick recently read this book…



…and has decided to follow the author's examples and advice. What is this book about? Basically it's a tax scam in which you claim that your wages are not taxable and you are entitled to a full refund of all federal withholding.

Now, I hate paying taxes as much as the next person, but I'm not willing to risk the wrath of the IRS. But my friend Dick is under some kind of spell after having read this book. (It's reminds me of fundies!)

I've tried to talk him out of trying this scheme, but he is convinced that it is NOT a scheme…he believes the author of this book is interpreting the law correctly, and that the federal government has been defrauding voluntary tax payers for decades.

It’s been nice knowing you, Dick. Be sure to send me a postcard from the federal penitentiary.

So We’re Buying a House

After several weeks of stressful searching, hubby and I have found a house that we both like, in the town we want to live in, and for a price we are willing to pay. Hurray!

The house, while not being my dream house, is very nice. It is only seven years old, has a nice, open floor plan, and it is roomy enough for us, our cats, and our stuff. Hubby gets his den and garage work-shop, we will have a guest room (should we ever have guests), and there is a small yard that I can eventually landscape. The house needs a few minor repairs before we move in, but nothing we can’t handle.

Hubby was the one who initially suggested that we buy a house again, but with all my talk of plans to update, remodel and landscape, he is more than a little freaked out over the prospect of paying for all of this. I think I need to quietly dream-remodel for a while and let him get used to the idea of having a house again before I start talking about a budget.

I suggested that instead of buying a house, he could quit his job, sell all of our belonging, and we could bum around Europe for a year or so until we run out of money. Then we could come crawling back and beg our family to let us crash with them until we got haircuts and jobs again. It sounds good to me, but he said no.

I guess that makes him the mature one.