The House

Another truth is that we are doing just fine, financially. When mommy is a financial planner, the family gets to reap the benefits in good times and in bad. Sure, our income has been reduced by about 80%, but Dave is getting unemployment and that gives us what we need to pay our bills and still have enough leftover to eat lots and lots of burritos. Sometimes I even splurge on sour cream!

What it doesn't pay is the mortgage. The mortgage has to get paid from our savings account.

And I HATE THAT.

It's PHYSICALLY painful. I've spent years tenderly nurturing our savings and investments and I refuse to squander all that financial security on a rapidly depreciating asset. Deciding whether or not to keep the house is one of those macro financial decisions that after seven years of telling OTHER PEOPLE what to do with their money, I can see with perfect precision.

My professional experience screams in my ear: let it go.

Sure, we are DESPERATELY optimistic that the bank will decide to negotiate with us, the excellent customers with perfect credit who've never been even an HOUR late with a payment, but if they won't, we're trying to mentally prepare ourselves to walk.

Don't get me wrong, I *LOVE* this house, but I've seen SO MANY WOMEN sell their souls to the devil (usually after divorce or death) just to keep what is fundamentally only a roof over their heads.

I'm smarter than that.

I am NOT defined by my possessions. And I will NEVER be defined by any walls.

So yeah, I want to keep this house, but I'm not at all willing to sacrifice our financial security just to do so.

Comments

[Beth]

You are so smart.

[Tara Anderson]

If only more people held that same belief, we probably wouldn't be in the credit crunch that we are.

Very wise words.

(Also? I'm slightly jealous of your savings account.)

[Jen]

You are SO smart. My grandma and grandpa got divorced over her inability to let go of her Dream House (which, in reality, was a huge money pit, caused them to declare bankruptcy, etc) And now she's remarried, they have a huge house in Florida, and she's now facing the same thing. They could have sold 4 or 5 years ago and made a KILLING, but because she was stubborn, now they're stuck and they're getting older, can't keep up, and the place is kind of falling apart :( Makes me so sad.

I hope you guys DON'T have to leave your house, but I give you props for having the common sense to realize it's just a house. It would suck and be so sad, but you would be able to move on. Good luck!

[laura]

just a lurker but love your blog and know your in our thoughts. plus you make the family not the house :)

[Alison]

What a tough position! As someone who has worked in the mortgage industry for years, I admire your ability to step back and look at the bigger picture.

[Kris]

OK, good. When you wrote that you would probably "lose the house" well that' been on my mind ever since! Seriously, I have been like, Amanda and Dave are losing their house, the world is coming to an end! So I know it may be splitting hairs but I am glad to hear it is more of shrewd financial decision. All the best to you guys...

[beki]

Oh, geeze, I'm so sorry to hear this. Good for you for having a sensible head on your shoulders. Best of luck to you. I'm sure y'all will make the best decision for your situation.

[franticallyheidi]

Oh honey, I've been there. And having had to make that ugly decision to walk away, I can say that we are just as happy in our tiny little house now as we were in the big one. Why? Because, ultimately, we chose it. There were all sorts of things we could have tried to do to hold on, but in the end, it wasn't worth the strain on our family. This is the life I chose, and I think I chose pretty well. (Though I would love to have a bit more storage. :) )
Hang in there.

[jen]

good luck! hope you can work it out. we were perfect home owners too, but the bank was unwilling to work with us unless we actually missed a payment or 2. crazyness. and then we put it on the market. it took us 9 months to sell it and we just barely broke even... sigh... hard times. best wishes...

[Emily]

Delurking to say, I'm so sorry. My husband was laid off this week and it's been a whirlwind of emotions. I wish you and your family all the best.

[Mrs. Kennedy]

That's it. I'm divorcing Jack and marrying you.

[Heather]

Absolutely the right attitude to have. Hope the bank is willing to work with you so you don't have to make that choice.

[Brandy]

What a tough decision!! I know how much you love your house! I hope the bank will work with you. When I worked in loans and dealt with Loan Counseling/Foreclosure customers, I was amazed at how much the bank would work with their customers. Foreclosure doesn't benefit the bank in any way. They take huge losses in foreclosures, so that is usually their last resort too. So you may be surprised at how much they are willing to work with you.

Of course, all banks are different though. So, I see your point about walking away. No sense in paying so much more than what your house is worth. Especially to a bank that isn't willing to work with you.

I have always wondered though, if a person does have a foreclosure on their credit records, does it make it extremely difficult to get another mortgage to buy another house? Do you have to rent a few years till the foreclosure is off your credit report and then buy? Or, does a foreclosure make it hard to find a place to rent too since they usually check credit reports as well? Just curious how that all works for folks trying to recover from foreclosure...

Hang in there Amanda!!

[Deneen Sedlack]

You guys are in a tough situation, for sure. Hopefully the bank will work with you in some way. I feel optimistic about that considering the economy.
Don't feel down about not finding anything in your past life career. You have a true talent to write. Market your book. I am certain that you will encounter a new career for yourself as a romance writer.
Best of luck to you guys! I wish you all the best!

[Sue]

Oh Manda. We've been there - boy have we ever been there. I believed the same thing about hard work. I worked my BUTT off for years and we had the whole schmiel - gorgeous house in a great neighborhood, two paid off cars, a boat... And then our business went up in smoke. We were suddenly THOSE PEOPLE I'd always thought we'd never be - those people who end having to file for bankruptcy and who nearly lose their home to foreclosure.

Unfortunately, our experience was that the bank would not even talk to us until we'd missed two payments. But if you end up missing those two payments, you have to do it purposefully, because most banks require a "good faith" payment (usually a sum equivalent to 1.5 payments) before they will put you into a loan modification program. It's crazy.

Hang in there woman. And email me if you need to vent/talk/brainstorm. I totally get it.

[Sue]

As for the question about post-foreclosure renting / purchasing...

There are plenty of landlords will work with you when you try to rent a house - especially if you can give them first and last.

Foreclosure and short-sales - after both it takes about three to five years before you will qualify again. Although who knows in the new lending environment.

[Kerri]

I didn't know that financial planners advised this! I also didn't know that a bank would just let you give up your house. Doesn't it cost them a lot of money to do a foreclosure? Wouldn't they resist that if you do have money to pay, even if you don't *like* using the savings?

[Amanda P. Westmont]

Just like an auto loan, a home loan is collateralized. That's what a foreclosure is - it's the bank taking back its collateral. Banks have no choice but to let us "give up the house." If we stop paying the mortgage, they simply repossess it. We no longer owe them the money if they own the house.

What Dave and I are trying to do is negotiate a new loan with bank instead of forcing them to foreclose on us, which will save the bank time/money/energy/opportunity cost, etc. Either way, it's probably going to cost us our credit rating, so I'm not sure it's necessarily something I'd RECOMMEND to other clients. It's just what works in our particular financial situation. We'd rather be homeless than cashless.