NorCal, What are my Options? Lender: Litton Loans

[Joel Fraser]

Here is my story, my wife and I work bluecollar jobs here in the Gold Country foothills of California. When I got out of the U.S. Navy in August 2005, I moved back to my home town which is about a 45 minute drive East of Stockton. My wife and I began to search for houses to buy and at our dismay we were shocked on how inflated the housing market was after be being gone for nearly five years. We got approved for a (stated income) combo mortgage loan were the first was a five year fixed and the second was a 30 year fixed and bought a townhouse in April of 2006. About eight months later we refinanced both loans, into another combo loan that now includes our Tax Impounds, however the terms on the first loan are now 5 year fixed at 6.1 % (lower than previous), and their is a prepayment penality until Dec of 2009. The second loan is a 15 year fixed at around 9%. During the refinance we also received a credit back from the closing costs of $4,134, which went to payoff a car loan, and now we don't own that car anymore. Overall, my wife has experienced a decrease in her work hours, and I work for a semi-qusi government funded organization that only give bare minimun wage increases of a max of 3% a year. Combined we only net about 65K a year. Our primary mortgage owed is $262,400, the second mortgage owed is $16,235. Our hardship is mostly because the costs of gasoline to commute to and from work, and new child care provider services needed we can not afford our existing payments, and really need a indefiniate drop of about $500 a month in our mortgage payments. Being we cannot refinance because our house value has dropped more then 50% from the bank owned foreclosure properties in our area being sold and a extremely low market price. A lot of "Buy and Walk" situations are increasing the amount of foreclosures too in our area. I have read a great deal of posts on this site and it has been informative and thank God for the Howeowner's Tool Box. Yesterday, I submitted a Hardship letter with supporting financial documentation to my primary lender Litton Loans, which is now our third loan servicing company since we refinanced in Dec. 2007. I stressed in my Hardship Letter, being our 5yr fixed is not going to go variable until Jan. 2012, and our interest rate is good, that they consider me as a candidate for the Titile IV Housing Bill (HR 3221) to have our principle reduced and get into that FHA 30 year fixed loan, because of our financial circuimstances with debt to income ratio. We are currently up to date on our payments with that assistance of borrowing money from relatives, but I'm trying to be proactive with them in letting them know what is going on and Litton Loans is taking their sweet as* time getting back to me.My Questions:1. If Litton Loans will not cut my principle and I have to go through the foreclosure process, will they be able to judicially go after me for the Deficiency being I refinanced?2. Will I be exempt under the 2007 Tax Relief Act from paying taxes on the difference, between what the Lender sales the house for and what I originally owe them?3. Also if I cannot afford future payments, should I even bother trying to do a "Short Sale" ?(My Lender stated that I need to try and keep current, and pay the HOA dues if I chose to do so which is not a option really for me unless I win the Lotto.)4. If all else fails with renogatiing into a new loan supported by the new Housing Bill, should I just try a Died in Lieu of foreclosure?5. Lastly, should I try and secure another house before I chose one of the option of just a plain Foreclosure process if I'm not able to qualify for a "Short-Sale" being I can't make the payments during the process it takes?Thanks in advance for any Advice!Best Regards,StuGoTs