Scared and Lost

[Joel Fraser]

Well here it is our ugly story, self employed for 20 yrs in real estate in our area. Excellent income and credit credit till we filed Chapter 7 a few months ago. Income cut in half last year and almost non-existant this year. Sold everything we could and cut back everywhere, used every asset to keep going. Closed our business location and now work from home.We are in one of the hardest hit areas in Va. Things are getting better but not fast enough. Cashed out 401k in January to survive and pay mortgage. We had been paying minium and funding 401 K so it only seem right we use that money to pay mortgage. Our attorney said we could have kept that money but that did not feel right to me. Purchased home in 2005 for 880,000 put 10% down did Option Arm with Countrywide. Right away loan staring increasing after 1st month and by Feb 2007 we needed to refi out of it . We took another Option Arm with a better rate but the recast was only 110% and there was a 3 yr pre-payment penalty (uggh) but we took the Chevy Chase Program and figured we would pay interst only payment to prevent recast until we got past three year penalty. House apprasied for over a million and at the time our income was still great or so it seemed and we figured the home was in a great area with great comps all around us. Over the next 90 days sales dropped off we took a second for 110,000 in May 2007 and then the mortgage mess happened and foreclosures went wild in our area and our market stalled. Values dropped like a stone.We held on as long as we could . Now behind 3.5 months on 1st and 2nd. Have tried working with bank I called them as soon as I went 30 days late they gave me a work out which double my payments. That did not work!I have not been able to get past customer service for weeks and then finally I got through to Bankrupsy specialist who wanted me to do short sale she sent all the paperwork three weeks ago. We want to keep the house if at all possible. We have Jumbo Option Arm loan with Chevy Chase. We of course have paid the minimum payment due to our circumstances. Since we filed Chapter 7 have not been able to really get anyone at the bank to talk with us. They petitioned the court for a release of stay and got it two weeks ago, drive by visit was completed two weeks ago, we have not received any notice of foreclosure yet. We hired a Housing Councelor on May 29th to help us and she has gotten a contact at the bank as of last week and sent our hardship letter but nothing else has happened. The process is so slow and I feel so out of control. I feel like we should send in a package just like you would a short sale with everything so the bank can look at the whole picture and make a decision. But I guess I just need to trust the housing councelor ,I am emotional and this person is not. Income is starting to come back and both are actively trying to find work which ever one of us finds work first will take the job. We just make enough to pay living expences and mortgage maybe. I have enough to make three payments now but have not sent anything since they want four and will not accept partial payment. The bank just paid our property taxes and made up the diffence in the escrow to cover it. If we walk away the bank/investor stands to loose big we do not want this for them or us. Will they consider a self employed person who's has a 20 yr track record of excellent income and credit worth working with? Will the bank take 6 months or 9 months of payments and put them on the back end of Option Loan to give us a chance to recover and come back from bankrupsy and catastophic loss of income? We have always made more than enough income before this happened and we will again. Our Chapter 7 will be discharged in 30 days will we need to wait till them for them to talk with us? . If they put missed payments on back of loan we will hit recast quicker it is only 110%. Yes the one month libor is doing well right now so that is helping we will not recast for at least 18 months maybe longer. Needless to say we will not be able to refinance due to bankrupsy so this could be a real issue when the payment jumps unless they can freeze us at our present Interest rate which would make our payment possible at Interest Only when income comes back. Have you ever seen them modify the cash flow arm to keep everything the same just start over? The interest rate right now is 5.875 which is great. Do they ever write down the loan amount if the home owner can afford to try and keep the house and lesson the impact to the investor and the bank? If we loose it we are talking 300,000 loss possibly with foreclosure costs just on the first trust. I am not sure how to handle the second after Chapter 7 since they are in second position and first is so upside down. Our loan is 900,000 and the value is now 685,000 ( I told you we are in a hard hit area) the second is 110,000 with National City. The market will come back and the value will be here someday the smart thing is probably to walk away but that is not who we are. We have always tried to do the right thing for all involved this has been a humbling experience to say the least. I keep thinking if I could talk to the investor and show him our situation I could pay the property taxes and insurance in good faith for the year and take 6 or 9 months of payments and put it on the back of the loan to give us time to catch up and recover we could stay on the same program and he will get his money long term with out the great loss. We may need him remove the pre-payment penalty to allow us to sell if recast hits in less than two years and market corrects. Am I thinking crazy?