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Might be losing house #2...


almost_there
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Well, after escaping the clutches of Litton Loan Servicing via Chapter 7, we found out Friday afternoon that we may be in danger of losing a second home! We left our first home in August and moved into our current home in a lease to purchase arrangement. I received a call on Friday afternoon from a local bank (Vice President) and found out the owner of our house has given the deed back to the bank so unless we can get a loan to buy this house we will have to find a new place to live - again.

Our lease purchase agreement would have given us 2 years to recover from our bankruptcy (discharged in May '08) and now that agreement is void - I don't know if we've lost our down payment or not - and we are forced to decide much sooner if we can or want to buy this house.

Our biggest concern is displacing our daughters again. Our 3 1/2 year old has made best friends with our 5 year old neighbor girl and our 18 year old is getting ready to graduate in May. From the sound of things, if we can't buy this house the bank will only give us a couple of months to move out, so I don't even know if we'll be able to have her graduation party here!

We've been through this before, so we know what to expect somewhat, but this certainly is a development we were not expecting and aren't looking forward to the idea of moving again so shortly - we still have unpacked boxes in our garage.

If we can't stay here, we might just say to heck with it, give up our foster care license, and maybe even get our oldest moved into a group home (she's developmentally disabled) and just move into an apartment with our 3 yr. old. We can only take so much and this just might be the last straw in an attempt to keep a home, keep our family intact, and keep providing care for foster children...maybe those things are just not meant to be.

The VP of the bank and our former landlord are coming out on Tuesday afternoon to inspect the property and talk about our options. I would appreciate any prayers that can be sent for our choice to stay in this home, but we know that God's will is whatever is the highest good for our family.

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Good luck to you. I hope the landlord returns your deposit. IMO, the landlord MUST return your down payment or face an action in breach. You performed your responsibilities, the landlord did not. I'd hear the landlord out but make sure you get your point across that you are ready to take legal action if need be. Maybe the right to purchase is now void but it doesn't mean the landlord gets to pocket a hefty deposit.

I'd also level with the VP of the bank. Its in everyone's best interest if they allow you to continue to rent the home. First, they'll take a financial bath if you move and they have to sell it vacant- another empty foreclosure home brings nothing for the bank but headaches. Second, you may want to discuss the bad press that would come of this if the local news ran a story about a "greedy" bank that kicked out a couple that is giving so much to raise foster children.

Moreover, the bank, you, & the children would be in the best of all outcomes if the bank sold you the home at fmv (agree on an independent appraisal process), the bank took the first lien on the home to secure the value, and they financed the purchase at a reasonable rate of interest. Sure, you have a bankruptcy, but so what? It usually means you have little credit card debt and cannot file again for x years. In exchange, maybe you'd be willing to call the local news about a generous bank who worked with you. Everyone wins. Present your suggestions to the VP in a typed letter so he can return to his bank and look like a genius for turning a potential PR nightmare into a win-win.

Just a suggestion- plus a few :please:.

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First of all, thank you jq26 for your advice and prayers. We will continue to carefully weigh our options and keep your advice in mind as we move forward.

Here is the update: The builder, whom we were in a lease to purchase agreement with, is BROKE. If he hasn't filed BK yet, I'm sure it is coming. A little back story on the development we live in - the original financier of the development, I believe, was busted a few years back for mortgage fraud of some kind and that is how the builder wound up with a handful of houses on his books. I'm not sure exactly what happened except I know there was a huge foreclosure problem in the very beginning of this development, which is only a few years old. In an attempt to sell them, the builder was doing rent to own, contract for deeds, and lease to purchase arrangements. It sounds like a lot of his "renters" were defaulting, there has been high turnover out here. At yesterday's meeting, he said of all his tenants he's had the littlest contact with us because we do what we need to do and take care of ourselves, so apparently by paying our rent each month we are the exception and not the rule! :shock:

Our house is brand new and about 2-3 years old, it was just sitting empty until we moved in and I suppose the entire time he was trying to keep current with the bank. We moved in in August and they had to finish the house so we could move in by installing carpet on the lower level, installing the toilets (that were sitting in boxes waiting to be installed when we first looked at the house) and we paid $1000 to the builder for the upgrade to stainless steel appliances (a move at the time we thought was a good look forward/looking ahead to our own planned equity).

Apparently, this builder hasn't been making enough money or paying his debts because it was revealed at our meeting yesterday that there are some $30K in liens, judgements, and deliquent property taxes that are defects to the title of this property...including a $2698.55 lien on the appliances. :-(

When I asked about our losses, thankfully only $2350 (the one month's down payment and the cost of the appliance upgrade), the builder's response was that he is so sorry he can't give it back to us because he doesn't have it. I can sympathize and empathize with that because that's exactly where we were a year ago when we were preparing to convert our chapter 13 to a chapter 7. It may very well be pointless to try to chase after that money now. The builder apologized several times and said that making the decision the fold was nearly driving him crazy. Been there. I don't believe there was malice here, just extremely bad circumstances. The bank is preparing to lose money, too.

I think it very unlikely we will try to buy this house, if our credit doesn't screw us it it will be the title defects and I don't want to go on a financing wild goose chase if my time and energy would be better spent elsewhere. Not to mention to save myself all of the inquiries that would hurt my rehabilitating credit. There are alot of personal considerations also. Our oldest repeatedly tells us how much we suck and how badly she wants to move out into a group home. Ok. Foster care has been a real challenge and we know a family right now being rail roaded by their county because a troubled kid in their home decided to throw his power of allegations around and now this family is on the verge of falling apart. Giving up our license wouldn't be because we lose our house, it would just make it all the easier to make the decision. And after losing one home already to a crime (ms fraud), this in comparison, is much easier to swallow. It might be such a relief to live in an apartment and lay low while the mortgage meltdown continues to unfold.

Cont'd in next post...

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Cont'd from previous post

I actually am feeling really good about this because we have a lot of options...buy/don't buy, move - where? into what?, maybe even a new town or state - been wanting to move to AZ since I was a little girl. PA and TN are nice. I love my oldest daughter, but living with her has been like living in a war zone, maybe this is life's way of moving us all forward and in healthier directions. I don't know, but I believe I will know soon. No doubt this is will be a very hard decision and we'll be talking about it probably in every spare moment over the coming days. I'm supposed to touch base with the bank VP again early next week. They are willing to let us make a rental proposal that includes how long we'd like to stay...at least until after the end of the school year! If we knew we could secure financing in 8-12 months, they'd be willing to "hold" it for us, but if we just need time to move out they want to get it appraised and listed. We will also not have to pay $1350/month, the bank is willing to consider any offer and make it retroactive to Feb. 1st because we haven't paid yet for this month and we need to agree to an amount first.

At this point, I only have $1202 of misc. debt, including post-BK medical bills and a $297 CC balance. (this doesn't include secured vehicle debt and student loans), maybe we should pay off all we can, live frugally, save and invest all we can, lay low in a rental, and see if we can't build our wealth while we rebuild our credit...something we should be doing anyway.

I could feel bad but I choose to feel hope instead. xdancex

And if anyone thinks they have a creative financing solution or possible remedies to recoup our $2350 loss to the builder, we're open to all options at this point...and this is exactly why I love this forum :)

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maybe this is life's way of moving us all forward and in healthier directions. I don't know, but I believe I will know soon. No doubt this is will be a very hard decision and we'll be talking about it probably in every spare moment over the coming days.

April, I lost my house back in 2002 and looking back, I can say that it was the best thing in the world. I learned that the only thing keeping me in that city was the house. Once that was gone, I was able to move to my current city and start living out some of my dreams.

So, take heart. In the end, this whole mortgage mess could actually end up being the thing you need. Sometimes we are afraid to take the next step and we need a swift kick in the pants to get moving.

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thanks swirlgirl - I know exactly what you mean! I was in such a funk lately and having health problems, tests revealed nothing physically wrong - my conclusion is it has to be the ongoing stress I've been under almost constantly since becoming the parent of a high maintenance, special needs teen. Most other foster/adoptive mom's I know are on meds!! I grew up with a mentally ill father, I thought that would be excellent background for bringing a challenged youth into my home, and it was - but in my father's case, my mom is like his caregiver and I recently found out her BP is 196/135 :shock::shock: and she's angry and stressed all the time....I don't want to follow that path. My daughter is 18 now (we're her legal guardian's though) and she's done with school at the end of May. Moving her into a group home would be kind of a natural transition, like going off to college for "normal" kids...we'll see what we decide but just allowing myself to more seriously consider moving her on (we could get by with a smaller, cheaper rental that way) feels lighter than having to fight to find ways to make keeping her in our home doable.

*sigh*

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April,

I wish you the best of luck in whatever you decide, and know that you have been the worst of times with your previous mortgage mess, and now this. Feel blessed that you did not have to put too much of a down payment on the home, and side of thje fancy appliance upgrade, you will not be losing out on several thousand dollars in down payment money.

Does this bank underwrite FHA loans, and do they also have capabilities of manually underwriting FHA loans? Those are the questions you will want to ask the bank VP when you talk with him next.

Normal FHA guidelines are three years for a foreclosure and two years post BK to underwrite an FHA mortgage. With your previous experiences with mortgage servcing fraud and fees forcing you into foreclosure, if the bank can manually underwrite the loan, then you may stand a decent chance for "extenuating circumstances," and get an approval.

Can you rent the home and still establish a cosistent savings plan, while you are renting? Can you create a three month reserve so that when life throws you or DH a curve, you will be able to make payments. This will look real good on your application, and get you where you need to be.

Be honest with yourselves, and know what you can comfortably afford and set a plan to get there. Know that when the time threshold on qualifying for a home has past, you will be ready this time. Then you be ready to own a home.

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Thanks mortgageman! It is good to know the right questions to ask and the right considerations we should be looking at...

Here's a scenario my DH and I thought up tonight and I'm looking for some feedback. Go ahead and call us crazy if you think we are but we have an idea and wondering what other's might do if in our shoes. Here it goes: My DH has an IRA that was rolled over from a 401(k) when he switched jobs last summer. You all know we've gone through bankruptcy, have very little debt, and this is the 2nd home we will end up saying goodbye to in less than a year. What we crave most at this point is stability. We need to catch our breath! Stability maybe a tall order in this economic climate, but we think we have a solution...take the IRA, find a dirt cheap property - we've already found 4 in our general area, including 1 just 6 miles up the road from where we currently live - pay for it entirely and then ride out whatever financial storm is yet to come. We could live there for a couple of years, rebuild our retirement fund as well as begin investing, rebuild our credit and own a house free and clear that we could rent out when we're ready to buy something better....please tell me if this is just nuts because it honestly feels like a good step to take but I am probably not being entirely objective at this point. We know that there'd be a tax hit for cashing in the IRA, but we also know that if we owned our house free and clear that we could survive if one of us lost our job. A house of our own beats a rental because we have 4 cats. Apartments around here only allow up to 2 cats. So that's also a pretty hefty consideration - we take our kitties pretty seriously.

Some experts say NEVER, EVER take from your retirement fund. Some would probably advise to seriously weigh your options and do it as a last resort. I'm ready for advice from the experts here...ultimately, we're going to do what we're going to do, but I like getting views from all angles first. I guess I'm looking for a really good reason why this would be a totally bad idea.

I have this quote on a post-it right above my computer screen that says "Decide to thrive. It's not about resources, it's about resourcefulness." That's what we're trying to do.

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Hi April,

I think you are on the right track and have the right mindset. I'm sure with your attitude in five years you will look back and say "wow. I can't believe we made it through those hard times but we made some sacrifices and the right moves and look at how far we've come." Now to your proposal...

First, taking out of an IRA: you will get hit with 10% plus taxed at your highest state and federal marginal rate. I don't know what that high rate is because I don't know your combined income and amount of deductions, etc. But assume at least 25%. That's 35% federal then state- assume 5%. That's a 40% hit on whatever comes out. If 100k comes out, you have $60k to use and you set aside $40k. Its quite punitive for two reasons- (1) penalty and (2) its "bunches" income earned in multiple years into a single tax year and inevitably pushes you into higher marginal rate. And it instantly reverses the advantage of having tax free growth over decades. Okay, that's the downside.

Some of your tax liability may be mitigated by two things: "first-time homeowner" $20k tax-free IRA withdrawal & this pending stimulus bill. If you AND your spouse have not owned a home for the past two years, you are "first-time homebuyers". The feds will then let you withdraw $10k for each of you ($20,000) from your own IRA tax free & penalty free. If its only one IRA, then its $10k. Still very susbstantial! That $100k withdrawal is now only a 90k withdrawal for tax purposes. There is also now talk on the table to give a $15,000 tax credit to buyers of homes within one year of when this stimulus bill is passed. This is a tax credit, not a deduction. They say it will be worth up to 10% of the value of the house, up to $150k. So that helps mitigate your tax liability. If this is passed and you qualify for the entire $15k credit, if you yank $100k from the IRA, you then only have to set aside roughly $25k. Combine the IRA "first-home purchase" rule with a $15k stimulus credit, and you only need to set aside $21k out fo the $100k.

Now the upside. You would own a home. You wouldn't have to live by a landlord's rules. The home would be yours and the appreciation is yours (tax-free due to first $500k capital gain exclusion) should you ever sell. Much of this stuff is unquantifiable but certainly has value.

I think you need to balance your future needs (IRA intact) with today's needs (a solid home and stability). Are you mortgageable? What if you took out a small portion of the IRA to use as exactly a 20% down payment? That avoids MI and upfront MI fees if you go FHA. This is ideal....can this be done? Under this plan, you benefit three ways: 1) the IRA remains partially intact- allowing your future needs to be kept a priority by allowing LT tax-free gain (plus an emergency fund in the future if need be) 2) Between the above-mentioned tax goodies, you may face no liability for the smaller IRA withdrawal at all. 3) you avoid the upfront 1.5% MI and monthly MI and you have a smaller payment with 80%ltv. 4) you get to taker advantage of mortgage interest deduction, 5) *most important* you get the stability you are looking for.

If you can't do the 20% down thing, what about 50% down? At some % down payment on a secured asset, even those with NO CREDIT become no-risk loans. Surely, someone would be willing to hold a note and generate income if you put down a massive down payment.

Any thoughts?

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jq26, I'm going to PM you more details - not afraid to tell the world my credit score but hesitant to give details about our income :roll:

I'll just say we've found 2 properties in our immediate area that we could buy tomorrow if we felt it was a safe bet, we're going to call our realtor/contractor friend of our's and start looking at them.

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PM'ed you back. Just to clarify, the $10k traditional IRA is penalty-fee but not tax free. The calculation is in PM #2. Good luck and keep us all posted. And definitely keep an eye on the $15k stimulus tax credit for home purchase. In its current form, it looks like a whopping CREDIT available to everyone to buy a home in the next 12 months. Morrow posted about it earlier.

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  • 2 weeks later...

Well, the bank is starting to get a little tighter with their expectations, they now want us to sign a termination of lease to purchase agreement that includes alot of "legalese" as well as the terms to vacate, which they have now insisted be May 31st. I tried to negotiate a longer stay due to the fact that my oldest is graduating on May 26th and we need more time to find a group home for her and transition her.

They were sweet as pie to us as prospective buyer's and now that we've pretty well concluded we'd have, like, zero chance of obtaining financing they are now pushing us out and trying to make us sign off on these agreements. I'm fairly certain if we refuse to sign their paperwork that we'll be evicted.

This just sucks...

We did put in an offer on the house we can pay cash for and we're just waiting to hear the acceptance or counter-offer any minute now. If we get the house for cash, we may just tell the bank "thanks, but no thanks" and then make whatever arrangements we have to to let our daughter finish school from another school district (new house is out of the district).

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Thank you, Rainelli :)

Just got off the phone with the bank V.P. - he's coming out today with a realtor to snap some pictures (which by the way feels like an invasion of my privacy, but what can I do) so they can get the house listed and when I told him we hadn't signed the papers yet because we want to review them with an attorney first, his response was "well do you think you can have that done by the time I come out this afternoon?" I just got the papers Tuesday evening!! I'm still waiting for call backs from the attorney's I've contacted.

We also received a counter offer on our purchase offer for our new house, they asked for $7.9K more than we offered, we countered back offering only an additional $2.5K and we're awaiting their response. But either way we are going to be purchasing our next home with cash money baby!! ::travolta::

I can't wait to post the final results in the Off Topic bragging board. ::rockon::

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They accepted our offer!!!! We will be purchasing our next house for $12,500!!! Yes it needs several thousand $$ in repairs and cosmetic work, but the taxable market value is $74,000 and homes are still listing in this community for over $100,000. We will renovate the bathroom, update the breaker box, paint the walls, clean the carpets, etc...then this summer we'll look at installing new windows and possibly siding. Many of the costs we will have coming up can be done over time, there's nothing that HAS to be done before we can move in, save changing the locks.

If someone had told me a year ago, in the middle of changing our chapter 13 to a chapter 7, in the middle of losing our home and it felt like the entire sky was caving in, that we would be paying cash for a house in such a short time I would've said "that's some good drugs you're on!!":shock:

Fortunately, we have alot of family and friends that will be helping us with all of the updates. The $ we won't be paying on a mortgage can go to rebuilding our retirement fund and to our equity. We plan to live in the house until we bebuild our damaged credit and then, if we decide to buy something else, we'll have ourselves a rental property.

I am just THRILLED! :BigDance:

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The $ we won't be paying on a mortgage can go to rebuilding our retirement fund and to our equity. We plan to live in the house until we bebuild our damaged credit and then, if we decide to buy something else, we'll have ourselves a rental property.
Great plan!!!!! That's the way to do it!
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