It’s been a while since I wrote about my housing crisis frustrations. Thankfully I got things wound down with my property that I was selling (more details here and here). At the end of the day, my HELOC lender refused to release liability so I ended up up filing Chapter 7. I couldn’t see spending the rest of my life paying off a loan for a house I no longer own. If the banks and Wall Street hadn’t played games that tanked the market, I wouldn’t have been underwater in the first place, so I don’t feel particularly bad about making that move. It gives me a fresh start and allows me to move on.
If you’re in a bad housing situation, don’t just wait and hope it will get better. There are no guarantees and few indications that things will significantly improve any time soon.
I have three friends that are also involved with short sales. One is selling and two are buying. The friend that is selling has a clean offer, but it’s for less than the lender thinks the house is worth. The lender needs to do their homework – the house needs a lot of repairs and won’t bring the money that the lender thinks that it will.
One of my buyer friends just finished his purchase. It turned out to be quite an ordeal, in part because he used VA financing. The VA inspector demanded some repairs which the lender and the seller refused to pay for. He had a solid approval, so he chose to go ahead and pay for the repairs out of pocket. That was a brave and in my opinion risky choice, but it worked out. He closed a couple weeks ago and is now moved in.
My other buyer friend is thus far in a less desirable position. He found a house that he very much likes, put together a deal, and made an offer. Again, the second won’t release liability. But in his case, the seller refuses to close unless both the first and second mortgage holders release her from liability. I really don’t understand why these second mortgage holders take this approach. In most cases, the homeowner would keep the house and keep making the payments if they were not in financial distress. How can lenders think that they will really recover enough from a homeowner that has already decided to walk for it to be worth the effort? I just don’t understand the rationale. All I can think of is that they want to keep the loans on their books as an asset regardless of whether they are performing or not. You can read more about this sale at http://wellsfargolies.blogspot.com/.
All in all, the pain is far from over. There just aren’t any economic indicators showing that demand will increase, and it will likely decrease when the tax rebates expire. I’ll be interested to see how things play out over the next few years.