So, there we were: living in Iowa with a home in Arizona that we couldn’t sell. Great credit scores but anemic savings. A mortgage company that couldn’t or wouldn’t work with us because we weren’t “in trouble”, at least on paper. We had renters but rent checks that were starting to come in late.
What I remember most about this time was feeling so frustrated that there wasn’t a single good option open to us. No matter what we did we would lose money, our credit score or maybe both. And we hadn’t done anything wrong. We hadn’t bought more house than we could afford. We hadn’t lied on our mortgage application. We weren’t trying to make a quick buck in a real estate boom. We just wanted a house to raise a family in.
Mr. Monkey and I circled around the “what to do” question for months. In hindsight, I think I knew all along what we were going to have to do: voluntary foreclose. But we were hesitant to pull the trigger and stop sending in that monthly check.
And then we got a bombshell: the house next door to ours (a house that was larger than ours) went into foreclosure and was sold by the bank. For $78,000. It had been valued at $245,000 when we bought our house. Overnight our house went from maybe being listable at $130,000-$140,000 to being worth less than $100,000. We still owed probably $190,000 on it. We were screwed.
So, we pulled the trigger. We didn’t send in the mortgage that month. The rent check came in and we put it right into savings. We agreed that if we were going to knowingly ruin our credit, we were also going to bust ass to build up savings. We thankfully were credit card debt free and only had one car payment and my student loan as debt, which helped a lot.
The worst part of that first month of non-payment was wondering what would happen next. Would I get mean calls from the mortgage company? Would they call me at work? Would we get letters? How fast would everything happen?
The next month we got a mortgage statement with a past due balance and a rent check. We put the rent check in savings and filed the bill.
That month I got my first call from the mortgage company. They were civil and even helpful on the phone. I told them we didn’t have any intention of getting caught up on the bill and would be pursuing a short sale or foreclosure. They reminded me that they’d have to report to the credit agency and asked for additional phone numbers to reach me at. I declined to give them any other numbers (a wise move, I think. Made it so all the calls only went to my cell and I didn’t have to worry about getting called at work).
The next month we got two notices: a past due and notice that the bank had sold the 20% mortgage to a different company. This ended up being significant, though I didn’t really realize it yet. We also got the rent check and put it straight into savings. I have to say, seeing our savings go up $2400 in three months was so encouraging.
A few more months passed (this process was so very slow). Our renters moved out and the home was vacant. We finally needed to make a choice: short sale, foreclosure, or deed in lieu.
To be continued in the next post…