I hope a story book ending comes your way. I used to live in Silicon Valley when the cherry trees dominated the open fields – South County near IBM/Cottle Rd. I moved in 2004 for a business opportunity in S. Cal and so far all has worked out. Believe it or not, the market here was at the time 20% – 30% less than Silicon Valley when we bought. If you are able to move from the SI Valley, I would recommend N. County. There is a home that is 3400 sq feet, custom built, ranch style in a 4.3 acre lot in Olivenhein. 4 bedrooms and 3 baths. This area is similar to Los Gatos, Saratoga and parts of Santa Barbara. List price is $730K. A few things I don’t miss are: Sirens, Graffiti, Crime, traffic. Sure we have the 5 here, but it really is not that bad if you learn the ‘routes’.

We’re in Silicon Valley, South County. We’ve lost 30%, not counting improvements. Despite 20% down, our mortgage is under water. Foreclosures are increasing. Inventory is up. For the forseeable future, the local market has nowhere to go but down.

As for you… there are much more knowledgeable people out there than I. I don’t pretend to know everything, and I certainly can not predict the future. Otherwise, I wouldn’t be in this situation.

I am not in a position where I MUST make a decision. Therefore I will watch and wait. In time, the picture will become more clear.

http://tinyurl.com/ygsa6j

Depressing graphs and charts. Like me, he’s an optimist. Forget his last paragraph – NOTHING can be done to prevent the planned Outcome.

We bought our first home early in 2006 in S. California. What city or area are you in? I’m in N. County and my home value has taken a LOSS of 4% so far and that is good news (very good news thus far). However, who knows what will happen 3 – 5 years from now. We purchased at $630K with a 7/1 ARM and HELOC 2nd. We have great credit and this is an A paper loan. Our debt to equity is just under 30% and our income is approaching $200K per year. We can afford this home. Am I upset about the dropping home values in the surrounding neighboorhoods? Sure, because that is what sets the market. But, we aren’t selling anytime soon. This house is not an ‘investment’ in the traditional sense, but an investment in life, family and the pursuit of a home 3 miles from the beach. Now, if our neighboorhood value drops to to 20 – 30% sure it would be a hard pill to swallow. My fingers are crossed that the value holds, but how many hits can one take before crumbling into a pile of stucco and wood. What do I do? Lock in a 15/30 traditional mortgage? Wait until 2013 to refi? Go into foreclosure on purpose and bank roll $200K in 2 – 3 yrs and look for a distressed buyer selling their home closer to the beach or on the beach?

They say, buy a modest home in the best neighboorhood you can afford and so far our neighboorhood is holding up. Make no mistake about it, if our values slide….i will be slinging %&*#! all over this forum =P

The potential problem with not going the “buy and bail” route is that your wrecked credit may restrict your options to buy again down the road. However, there are several factors that you will likely have in your favor – first, if you have a ton of cash to bring to the table your credit rating becomes less important. Money talks. In addition, you can rebuild credit fairly quickly these days. Furthermore, I think foreclosures/short sales are going to be more accepted blemishes moving forward. But you really need to sit down and crunch numbers on this – the numbers will tell the story.

As for looking in your loan docs to determine recourse v. non-recourse, there is no need to do so if both loans were taken out to purchase the home. If you took out that HELOC as the 20% of and 80/20 100% financing deal, it’s non-recourse by law. Period.

Bert brings up a great point about people who should probably get a game of chicken going with their lender but won’t, mostly playing the morality card against themselves and/or avoiding the stigma of a foreclosure. It is a public record, after all. There will be those who just stay put and take the bloody pummeling right in the face. That’s their choice. I think as we go forward and things get worse that the calculators are going to start coming out and the numbers are going to tell most people what to do. The numbers just do not lie. Most every man has his price and if someone can erase hundreds of thousands of dollars of negative net worth and immediately begin stashing large quantities of cash due to a much lower monthly outlay, they are going to have a tough time refraining from doing so. Bert is right that some will stay the course and take a vicious and unecessary bloody beating in the name of morality or obligation. So be it. Others are going to let go, move on and begin building wealth and security for themselves and their families.

Yes I know it was only to help the banks- I just can’t see how it will help those who shouldn’t have gotten a loan in the first place- those with stated (ebay) income(that was truly genius).
The FHA won’t allow for that. Are they going to devalue the property then wipe out the seconds and then issue a loan for the lower amount?
(sorry if i don’t use mortgage lingo)
If thats the case then i should walk – thats crap-and brings down the values even further. who is going to appraise these homes?

Yes, this is a mess beyond description. I don’t even know what to call it, as there is no prior event which closely enough matches the current situation. There are certainly similarities and correlations to be drawn, but I believe this is an entirely new animal.

dacounselor: Thanks for providing REAL knowledge and advice (as opposed to lectures and blame) to those who have asked for help.

bought at the wrong time: I hope you have found some of the info you are looking for. In regards to the bill – yes, there are tons of loopholes, and yes they will be taken advantage of. It will help SOME homeowners, many of whom really shouldn’t be in their houses in the first place, with or without a new modified mortgage. Expect to see many of those who have been “helped” default later down the road – especially as home values continue to slide, WHICH THEY WILL. However, helping homeowners is NOT the primary purpose of this bill. First and foremost, the purpose of this bill is to PROTECT FANNIE and FREDDIE. Remember, the bill languished for months until the Fannie/Freddie mess came about. Only then did the legislators get off their tails and do something.