What should we do with this house?

[Ben Smith]

What is the name of your state (only U.S. law)? Georgia

I am posting this thread in hopes that some advice will help my wife and I in making a very tough decision that we need to resolve very soon.
This story starts over 2 years ago with a move that we made from out west to Atlanta Georgia. We looked for a new home for several months before we found one that we decided to purchase in an area that was close to work and seemed to be what we wanted for our family. The purchase price was 295K and we secured an 80/20 conventional 30-year loan.
The subdivision was about half finished and should have been complete by the end of the next year. Over the next several months we saw the building and home sales drop steadily and come to a stop. Over the next year and a half, several of the homebuilders in the subdivision foreclosed on their homes and the remaining building lots (one builder on a whole street of 15 finished empty homes). Also over the last year+ around 15+ homes have been foreclosed on by their owners for various reasons. Both homes to our right and left and one across the street just in our cul-de-sac have gone back to he bank. The subdivision, 2 years ago sold in the 290K to mid 300k(with basement) range. The Builder foreclosures have and are now selling for right around the 190k range and the private foreclosures are selling at the 160K - 175K range. The one to the right of us sold for 162k and to the left for 174k (original sales prices of 286k and 295K just 2 years ago).
Needless to say, the Subdivision has taken a big hit in many ways over the last two years. The Streets that are still construction grade without the finish topcoat are falling apart (pot holes everywhere that are being filled in with sand) and we are told that they will not be fixed or top coated until the subdivision is over 80% complete as per builders contract (that % may never happen!?!). The yards and curb-appeal that once were some of the best in the area have gone the same way as the real-estate market as there are many vacant and bank owned properties that are not kept up.
Now I don't mean to sound elitist in any way, but it is just the way things are that the new owners in the subdivision are 150k homeowners in what "was" a 300k+ subdivision. Not only are these homes our new "comps", but this new demographic is also a big drag on the home values as their yards don't look much better then the abandoned yards, and the bed sheets hanging in the windows and the oil-leaking cars in the driveways and on the streets (the term "Streets" used very lightly) are not helping either.
Several of the latest foreclosures are of the neighbors that are just walking away because they don't see the subdivision going back up to the original value for many years to come (If ever) and are just not going to live in it any longer, let alone take the 100k hit in home value. Living with neighbors that are living in your same home for close to half the mortgage that you are locked into paying and are still bringing down the value of your home can be a drain, not only financially but also emotionally. This subdivision is so far from what many bought into just 2 years ago!
Now to the Legal issues of possibly walking away with many of the others!??! We have looked at everything from a short sale to refinancing to even the new mort loan modification and we don't qualify for any of it~ and if we did, is it smart for our financial future to stay anyway? Some in our "Hood" feel that prices will come back in the next 3-5 years to the breakeven point. Others see that our subdivision (for many reasons that we see now in hindsight) was the first type of subdivision to fall and will be the last to rebound (especially with all the new found problems). I have some very serious doubts that it will ever reach the breakeven point that many are hoping for to post their for sale signs.
We are seeing that we could rent a home very comparable to the one we have in a better situation for our family and kids for less than 2/3rds of our current mort. We could be out of this dead end subdivision and home, and have the 1/3+ in positive cash to put down on another home in 5 years or so when the F-word drops off. Would we not be fools to stay!?!?
So to make a "Financial Business Decision" on what to do that is in the best interest of my family, and I say this as the decision based on ethics is so far buried that it is dead! The financial/wall street sector in this country is without ethics and I am tired of being held to the higher standard! I will play within the rules of Law and not ethics as it seems no corporation or financial institution has any consideration of ethics when it comes to their decisions, as it is all business, right? Apples for Apples and the same rules for all!

The questions are~

1- How do you know if your Mort is a Non-recourse loan? (Wishing about now that my mort was in California)

2- If it is a full recourse, do they actually spend the $ to come after you? Can they garnish wages and go after assets?

3- What about taxes? From what I can find, as long as we were living in the home (not investment prop) we are fine there??!??

4- How long will the foreclosure be on our record? (This answer seems very fuzzy from what I can find!?!)

5- How much of a credit score drop can we expect from just a foreclosure as all our other debts will continue to be paid in full?

6- Can our auto loans and other such loans be affected by such a drop in credit?

7- If we are to stay in the home, can the loss be written off in any way?

8- What do you think in general about our situation? Be honest, although we are Numb by all of this, we still have thick skin!

Any answers and/or thoughts would be greatly appreciated as our minds are constantly going back and forth on the issue~ B. Smith

[JustAPal00]

Originally Posted by Ben Smith

What is the name of your state (only U.S. law)? Georgia


1- How do you know if your Mort is a Non-recourse loan? (Wishing about now that my mort was in California)

2- If it is a full recourse, do they actually spend the $ to come after you? Can they garnish wages and go after assets?

3- What about taxes? From what I can find, as long as we were living in the home (not investment prop) we are fine there??!??

4- How long will the foreclosure be on our record? (This answer seems very fuzzy from what I can find!?!)

5- How much of a credit score drop can we expect from just a foreclosure as all our other debts will continue to be paid in full?

6- Can our auto loans and other such loans be affected by such a drop in credit?

7- If we are to stay in the home, can the loss be written off in any way?

8- What do you think in general about our situation? Be honest, although we are Numb by all of this, we still have thick skin!

Any answers and/or thoughts would be greatly appreciated as our minds are constantly going back and forth on the issue~ B. Smith

1- Read your loan documents. Because the primary was an 80% you may have gotten lucky. Most high LTV loans are full recourse, but at 80% it might not be.

2- Yes they will go after you. For 100k you can guess why. BK may be your only hope, but buying a 300k home you probably won't meet the means test.

3- If you're paying your mortgage, the taxes should be current.

4- The last I checked it was 10 years, but you can buy again after 4 at a slightly higher rate.

5- Hard to say, but probably 100 pts or so.

6- No, but the bank can go after assets.

7- Unfortunatly not until you sell it.

8- I think it's a shame. It's a sad situation. Too many people were buying homes that shouldn't have. In your situation, if you didn't have the 20%(60K) to put down, then you couldn't really afford that home. This is why our government needs to stay out of private enterprise. They always mess it up!