friend of mine needs advice(walk away from loan)?

[svt4cobra6]

Hi my friend lives in Nevada and is a government contractor with a security clearance.
He purchased a house in Las Vegas in spring 2006 with an 80%/20% (balloon payment in 12.5 years I think on the 20%) Countrywide loan on both. He has 2 dependants and paid over 305k for his house but he told me the house accross the street that is 300 square feet larger has been on the market for several months at 169k.
He is not in danger of forclosure as long as he stays employed but I think he said he is not able to contribute to his retirement or much anything else as he said it consumes more than one of his paychecks and he gets paid twice a week (1 paycheck household). He told me he contacted Countrywide but did not recieved any assistance as he was trying to get the loan re-written to the actual value, hope for home owners program. I was telling him he should walk away from the house as it will never be worth what he paid in his lifetime. He said he has excellent credit and would be worried about employment with his credit effected.
Any feedback is appreciated.
Thanks Jason.What is the name of your state (only U.S. law)?

 

[Zigner]

Hi my friend lives in Nevada and is a government contractor with a security clearance.
He purchased a house in Las Vegas in spring 2006 with an 80%/20% (balloon payment in 12.5 years I think on the 20%) Countrywide loan on both. He has 2 dependants and paid over 305k for his house but he told me the house accross the street that is 300 square feet larger has been on the market for several months at 169k.
He is not in danger of forclosure as long as he stays employed but I think he said he is not able to contribute to his retirement or much anything else as he said it consumes more than one of his paychecks and he gets paid twice a week (1 paycheck household). He told me he contacted Countrywide but did not recieved any assistance as he was trying to get the loan re-written to the actual value, hope for home owners program. I was telling him he should walk away from the house as it will never be worth what he paid in his lifetime. He said he has excellent credit and would be worried about employment with his credit effected.
Any feedback is appreciated.
Thanks Jason.What is the name of your state (only U.S. law)?

Was there a specific question in there?

 

[svt4cobra6]

Yep, should he walk away from the house or will this have a negative effect on his credit/government clearance!

 

[racer72]

Of course it will have a negative effect on his credit. He will have a foreclosure on his credit. Then after the creditor sells the house, he could be held liable for the deficiency, this is the difference between what the house sells for and what he owes. And where did he come up with the asinine idea that his mortgage company would redo the mortgage for the actual value of the home? He borrowed X amount of money, he needs to repay that amount plus the interest. Mortgage companies don't reduce the amount owed just because the house has lost value.

 

[thedoctorisin]

Walking away from the house would be a double hit as far as the clearance is concerned, because it demonstrates both financial problems and irresponsibility in general.

 

[svt4cobra6]

thanks for all of the responses. Another friend of ours who is a retired Realistate/broker person told him he should just walk away from the house, strickly as a buisness decision and said it will never be worth what he paid. He also reviewed the hope for homeowners program and it states that the mortgage will be re-written to actuall value for individuals that have payments greater than 31% of gross income. He also said that it looks like the government is funding this in some sense. The real problem is that the housing cost was about twice of what it should have been at least here in Las Vegas so for those that have bought in those peak years 2006 or so will not be supporting the economy in any way other than shopping at walmart for basic necessities! My friend said he is paying like 20k in interest a year so guess he is supporting Countrywides profits and the investors that bought the loan.

 

[rob2060]

Very similar situation...

... svt4cobra6, I am in a very similar situation but am Active Duty military instead of a gov't contractor. My situation is compounded by the fact that I am facing a mandatory move in the next year, to my next assignment. I cannot afford to carry this house passed this assignment without some compromise from the lender and a renter in the home.

There's no out for your friend in the credit department. If he walks away, he will take a huge hit. Before he sends in the keys, though, make sure he is taking into consideration the possible deficiency judgement.

racer72, the Hope Now / Home for Homeowners program is offering FHA backed mortgages for homedebtors at the current market value of the house...provided the lender agrees and enters into an equity sharing agreement with the mortgagee and government.

 

[svt4cobra6]

I would think the government would give special pay in the situation where you have to move and can not rent the house out for enough to cover the house payment. Here in the North West of Las Vegas my friend said he can only get about 1100 per month for rent and his payment is over twice that not counting association fees and fixing things when they break. He also has excellent credit so did ok on the interest rates when he purchased the home, just the price was way over the actual value. I think he was looking into refi but since the house is worth 50% of the purchase price I think there would be too much negative equity.