Thursday, September 27, 2012

Ahead, Not Behind

Trey Smith

As I detailed in three posts yesterday, my wife and I have come to the conclusion that we will most likely need to give up our house. It's not something we relish doing, but we've come to realize that we don't have (and probably will never have) the financial stability for this to be sustainable.

So, I decided to be proactive in regards to this issue. We purchased our home through the USDA Rural Development Direct Home Loan Program and so I called USDA to discuss the various options available and the ramifications of each one. Well, I suppose I should say that this was my intent because I received very little information about options or ramifications.

You see, bureaucracies are not used to people being proactive. No, they expect to deal with borrowers ONLY after borrowers have gotten behind on their mortgage payments. At that juncture, USDA starts sending out letters threatening foreclosure. Since I'm a rather intelligent bloke and I realize the direction this situation is headed, my hope is to work with them BEFORE we get to that point.

To my utter amazement, my proactive stance was rebuffed. Why? Well, according to one USDA rep, they can't offer us any options UNTIL we begin falling behind on our mortgage payments!! In other words, they are trying to dissuade me from getting out in front of the problem and to wait until the problem mushrooms!

I'm not so easily dissuaded. I'm going to keep working on this issue. I'm fairly certain I will encounter more resistance and this will lead me toward greater frustration, but I feel that the responsible thing to do is to try to head off a major problem before it becomes too big and swallows us up.

Me thinks Laozi would agree.


  1. Possible options:

    1. Loan modification, contact your lender to try to refinance your loan at a lower interest rate. Probably won't help, they are famous for stalling, but worth a shot.

    2. Get yourself a real estate agent, and put your house on the market as soon as possible. Be honest with your agent, discuss options. Explore the possibility of doing a short-sale, whatever it takes to sell the house as soon as possible.

    3. Take in a boarder. Got an extra room, any space that you could convert into a rental, to help with your mortgage payment.

    4. How much equity do you have in your home? Don't answer that here, just think about it. How much of a profit would you expect to walk away with, if your house sold for fair market value? Is it too much to walk away from? If so, you will want to sell this house by any means possible. Maybe you could ask family to give you a loan, if you know you could pay it back once the house sells.

    Either way, once you stop paying your mortgage, you got at least 3 months before they put it on the foreclosure auction block, before you got to be out of there. Though realistically it could be longer depending on your lender, the average I think is about six months.

    If that happens, think of it as a strategic walking away, an opportunity to save as much money as possible, to be able to move, get into an apartment; your credit rating will not be completely shot to hell just yet, should still be able to get an apartment.

    Either that, or figure out another way to increase your income, fast.

    1. As to Point #1, the government IS the lender. Besides, our interest rate is only 1%. We can't get much lower than that.

      As to Point #2, we can only short-sell IF USDA allows it. I live in a very economically-deprived county -- there are many area homes that have been on the market for one year or more with NO offers.

      As to Point #3, a boarder is tricky because it impacts my SSI check. In addition, I'm anti-social (part of my disability) and I would have a good deal of trouble feeling comfortable in my own home with a stranger afoot!

      As to Point #4, it's a bit complicated due to the fact that the USDA subsidizes a portion of our monthly mortgage. As to the loan, no can do. That would mess up my SSI.

      We could allow USDA to foreclose, but there ARE other options and it's these options that I want to discuss with them.


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