Upside down on Loan

C.
We did the same we moved out to Riverside County for the bigger houses early 2006. Our house has lost about 40% too. I too am a SAHM of 4 small boys.

I have to agree with Kristen though. As long as you can make the payments you shouldn't default on the mortgage as it will ultimately ruin your credit and you will be left with nothing. I know it's hard right now but the loss is only on paper as long as you don't loose the house and the situation is eventually going to get better. We tried to refinance as well and we were told we need to default on our mortgage first!! How stupid is that? And by the way if somebody suggests that to you: it's illegal in California.

There is an effort on part of the banks to help once you are actually threatened by foreclosure. If you have a loan with Countrywide as we do: they don't want to help at all.

Good Luck to you and your family and hang in there.

I'm not a finance expert by any means, but if you have good credit, you should do everything in your power to avoid foreclosure, which will wreck your credit and create a lot of problems for you in the long term. Is the immediate problem that you need to sell your house and move, or is it that the mortgage payments are sapping too much of your income? If you don't have to move, I'd say stay put until the market rebounds so you have a chance to regain your equity. If you have to move or your finances are in big trouble, then it's time to slash your expenses drastically, take a part-time job, do whatever necessary. But you should probably talk to an accountant or real-estate attorney to truly understand your options and the consequences or advantages of anything you decide to do. At least be comforted by knowing a LOT of people are in the same situation. Good luck.

You should absolutely try and modify first. Call the bank each week and ask about your options. Things are changing all the time so be persistent.

-M. Drews
Loan Officer

Many many people are in very similar situations as you. If you can make the payments each month and are still employed, then you should keep making the payments. You are only upside down on paper. The market WILL come back, it just needs time to recover. But if people keep defaulting on their loans, because on paper it is worth less, then it is going to take a lot longer for our banks and economy to recover.