Just one more in a long line of military families having to go into foreclosure or short sale status due to PCS orders for this summer...

When we PCS'd to Hawaii in the summer of 2003, there was a very long wait for military housing, so we bought a townhouse figuring we could sell or rent it when it was time to PCS again. Now it's time to PCS (and our request for a year-long extension was turned down).

Why can't we sell?
Because of the drop in the housing market, our townhouse is now worth about $140,000 less than what we owe on it. Even though we are very careful with our money, our investments/assets don't come close to covering that amount (especially now that *that* market has also tanked). We cannot make up the difference between what we owe and what we could sell it for today.

Why can't we rent?
1. With the drop in the market, the going rate for monthly rentals of these townhouses covers only around three-fifths of our mortgage;
2. When we PCS this summer, we will receive $2000 less per month (due to the decreased housing allowance and cost of living allowance).

And why can't we refinance to one of these cool new lower interest rates?
Because we are "upside down" in our loan, of course (the home is now worth $140,000 less than what is owed on it). I could understand it if I was asking some *other* mortgage company to refinance us--why would they want to get involved in our mess? But Countrywide already has our loan and our money, yet they do not want to work with us to offer us any of the deals that other folks are being offered (reduction in interest rate or mortgage, etc.)

Why can't the mortgage company understand that it works out better for *everyone* if they work with us rather than against us?
If Countrywide *would* offer us even a reduction in interest rate, everyone would win. We could keep the house and rent it out, even if we had to pay a bit extra ourselves to cover the mortgage. We wouldn't be tainted by a foreclosure or forced to lose our life savings & investments in a short sale situation.

Countrywide would still make lots of money--they wouldn't have to lose money or deal with the hassle of a foreclosure or short sale situation. Countrywide would still have our business--solid customers with an incredible credit rating who are never late on a payment and have a guaranteed income thanks to the US military.

I don't understand how it makes good business sense for them to be willing to do a foreclosure or short sale (in which they will lose money) instead of simply giving us a break on the interest rate. Military members (and others affected by the downturn in the market) aren't asking for charity--why doesn't common sense prevail in mortgage lending companies? Am I missing something?

I like to take responsibility--even to the tune of $50,000...
I take full responsibility for my actions and realize that the real estate market isn't a sure thing, but I'm pretty confident it's not my fault that the housing market collapsed. We are even very much willing to "eat" the cost of the $50,000 we saved and used to renovate this townhouse. I don't mind the loss of the money as much as I mind the hundreds of hours of work my husband put into this place seemingly for nothing.

My husband has been in the USMC for fourteen years and is proudly making a career out of it. I am a former Marine and have been a disabled vet for twenty years (and receive a very small amount for a disability pension). Due to health issues, I can't work outside the home, but I do whatever I can to cut expenses and save money. We don't carry any debt (except for our residence) and I homeschool our son so that he can receive a quality education here in Hawaii.

Thank you.
I appreciate all the work you folks are doing to help out military families, and I will definitely follow the links, sign the petitions, and contact my congresspersons. I know there are military families in much more dire straights than we, and I feel for them. It would most definitely benefit military families to put into place some sort of legislation that would ease the burden these families incur due to transfers every few years.

I don't have a degree in economics, but even *I* "get it"...
Indirectly, it would benefit the military (and our country) in regards to the retention rate of military members. How many military members will decide that it is just not worth putting themselves and their families at financial risk? How many will be willing to continue to risk the stress on themselves, their spouses and children? How many will say that it's just not worth the hassle anymore, especially when combined with the stress (for both the active duty personnel, their spouse, and their children) of deployments and combat?

How many hard-working, experienced military members is our government willing to lose only to have to pay even more money to train new military members when it is already difficult to meet recruitment goals? How many potential recruits will no longer consider a military enlistment or career when they see the stress placed on military families due to loss of their homes and savings?

I hear the phrase "taking care of one's own" bandied about quite a bit in the military and government. Having our military/government take steps to ease this particular burden of military families would go a long way toward proving that they mean what they say.

We are in nearly an exact same situation to yours... We bought in a very overpriced area of the southwest when the market was red hot cause there was no basehousing available for months. We are currently upside down about $150,000.00 and have put in about $15K in upgrades into our house while we've been here.

I too am unable to work due to health issues and so my husband's salary is our only source of income and has been since we purchased our home.

We would take about an $800 per month loss on renting out our home (as that is what rentals in our area are going for). Thus, we'd have to make up the $800 extra per month AND take a hit at our next duty station, which is likely to be a lower BAH rate. There is no way we can afford this. It appears we will be forced to foreclose or short sale. Our bank has also denied us refinancing since our house is worth $150,000.00 less than when we purchased it.

We are set to deploy in the summer as well.

I urge you to take a moment to write your legistators and tell them of your situation and spell it out to them as clearly as you've done on this site. I recently wrote to all our congressmen/women as well as forwarded the letter to family and friends to hopefully cut and paste. We MUST put pressure on the lawmakers to offer those PCSing in these sorts of situation at least SOME assistance.

I also am not expecting a hand out, and I am willing to take the hit of what we've put into this home throughout the time we've lived here (paying toward the mortgage... sometimes extra payments to lower the principal, as well as all the upgrades we've done while living here), however I believe when a military family is being forced to PCS, we deserve some sort of recovery for our losses. Some people will NEVER recoup from the hit their credit takes, or worse the hit their security clearances take from this crisis.

PLEASE take a moment to write your lawmakers and pass on the word for others to do so as well. This is the ONLY way they will see there is a HUGE problem that is only getting worse.

http://directory.usayfoundation.org/

Best of luck to you....

I tried to think of something intelligent to make in reply, but frankly, you both have said it all far more eloquently than I could. Eventually the system, our governing officials, will figure it out. Specifically, that it costs far more to recruit, train, and retain the replacements for the highly talented and experienced members that will ultimately "vote with their feet" than to simply pay a relatively small amount to cover "employment related expenses" as they do with other federal employees. PLease stay tuned, engaged, and don't take the pressure off! And thank you both for sharing and serving! Joe

Yes! This is ringing all to true! I work as a Realtor in Las Vegas! Yes a hard hit area. Bought a great home and have lived here for over 6 years. My husband is active duty reserve and the time has run out on his job here which we were told would not happen. So a PCS is in order BUT now my house that I planned to live in forever is upside down 250K. Do I stay? Do we run 2 households? Do I Short Sale? He has 6 years left until retirement it would be crazy not to follow that through. Plus he LOVES the military and will continue to serve as long as he can. It is a constant thought on my mind for myself and my clients. My team has been listing and selling short sales for 6 months and they can be done. I just NEVER imagined it would come to this.

Kristina,
Thanks for sharing your circumstances with us. Though this may sound like a broken record, I strongly encourage you to click on www.moresam.net, modify as necessary the pre-written letters, print and send to your home state elected officials (addresses provided). Then call them and demand that they get this fixed. Tell them that the stimulus provisions for military families fall way short of any simulance of effective relief. Ask your family, friends, etc. to do the same!

Please stay tuned to this forum, and / or subscribe to our newsletter (see left column of this page) for more updates.

Joe

Here's an update on our situation.  We are now in VA and the condo is Hawaii has been in escrow for several weeks.  We kept lowering our asking price and found a buyer who loves the place.  We cleaned out our accounts and took out 35K in secured and unsecured loans to cover the 80K it will cost us to sell the place.  It's a lot of money, but to us it is worth it.  At this point we've already kissed off the 50K we spent in renovations and all the other money we've poured into the house.  The final "insult" is the almost 100K we are going to have to spend *just to get rid of it*.

The big glitch now is the APPRAISAL.  The appraisal came in really low!  I mean rediculously low.  Both realtors involved are upset.  The buyer just went in to talk to BofA.  The appraiser won't budge on her appraisal.  In HI, they are all covering there rears by coming in low.  This means that the bank won't loan the buyers enough money for what we are asking.  They are doing all they can to come up with the extra money and want to meet up halfway on the difference.  This means us coming up with another 15K.  We don't have the money and aren't exactly sure we could get another 15K in unsecured loans.  If only the appraisal had come in at a fair and decent price.  I asked "why not get another appraisal?"  Apparently, once it's set in ink, it's difficult to get changed.

For the first time, my husband has considered walking away from it and going thru a foreclosure.  Our credit is absolutely stellar and we don't want to hose it up.  I understand that a foreclosure stays on one's credit for 7 years.  Before we took out the 35K loans (which is just sitting in our checking account now), the only debt we had was the condo in HI.  Heck, we could walk away, pay back the 35K in loans, return the rest of the money back to our investments, and easily save $3000-$3500 per month.  When the time comes to buy a car, we would just pay cash.  The husband is staying in the USMC at least another 6 years anyway until he can retire.  By the time we want to buy another house, the foreclosure will be gone from our credit record and we'll have lots of money to put down to buy a house. 

Our problem is that we are struggling with the morality of walking away.  We want to be responsible and pay off our debts.  We've always lived frugally and as debt free as possible.  Walking away (foreclosure) as this point will save us so much money (almost 100K!!!).   Is walking away justified in these circumstances?  The banks are to blame in the first place for the subprime lending mess which has caused the housing market to tank, they aren't working with borrowers even though they've been given a whole lot of taxpayer money to do so, and now they are hurting us by undervaluing the appraisal so that they don't have to lend as much.  They get to hold the mortgage on a piece of property that is much more valuable than what the buyer can get a loan for.  That leaves the bank sitting in a very advantageous position.  At this point, I don't have much sympathy for the banks in general (and CountryWide/BoA in particular).   Why should I spend almost $100K (and put myself into 50K in debt) just so the bank comes out happy?  It doesn't seem right.

CJ,

Yes, I believe you are justified in this case. We are in a similar position (also stellar credit history, time in service left until retirement, with a home that is $50,000 under payoff). We would also need closing costs and fees for the agents involved. It is not selling, and we've done all that we can. We've hung on a lot longer than a few other families who were also military. It is a horrible feeling that we may actually round our 3rd year going through this. We need to move on. We need peace. (We also had a regular VA loan and it wasn't a crazy amount!)

We have tried for two years to sell our home. I will post my story once we have notified our tenants.

We have lived at poverty level (food and other household needs) for the duration. Husband deployed in 2008 and deploys again in 2010. He's career military, so as you know, those were NOT his ONLY deployments. We were not about to be separated in between. That has meant that I go without eating when necessary amongst many other things that my husband and I have never faced before.

I would look into your options to walk away. It is ridiculous to think of you guys draining your savings to that extent and incurring that amount of debt, which will create a future hardship. I'd much rather pay cash for cars and never use credit again until we heal this would that is foreclosure.

We only pray that husband can retain his security clearance.

Hi, this is Joe Gladden, responding to CJ and anon with a few thoughts.  First, though it sounds like a broken record, I want to say just how sorry I am that both of your families are going through this.  As a tax-paying citizen, I am truly embarrassed and ashamed that we allow our Military Families to be in this situation.  

The Cat is out of the Bag on the HAP in that it is a total failure.  While I wouldn't discourage anyone from signing up, I would never give anyone false hopes that it would help.  There simply is no evidence that it has or will.

Regarding the appraisal issue, this has been a major source of pain since the government moved to tighten up regulations regarding appraisals and underwriting.  And again, poorly thought out solutions and knee jerk reactions result in unintended consequences.  As in CJ's case, both buyer and seller lose!   The National Association of Realtors is very engaged in getting this fixed. 

A sidebar, it really causes one to pause and reflect on "government solutions" given the recent media coverage of other proposed "government solutions," doesn't it?  

For CJ, as painful as they are, if you can't get this sale together, I would encourage considering a "short sale."   The credit hit is for 2 years instead of 7, but you do need to be aware that there can be tax consequences to this.  We now have on our sight someone who can answer questions about short sales / foreclosures.   Please see the link to the Helping Hands Foundation, David Bryan.   

I would like to comment on the morality of all this.  I have been through a some of these circumstances with people close to me and we struggled with the same issue.  In the final anaysis, I realized that  first, you didn't make bad decisions, didn't ask to be in this situation, and certainly have ridden it further than most folks.   Secondly, I am guessing you pay taxes?   I can reasonably assume that your tax dollars went to the TARP program which bailed banks out and supposedly through money at these fixes, many of which haven't worked.  In my humble opinion, you have a morale obligation to do what is best for your family and you should sleep at night knowing that you did your best.   

The fact is once you accept the reality and take that first step, you will feel rather relieved and liberated.  

A final thought.  What if we had a ground swell of outrage over this issue from our Military Families, including Mom's and Dad's back home, similar to the recent town hall meetings regarding the health care debate?  What if every Military Family that lived in the DC area made an appointment with their Congressman, drove to their DC office and looked them in the eye and told them these stories?  What if everyone in this situation got 10 people to write their Congressmen and told them to get it fixed? 

I hope we can provide more detailed info as we go along, but know that you are in our prayers.  Joe

 

This is CJ Fillmore again with an update.

We were finally able to sell our condo in Hawaii about 2 months after we moved, thank God. We lost the $50K or so that we had used from savings to remodel the condo. We had to bring $100K to the table just to sell the place. We were able to come up with half of that from wiping out our savings and investments accounts. We were able to get another $50K in secured and unsecured loans.

I am happy to say that we have just finished paying off the $50K in a little less than 2 years. So now my husband is at 16 years time in service and it's like we're starting over with nothing. At least we're not in debt anymore.

As a Christian, it's been a good lesson for me. I've always known *in my head* that God will always take care of us, but this incident really forced me to have *faith* in Him. It also reminded me that, no matter how much we strive to do the right thing (not live beyond our means, make wise financial decisions, stay out of debt, etc.) that things *still* might not go according to *my plans.*

I realize, though, that my particular situation, while frustrating for me and my family, is not nearly as dire as that of so many others. I'm hoping that this situation improves for all the other military families out there. Hang in there and God bless you all.

We are finding ourselves in quite a predicament with the housing crisis.

We have owned our very first home for almost a year now. We took advantage of the down market and puchased a foreclosure in a well-recommended area near the base and invested our savings into fixing it up, with the intentions of selling it eventually and benefitting financially. Our VA loan is at an incredibly low interest rate, and the home is well within our means (significantly under BAH).
However, now a year into what was supposed to be a three to four year investment we are met with the following circumstances:
--horrific crime problems that have surfaced in our neighborhood (gang & drug activity, as well as violent crime) that have seemingly come out of no where. This has greatly affected our property value and our own personal sense of security.
--impending orders within the next few months

We have spoken to our realtor, and she has informed us that since our appraisal a year ago, her analysis of the market is that our home is worth about $30K less than it was then. Add to that real estate agent fees, closing costs, etc and we could be looking at having to come to the table with upwards of $50K to get the house sold. In addition to the finanical aspect, the new crime issues are a MAJOR problem in the aspect of trying to sell the home. Our neighbors are also feeling the pain and many are walking away, leaving their homes to foreclose and continue dropping the overall price of homes in our area.

My husband has a high security clearance, and short sale or foreclosure could have a detrimental effect on his career, so that is obviously what we wish to avoid. However, in this situation, what is our best option? We have considered renting it, but again the issues with crime has made that avenue a difficult road and interest was minimal, at best. This is our first home and the financial stress it has put on us is staggering when it comes to this situation. How do we get out of it?