Do you like your condo? Do you see yourself staying there for a long time? If so, hold on tight for now. Lending to underwater loans will get a bit easier starting next month for owner occupants who have made at least 12 on time payments in a row.

Else, look into "selling" your home as a rent to own.

You are at rental imit, but is there a que in which your turn to rent your condo will come due? if so, if you can do any of the above this may buy you some time in order to officially rent the home.

As per buying another home now and then defaulting on your current home, talk to an experienced attorney who could offer suggestions on how to proceed.

If you need any help with the refinance feel free to contact me.

I understand you're making an economic decision. But it reminds me of the prisoner's dilemma to some degree.

I appreciate your response Anthony,

Thanks for the insight on the short sale scenario. I don't feel guilty at all what I'm exploring to do. The system was in place for these things to happen. I'm not a selfish guy, I look out for others as well. In my opinion, there ought to be some rewards for people that are doing the right thing.. it's not always a cinderella story. Of course there are people that lost jobs and experienced hardships.. then its not always as green on the other side. Some people are just bad financially whether it be savings, planning whatever.

at this point though, i'm just looking out for my best financial interest.

I'll take a line from wiki: "Some argue further that there is a moral duty to strategically default, and that one should make such decisions based on one's financial interest "unclouded by unnecessary guilt or shame", as lenders who do not modify mortgages do the same, "seeking to maximize profits or minimize losses irrespective of concerns of morality or social responsibility,"

Allow me to expand my answer:

That's right. A lot of people apparently made a bad investment during the boom years. There are people who lost their jobs or had some real life hardship, and my heart goes out to those people. I have tried to help those people. But based on what you have said, you are clearly able to make your payments, and yet you are trying to decide whether you will. There are people in the same situation as you that continue to make their mortgage payments even though they are completely upside down. Just because everyone made a poor investment doesn't entitle everyone to welch on the loan. You put down 20%? What about the people who put down 40%? 60%? What about those who have no loan because they paid cash or paid off their loan? All of these people lost equity as well. Maybe they should get their money back too because they were stupid enough to not finance. I put down 25% on my house, maybe you should pay me the difference. And just as Mark Goldberg said below, if you had made money on your home would you have paid the bank extra? I doubt it. It is decisions like these that are main the reason for deficiency judgements.

I don't know why everyone is suggesting a short sale. Unless you decide to lie, you won't qualify for a short sale because you don't have a hardship (negative equity alone is not a hardship). Likewise, a bank probably won't do a deed in lieu because you should be able to afford the payments.

Point of fact: Most of the banks didn't even want the bailout but were forced to take the money by the O'bummer administration. They were forced to take it under the argument that none of the stockholders would know which ones were systemically weak because the shorts were driving down the stock prices of banks like Citibank. The banks that had the money then gave it back as fast as they could when the government started telling them as private companies what they were and were not allowed to compensate their employees.

In your case I would say probably not. Have you thought or looked into short selling your place? I would speak with a few well qualified agents and real estate lawyers. This way will give you the best advice of whats best for you.

Aldi -

Unfortunately, you will likely not qualify for a short sale - no hardship. You have to understand that the term hardship is a banking term related to short sales and only has a few rules for qualification and they all have to do with income reduction, divorce or relocation. It is a hardship when your property is worth less, but not according to banks. But foreclosure will take more than 100 points off your score, it will take 200-300 points and there will be a time clock on you to purchase - 3-7 years. So, you would need to be able to purchase first. And the deficiency could follow you. I would encourage you to talk to the HOA and see if you can get an exception to the rental. Who knows.

Aldi, I would really like to send me and my attorney's info to you because even if you choose to work with another Realtor, it can only help educate you on the Short Sale vs. Foreclosure process.

Jeff Stewart
REALTOR®, @properties
3101 N. Greenview Avenue, Chicago, IL 60657
309-269-3499 CELL
jeffstewart@atproperties.com

Anthony you stated,
"It doesn't sound like you're in dire straits that you have a financial hardship. Maybe you should consider keeping the promise you made to pay back the loan when you took it (Remember the "promissory note" you signed???). The last thing we need is another REO on the market bringing down values because you made a poor investment decision. There's lots of people that are in the same situation, and you should consider it a test of character as to how you react to it."

Yes I recall this promissory note. I also recall thinking I was being responsible putting 20% down on my place when banks were irresponsibly giving loans out like nothing. Fact is, the responsible owners got a really crappy deal out of this whole economic mess and you know who was responsible for it. I recall banks being bailed out by TARP and who knows how many other programs to the tune of trillions of dollars. Poor investment decision on my part? I guess, but I guess everyone else that bought in the mid 2000's made a poor investment decision.

Thank you to the other's who have offered helpful advice and options so far. This is what I was looking for.

Hi Aldi,

Thank you for giving me the chance to get in front of you...even though I'm the 9th person in line! You desperately need to talk to a Realtor and a real estate attorney who are experienced in helping people with short sales and foreclosures. I have an excellent Short Sale vs. Foreclosure handout that I can email you and I also have an amazing short sale attorney (who ONLY handles short sales rather than conventional real estate sales) and she can tell you everything you need to know. I have handled dozens of short sales and am very versed in the home sale portion of it and I can say with 100% certainty that foreclosure is never a good option. You may have heard of short sales because of the current real estate market we're in and believe it or not, they are becoming so much easier and simpler to work with and we can easily handle the situation you're in.

To give you an idea, I just got a short sale approved by Bank of America where my homeowner never had to miss mortgage payments (she owed over $170,000 when her home is valued at $65,000 so similar to yours) and she is even getting $3,000 from Bank of America to help her move - all of this took only 60 days to complete. Although we can never predict where her credit score will be after the Short Sale process, the biggest reason credit is hurt is because of missed payments and she never had to miss one. Although this homeowner's situation may not be the exact same for you, this should give you some reassurance that there is an answer to your situation and it never has to be a foreclosure.

Please email me and I can send over my Short Sale vs. Foreclosure graph and I would love to chat with you about possible next steps.

Jeff Stewart
REALTOR®, @properties
3101 N. Greenview Avenue, Chicago, IL 60657
309-269-3499 CELL
jeffstewart@atproperties.com

I recommend that you have a consultation with a good foreclosure attorney. It will help you feel a lot more comfortable with whatever decision you make.

Unless you declare bankruptcy (and it sounds like this is not your case), foreclosure suit may result in a deficiency judgement against you. The bank will try to collect whatever they can from you.

The first thing I would do is negotiate with the HOA regarding the rental limit. HOAs do not benefit in any way from owners going into foreclosure. The more units are foreclosed in a building, the worse it is for the building. When there are too many foreclosed / delinquent units in a building, it becomes harder for new buyers to get financing for such building. On the other hand, some lenders in Chicago do not care much about % of rental units. My point to the HOA would be that in these times it is important to be flexible, and it is much better to have a financially healthy building with no delinquencies, than to maintain a certain rental ratio. Some Realtors will disagree with me. But keep negotiating with the HOA.

Try hard to refinance. This along with successful negotiation regarding the rental limit will make your condo more financially attractive to you (rental prices are pretty high right now).

You can also start a short sale process. Depending on who your lender is, you might actually get some money from the deal!!! Some banks now started offering such deals to homeowners to prevent them from going into foreclosure. Explore this option! If you decide to proceed with a short sale, get an experienced short sale attorney (with good success record) and a very organized Realtor to help you get the most out of the short sale. This is definitely a much better option than foreclosure.

Good Luck! And let me know if you need assistance. Marina James, MBA 312-434-4669

the current market has an answer for you. A mortgage is a business agreement and can and should be looked at that aspect. If you want to get rid of your current place do it..its not going up in value in the next 5 years , then it will go up 2 percent a year. the options are sell it and pay the balance, foreclose on it and have a 6 year penalty plus be sued for the balance or short sell it and have a 2 year penalty and and come to agreement about the balance. the key to the deal is to use an agent who has experience.. I work with the #1 team in Chicago and have the experience..I can close the chapter of your life with the minimum amount of damage.

the current market has an answer for you. A mortgage is a business agreement and can and should be looked at that aspect. If you want to get rid of your current place do it..its not going up in value in the next 5 years , then it will go up 2 percent a year. the options are sell it and pay the balance, foreclose on it and have a 6 year penalty plus be sued for the balance or short sell it and have a 2 year penalty and and come to agreement about the balance. the key to the deal is to use an agent who has experience.. I work with the #1 team in Chicago and have the experience..I can close the chapter of your life with the minimum amount of damage.

It doesn't sound like you're in dire straits that you have a financial hardship. Maybe you should consider keeping the promise you made to pay back the loan when you took it (Remember the "promissory note" you signed???). The last thing we need is another REO on the market bringing down values because you made a poor investment decision. There's lots of people that are in the same situation, and you should consider it a test of character as to how you react to it.

You sound like millioons of other folks who are contemplating what is called 'Stratgic Default' Google it. it might be the thing to do, but you need to speak with an accountant/attorney to understand your potential tax implications of a short sale or foreclosure as it relates to the lien holder going after you to collect the shortage from the sale. You also may have to pay taxes on that amount.
Since you seem to be able to buy something now....before you unload the condo...it sounds like you might be in a strong financial position......................which is one of the reasons the lien holder might go after you to collect. These are legal/tax issues and those folks do not comment on trulia.

You have other options: Deed in Lieu, Short sale, Loan Modification. Foreclosure is your very last resort. They will come after you for as much as you can if you foreclose. Call me if you like one on one advice. No charge. I'll be glad to help you. 773-517-8373.

There's an additional angle that no one will have the courage to bring up. When you took the loan, you gave your word (through a signed note) to the bank that you would honor the loan and pay it back to the bank. When you purchase real estate, you also purchase risk that values can go down (of course, they can also go up, and when they do increase, you're unlikely to pay a bonus to the bank). If you can still afford your home - and it sounds like you can as you can afford a bigger home - then you might want to consider the commitment that you made to a lender who lent you a whole lot of money.

Short sale the home to lessen the impact on your credit, avoid any possibility of oweing the bank in the future and avoiding any tax implications.

Feel free to email me at jeff.Nobleza@bairdwarner.com