My Walk, Vancouver WA, Provident Funding 1st, BOA 2nd

izzle

LoanSafe Member
Aug 11, 2010
214
1
18
Vancouver WA
I've been considering a strategic default for at least a year. This month we finally decided to go through with it. It is not a decision I have made lightly, but given the situation it makes the most sense for my family.

My Situation:
2003 Bought home in Vancouver WA with 80/20 for $242,000.

2005 Refinanced 80/20 into single loan with Provident funding to obtain better interest rate.

2006 Took out second with Countrywide for $65,000 to use as 20% down on second house. Thought I was being conservative since home appraised at over $360,000.

2006 Bought second house for $300,000 about 2 blocks from my current home. Put down $65,000 from second on first home. Took out Countrywide loan for $235,000.

2006 Rented out new house for $1300/month.

2009 Laid off from job

2009 Few months later got new job for almost same pay.



Realized that since purchasing the second home for rental, I have been basically living paycheck to paycheck and have not been able to save anything. I am in worse shape now since the values of both houses have sunk. I hate being stuck knowing that anyday could be my last at my job and that I have not been building any savings since purchasing second house. Being laid off last year was an eye opener for sure. I had been at my previous employer for almost 10 years and thought I would be "safe", not so.

Looking back I should have never purchased the second home for a rental. My calculations were that real estate would remain flat, that I could increase the rent about %3/year, and that I would continue to get annual raises at work. If after 5 years it didn't work out, I felt I would have equity (20% down) and could sell. None of these assumptions occurred over the next 5 years.
I thought I was being conservative and planning on keeping the property at least 5 years. I had some savings to support the $1000/month that I had to pay into it ($500 second on current house, + $400 difference between rent and mortgage, +$100hoa). But after 5 years the value of that property has dropped over $80,000 and I have put more than $48,000 of my savings into it, it is time to stop the bleeding.

I have an 825+ Fico score but BOA would not refinance to lower rates since houses are both underwater now. I have never been late on anything and it makes me sick that my credit score will drop... But I have come to the realization that it is more important to build savings for the many rainy days ahead than to preserve a credit score. After all if I do lose my job, then I would be forced into the situation and have no savings. So it is better to be proactive and prepare now.

I called BOA to consider my options, they would not talk to me unless I was 60 days late. I asked about DIL or short sales and they said it also needed to be 60 days late and I had to send them my financials.
I guess they are calling my bluff to see if I really need a modification. I guess they figure most people would not sacrifice an excellent credit score for nothing and they were hoping I would continue paying.

I also do not want to hand over my financials as I feel that gives them a roadmap to sue me for deficiency (since I "can" pay, although depleting savings every month just to do so). Doing a short sale or DIL (if they approve) will do just as much damage to my credit so why bother?

Here is my current plan, subject to modification as the situation may dictate.

Walk on the first house (the one I bought in 2003 with a first and second mortgage). Stop paying first/second and save mortgage payment in cash. Keep paying HOA and insurance on first house. Keep paying rental house mortgage and collect rent from tenant. Renter is in second house for another 7 months. Move to second house after lease expires and Provident forecloses on first house. I hope to settle the BOA second for <20% of 60,000.

First 235,000 Provident funding $1800 payment
second 60,000 Bank of America. $500 payment
Zillow value 250,000 if it will sell at all. Nothing has sold(even short sales in neighborhood since spring).
45,000 underwater.


First $232,000 Bank of America $1800 payment, renter pays $1300.
No Second
Zillow value 220,000
12,000 underwater


In doing so I hope to accomplish the following.

Reduce monthly outflow of:
$1800 first (Provident)
$500 second (BOA)
$100 hoa


From what I have read, the first is non-recourse loan in Washington, (according to youwalkaway.com)
Save the money for 7 months while forclosure proceeds. Use savings from not paying first and second to settle second since it is recourse loan.


From that I will begin to be able to save $1000 a month as long as I can keep my job. I believe my credit score should recover faster as I will still be paying a mortgage and keeping current on my student loans.

Am I missing anything? Has anyone had any dealings with Provident funding?
Anyone know if a refinanced loan in Washington becomes a recourse loan? I hope not, but if so it should be ok since the house "value" is around 250,000 and the first loan is about 235. Should be some left over after foreclosure sale, but who knows how much they will add in late fees/layers fees,etc...)
 

Moe Bedard

Call 1-800-779-4547
Staff member
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Aug 10, 2007
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This is a solid and well thought out plan. I couldn't have articulated it any better.

My understanding is that once you refinance the mortgage, it becomes recourse. This is pretty much the ssame in all sates that allow for non-recourse loans.

Here is the Washington law regarding this.:

61.24.100
Deficiency judgments - Foreclosure - Trustee's sale - Application of chapter.


(1) Except to the extent permitted in this section for deeds of trust securing commercial loans, a deficiency judgment shall not be obtained on the obligations secured by a deed of trust against any borrower, grantor, or guarantor after a trustee's sale under that deed of trust.

(2)(a) Nothing in this chapter precludes an action against any person liable on the obligations secured by a deed of trust or any guarantor prior to a notice of trustee's sale being given pursuant to this chapter or after the discontinuance of the trustee's sale.

(b) No action under (a) of this subsection precludes the beneficiary from commencing a judicial foreclosure or trustee's sale under the deed of trust after the completion or dismissal of that action.

(3) This chapter does not preclude any one or more of the following after a trustee's sale under a deed of trust securing a commercial loan executed after June 11, 1998:

(a)(i) To the extent the fair value of the property sold at the trustee's sale to the beneficiary or an affiliate of the beneficiary is less than the unpaid obligation secured by the deed of trust immediately prior to the trustee's sale, an action for a deficiency judgment against the borrower or grantor, if such person or persons was timely given the notices under RCW 61.24.040, for (A) any decrease in the fair value of the property caused by waste to the property committed by the borrower or grantor, respectively, after the deed of trust is granted, and (B) the wrongful retention of any rents, insurance proceeds, or condemnation awards by the borrower or grantor, respectively, that are otherwise owed to the beneficiary.

(ii) This subsection (3)(a) does not apply to any property that is occupied by the borrower as its principal residence as of the date of the trustee's sale;

(b) Any judicial or nonjudicial foreclosures of any other deeds of trust, mortgages, security agreements, or other security interests or liens covering any real or personal property granted to secure the obligation that was secured by the deed of trust foreclosed; or

(c) Subject to this section, an action for a deficiency judgment against a guarantor if the guarantor is timely given the notices under RCW 61.24.042.

(4) Any action referred to in subsection (3)(a) and (c) of this section shall be commenced within one year after the date of the trustee's sale, or a later date to which the liable party otherwise agrees in writing with the beneficiary after the notice of foreclosure is given, plus any period during which the action is prohibited by a bankruptcy, insolvency, moratorium, or other similar debtor protection statute. If there occurs more than one trustee's sale under a deed of trust securing a commercial loan or if trustee's sales are made pursuant to two or more deeds of trust securing the same commercial loan, the one-year limitation in this section begins on the date of the last of those trustee's sales.

(5) In any action against a guarantor following a trustee's sale under a deed of trust securing a commercial loan, the guarantor may request the court or other appropriate adjudicator to determine, or the court or other appropriate adjudicator may in its discretion determine, the fair value of the property sold at the sale and the deficiency judgment against the guarantor shall be for an amount equal to the sum of the total amount owed to the beneficiary by the guarantor as of the date of the trustee's sale, less the fair value of the property sold at the trustee's sale or the sale price paid at the trustee's sale, whichever is greater, plus interest on the amount of the deficiency from the date of the trustee's sale at the rate provided in the guaranty, the deed of trust, or in any other contracts evidencing the debt secured by the deed of trust, as applicable, and any costs, expenses, and fees that are provided for in any contract evidencing the guarantor's liability for such a judgment. If any other security is sold to satisfy the same debt prior to the entry of a deficiency judgment against the guarantor, the fair value of that security, as calculated in the manner applicable to the property sold at the trustee's sale, shall be added to the fair value of the property sold at the trustee's sale as of the date that additional security is foreclosed. This section is in lieu of any right any guarantor would otherwise have to establish an upset price pursuant to RCW 61.12.060 prior to a trustee's sale.

(6) A guarantor granting a deed of trust to secure its guaranty of a commercial loan shall be subject to a deficiency judgment following a trustee's sale under that deed of trust only to the extent stated in subsection (3)(a)(i) of this section. If the deed of trust encumbers the guarantor's principal residence, the guarantor shall be entitled to receive an amount up to the homestead exemption set forth in RCW 6.13.030, without regard to the effect of RCW 6.13.080(2), from the bid at the foreclosure or trustee's sale accepted by the sheriff or trustee prior to the application of the bid to the guarantor's obligation.

(7) A beneficiary's acceptance of a deed in lieu of a trustee's sale under a deed of trust securing a commercial loan exonerates the guarantor from any liability for the debt secured thereby except to the extent the guarantor otherwise agrees as part of the deed in lieu transaction.

(8) This chapter does not preclude a beneficiary from foreclosing a deed of trust in the same manner as a real property mortgage and this section does not apply to such a foreclosure.

(9) Any contract, note, deed of trust, or guaranty may, by its express language, prohibit the recovery of any portion or all of a deficiency after the property encumbered by the deed of trust securing a commercial loan is sold at a trustee's sale.

(10) A trustee's sale under a deed of trust securing a commercial loan does not preclude an action to collect or enforce any obligation of a borrower or guarantor if that obligation, or the substantial equivalent of that obligation, was not secured by the deed of trust.

(11) Unless the guarantor otherwise agrees, a trustee's sale shall not impair any right or agreement of a guarantor to be reimbursed by a borrower or grantor for a deficiency judgment against the guarantor.

(12) Notwithstanding anything in this section to the contrary, the rights and obligations of any borrower, grantor, and guarantor following a trustee's sale under a deed of trust securing a commercial loan or any guaranty of such a loan executed prior to June 11, 1998, shall be determined in accordance with the laws existing prior to June 11, 1998.

[1998 c 295 § 12; 1990 c 111 § 2; 1965 c 74 § 10.]
http://apps.leg.wa.gov/RCW/default.aspx?cite=61.24&full=true#61.24.040#61.24.040
 

izzle

LoanSafe Member
Aug 11, 2010
214
1
18
Vancouver WA
Update

Just an update...
We did go through with beginning the walk on our first home. I did not pay the August payment for the first and second mortgage on my house. It sure was nice being able to save an entire mortgage payment in cash. It is now 10 days past due and have not heard a peep out of either Provident Funding nor BoA. Maybe its because I changed phone numbers last year when I was trying to cut back on every non-necessary expense (to try and save, but that is another story)... Not receiving the phone calls might be a good thing... Although I would not want to be the poor fool who got assigned my old numbers.:eek: Anyway, the banks obviously have my address to send me mail.:D

I did pay the rental mortgage. I plan on keeping that current and move there once the tenant moves out and I need to move from my primary residence once it forecloses.

I was also debating what to do about my car situation prior to defaulting. Our car was over 13 years old and seemed to be running good. I was hoping it would hold out another 1 or 2 years and we would pay cash for its replacement.... I didn't want to take on any other debt prior to defaulting in case it would make the banks less likely to settle the first/second.
Well, just took car into the dealer for service and they said the timing belt was cracked and ready to break... There were additional items that needed to be repaired which would have cost over $2500:mad:. I decided to not spend the cash and take out a %2.9 loan to replace the car. I guess its better to finance a car now before the credit is shot. Not sure if this will hurt the settlement negotiations that are sure to come up next year once the foreclosure occurs... Although the loan may help rebuild credit (although I will not need another mortgage in the next 10 years as I have my rental to move to). I will let you all know....
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
Aug 10, 2007
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Thanks for the update izzle.

I would of done the same thing on the car, smart.

Everything seems smooth thus far and just take it one day at a time in a methodical and no stressful manner.

Take care!
 

izzle

LoanSafe Member
Aug 11, 2010
214
1
18
Vancouver WA
Spoke with Real Estate Attorney today

Quick update:

Have not heard from Provident mortgage yet.

BoA has sent me an email telling me to call them... I think I will not.

I just had a consult with an attorney asking about the recourse loans. He gave me the following information:

1. My first mortgage (Provident Funding) even though it was refinanced can be foreclosed on either judicially, or non-judicially. He stated that 99.999% of all foreclosures in Washington are done non-judicially. The reason being that Washington has a 1 year redemption period after a judicial foreclosure, and that they would have a difficult time selling the property with a 1 year redemption clause on the property. So the bank will close non-judicially and they will only be allowed to take the house and they can take no further action. So I do not need to worry about Provident Funding.

2. The second mortgage (BoA). Once the house is foreclosed on by Provident Funding, BoA security position will be wiped out. They will have recourse against me and they have up to 6 years to collect.

3. Not going short-sale route. I discussed that I was not going to be handing over financials for a short sale. He concurred that it would probably not be a good idea as they will then have a map to my assets.

I likened it to playing a poker game but showing all your cards to your opponent, and then wonder why you keep losing.....:D

4. Settling the second with BOA. We discussed ways to settle with BoA. He suggested communicating with them once I receive the NOD. Let them know that the house will be foreclosed and that I may be need to file bankruptcy. They should start considering settlements at that point. Keep in mind I do not want to declare bankrupcy, but will keep it as a last resort.

It would be in my best interest to settle the second with BoA sooner than later as they will keep reporting to the credit unions month after month, and my score will not begin improving until they are "taken care of".

I guess this is not such a quick update after all.:)

F-izzle - is what my savings did after purchasing my home.... :)
 

what to do

LoanSafe Member
Sep 2, 2010
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izzle, please keep us updated with the BofA proceedings. i may start this process soon and have a second with BofA.


thanks,
WTD
 

ProfessorShays

LoanSafe Member
Jul 14, 2008
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49er Country (NorCal)
Izzle:

The only added comment I'd make is chances are BofA won't be your lender for very long after they reach the point of being unsecured. Their likely course of action, since they don't want to be viewed as a debt collector is to package your loan up with a bunch of similar loans where collectability is in question, and sell them to an entity that specializes in debt collection. It doesn't take a great deal of talent to determine which loans are collectable (or partially collectable) and which loan are not.

The fact that your debt is sold isn't all bad news. The sales price is usually substantially discounted from the amount owed, so its purchaser can make a profit by settlling with you at a figure that is higher than they paid for it. The settlement amount is based, not so much on how much you owe, but how much you can afford to pay.

Oh and they are generally smart enough to obtain a financial statement from you where you spell out your assets and liabilities as part of the settlement process and insist that it be accurate.

Daniel

Daniel
 

Social Apocalypse

LoanSafe Member
Mar 17, 2009
693
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18
Washington State
Just a quick hello Izzle! We are neighbors!! Welcome to the forum, and what a great plan. You are way ahead of most who are just starting out on this mad journey. SUCH great support here, you can RELY on the people here, they are awesome... I am in La Center :)
 

izzle

LoanSafe Member
Aug 11, 2010
214
1
18
Vancouver WA
Received two copies of Notice of Intent to Accelerate from BoA today. One was certified mail, the other was normal mail. Only took them 22 days....
I have still not received one phone call from them, but like I stated before, its probably because I had changed my numbers about 2 years ago. I wouldnt want to be the person who got my old numbers.... :p

Have not heard anything yet from Provident Funding (first mortgage). But I am certain they will send something soon.

-------------
Aug 01, 2010: Stopped payments on first (Provident) and second (BoA)
Aug 15, 2010: Officially late on first and second
Sept 07 2010: BoA: Notice of intent to Accelerate
 

izzle

LoanSafe Member
Aug 11, 2010
214
1
18
Vancouver WA
Just a quick hello Izzle! We are neighbors!! Welcome to the forum, and what a great plan. You are way ahead of most who are just starting out on this mad journey. SUCH great support here, you can RELY on the people here, they are awesome... I am in La Center :)
SocialApocalypse: Thanks for the warm welcome. I have been lurking here since spring and have found this to be a wonderful community. I wanted to participate and give support where I can.... Maybe my story will help someone else in the future....
 

CA_NA

LoanSafe Member
Mar 7, 2010
238
1
18
Hi Izzle,

We also took advantage of our excellent credit and got a 0% loan on a new car. Our credit will tank on 10/1/2010 and we won't be able to get a good credit rate for many, many years to come. At least we'll have a dependable car for a few years. Please do keep us updated on the settlement with the 2nd. I will need to settle my 2nd but have not missed the payment yet.
 

izzle

LoanSafe Member
Aug 11, 2010
214
1
18
Vancouver WA
Just an Update

Provident: I received a late notice from Provident funding and they sent an unsolicited HAMP packet today. I will not be providing any financials so they will not get it back.

BoA (2nd): I received 3 more past due mailings from BoA.

Still wondering what date Provident will foreclose. I will make a wild guess of April 2011 at this point. Will have to wait to find out.... Staying put and saving payments until then...
 

izzle

LoanSafe Member
Aug 11, 2010
214
1
18
Vancouver WA
Update:

10-11-10 BoA had Titanium solutions leave a note on my door, stating they will assist me in contacting BoA. On their letter they state that BoA told them I owe 141,584. Not sure where they got that number from as my loan balance 2 months ago was around 60,000. Talk about some serious late fees... :rolleyes:

They also told me to "contact Bank of America at ." They did not put the phone number in on the form... Anyhow I will not be calling them at this point.
 

izzle

LoanSafe Member
Aug 11, 2010
214
1
18
Vancouver WA
Update: FICO scores dropping like a rock.

Well, I decided to check my FICO score history.... As expected it is dropping.

July: Everything current: 824
Aug: Purchased car, Missed payment on first and second: 802
Sept: 789
Oct: 718
Nov: 637


Wow! I expect it to go even lower before it recovers. I am just amazed at how fast it goes. We work a lifetime to keep this number as high as possible and within a few months it can be decimated... Simply amazing....

Its been a long time since I was in the low 600s. Well, I guess I will see "how low can it go"... I am still current on my rental house mortgage, student loans, auto loans (2), and credit card. It will be interesting to see how low it goes before it starts to recover.
 

izzle

LoanSafe Member
Aug 11, 2010
214
1
18
Vancouver WA
Update:

Provident has notified me that they assigned my mortgage to the foreclosure department.

BoA constantly sends past due notices at least weekly.

Still no NOD.
 

izzle

LoanSafe Member
Aug 11, 2010
214
1
18
Vancouver WA
Update: Credit card limit reduced

Quick update:

Received letter from American Express credit card that the would be reducing my limit. I was expecting this to happen soon anyway.
They cut it in half to within $100 of my balance. I always pay off the balance every month anyway.

I guess them seeing my payment history for the past 5 years where I pay the balance off each month wasn't good enough.

I have two other credit cards with high limit and zero balance that I have not touched in over a year. I wonder if they will reduce/close those accounts too...
 

izzle

LoanSafe Member
Aug 11, 2010
214
1
18
Vancouver WA
Update: Notice of Default

Received NOD today. It was only a few days behind schedule....
Great Job Provident Funding! Way to be efficient on the foreclosures....:D:D :D:D
 

izzle

LoanSafe Member
Aug 11, 2010
214
1
18
Vancouver WA
Four more copies of the NOD received in the mail today. And an additional one taped to my door for good measure.

So Far 7 copies and counting...
 

culater

LoanSafe Member
Dec 29, 2010
1
0
0
Thanks for sharing your stories. I am in Washington state and did a refinance on my condo about 2 years ago. I took some money out when I refinance thinking that I had plenty of equity. Two years later I am now about $50-60k underwater. I want to walk away, as this condo was a rental property and I am at a negative cash flow. I have read online that a refinance loan is a recourse loan, so if I walk away the bank will go after me for the difference plus all fees. The loan was with Country Wide - now Bank of American. Can someone please let me know if this is the case or not.

Thanks,
Vu