Now I believe. I did it. I bought a home, it sank, and now I have successfully abandoned ship.
It was down to the wire: The Short Sale closed days before a foreclosure was due. I was almost taken for $3,000 by some shifty lawyers. In the end, a few hundred dollars to a qualified Real Estate attorney to review my original loan documents to determine if I was open to a deficiency judgment on the first and/or the second loans was the best thing I did. I also had a kick ass real estate agent who negotiated with Green Tree to get them to take 3% to release the lien on my property.
Green Tree ignored me for months after the short sale, then started collection calls again. Rather than pay an attorney to send a “cease and desist letter,” I sent Green Tree a letter myself, simply telling them that they are mistaken, and that according to two qualified Real Estate Finance Attorneys I consulted before making the decision to pursue a short sale, I do not, under California law, owe them $58,636 because the HELOC was purchase money debt. (I recommended that they research California Code of Civil Procedure 580b, 580d, and 726 for starters). I asked that after researching this that they zero out my account and stop all collection activity.
After a series of FAX hurdles, I started calling them every day until I finally was able to get confirmation my letter was “uploaded to their system.” The team at Green Tree reviewed my information and I was told today, that as of tomorrow morning, they will send a letter granting me a full release.
Now my credit will start to repair and also….
It seems almost certain that I will owe no taxes for COD (cancellation of debt)! Yippie Skippy. This was not at all certain until April 12, 2010 when Gov. Arnold Schwarzenegger signed SB 401 by Senator Lois Wolk (D-Davis).
“Gov. Arnold Schwarzenegger Monday signed legislation that cancels the tax obligation for home sellers who dispose of their properties via short sales. The term "short sale" means the home is sold for less than the amount of the mortgage. In allowing such sales, the lender agrees to forgive part of the debt. But until the passage of the law, home sellers in California were threatened with a huge tax bill because the state considers that forgiven debt as taxable income.” – link
I’m posting this so others may learn from my mistake: The pay-option ARM I was talked into is what caused this, not the drop in the housing market. If I had gotten the 30-year fixed loan I requested at first (assuming I could really have afforded the payments), I could have stuck it out and held my home until the market recovered. (Will it? I doubt that now…) Now I’ll have to rebuild my credit and I won’t be able to buy for a few more years.
I got lucky and learned a hell of a lesson.
Some people go through this as a couple. I’m glad I didn’t have to put someone I loved through all the stress this short sale caused. It was my bad decision and I took the full weight of the fall…. without having to sell a kidney! If they invent time travel, I’d go back and tell my “five years ago” self that everything works out fine.