Home Equity Loan - Short sale of foreclosure? What is the best option?

Short sale of foreclosure? What is the best option?

I am aware that in California they passed a law about a year and a half ago where if your home foreclosures you are only legally bound to pay back the loan if you refinanced and took equity out not on your original purchase loan. That being said we can still make our payment but the neighborhood is getting really bad with gangs violence and break-ins. I am 20 something female whose husband works nights & I can't sleep at night anymore since this has started & I think it will only get worse on a house that is now worth 50K less than we paid for it. So would it be better to walk away or see if the lender will accept a short sale. In a foreclosure do they send you a 1099 to get taxed on the difference? Because of the area we live in our houses will be the last to have value return. So we'll be stuck there for the next 10 years probably & to top it off we have an ARM that we were told how easy it'd be to refinance before it resets so I fear 3 more years it will be too much $ anyways Thank you for the concern but I would rather have to live with a foreclosure for 7 years than live with not being able to sleep at night or every go out of town or in a worst case scenario live with being raped for the rest of my life. So please answer what I asked not tell me no don't do that. The values since the neighborhood is so bad are not likely to rise for another 6-7 years. I can't stay and wait for it to get worse and worse.

Public Comments

Short sale if preferable to a Foreclosure
It's a tough thing when your neighborhood watch group is decimated by foreclosure. You know, for $35/month you can have an alarm service monitor your house day and night. Usually with free installation. Why wreck your credit for a decade? Set up a web cam facing the places where the gangs gather. Put the images online and email the link to the cops. The squeaky wheel gets the grease where cops are concerned.
in my professional opinion, DO NOT walk away from the house. KEEP IT, and keep paying on it. IT WILL GROW IN value again, but not for 2-5 yrs. That is ok. IF you fear gangs, put a computer camera outside your home focused on a 180 degree spread. That way, the baddies will have no motivation to bother you. I can also guide you on how to rapidly pay down your mortgage, at no cost to you. [the trick is to split your mortgage payments into 2 payments; with the lender's permission. Doing so will reduce your long term payments from 30 to 23 yrs. make one payment on the first, the 2nd payment on the 15th. also, if you can, get a home occupation and put 1/2 of all that cash to paying off the home early. [its what most grandparents did 50 yrs ago!]
You may want to check again on the information you have concerning your liability for repayment of mortgage deficiencies. If the lender uses the conventional judicial (court) foreclosure process, they CAN seek a judgment for mortgage shortfalls. A 1099 may be sent only if the lender 'forgives' the deficiency and doesn't seek a judgment to recover it. As of last year, the federal government agreed to not make such 1099 income taxable, but California did not follow suit, making the 1099 income taxable for California state taxes. If you are financially able to make your payments, your lender may well NOT consider agreeing to a short sale of the property. You can only find that out by speaking with the holder of the mortgage.
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