Should I walk away from this mortgage?
November 26, 2013 3:47 PM Subscribe
My ex-boyfriend and I own a home together that he is currently still living in. We're underwater on the mortgage and he doesn't make enough to cover the whole payment. I've been paying half of the mortgage since the breakup in order to buy time and figure out a plan. But I'm at the end of my rope both emotionally and financially, and I'm wondering if there are any options left or if I should just stop paying.
The breakup was very nasty and we're not really on speaking terms. Early on we tried to discuss options but he refused to entertain selling or renting it out. He's also refused to take full responsibility for the mortgage even though he has full use of the house, claiming that I have an obligation. (Well, I do, but it's to the bank, not to him.) So, I've been paying half the mortgage for the last 9 months in the hopes that he could refinance in his own name and spare my credit.
Since the house is so far underwater and we weren't married, our only hope seemed to be a HARP refinance. He applied in his own name recently, but I don't see how it's going to fly - from what I've read, he would need proof he was making the payments all by himself for the last 12 months, and I don't think he makes enough to qualify anyway.
At this point I'm ready to just walk away and tell him I'm done paying as of December 31, which is almost assuredly going to mean foreclosure unless he faces facts and agrees to sell or rent it out. It's both a financial issue because I'm scraping bottom, and also an emotional issue because he's holding me hostage and this is the last thing to do before I can be free of him. I know the foreclosure will ruin my credit but I just can't see any other way out. Is this a stupid idea? Are there any other ideas I should pursue? I talked to an attorney and he didn't have any magic ideas. I'm in Minnesota. Thanks!
The breakup was very nasty and we're not really on speaking terms. Early on we tried to discuss options but he refused to entertain selling or renting it out. He's also refused to take full responsibility for the mortgage even though he has full use of the house, claiming that I have an obligation. (Well, I do, but it's to the bank, not to him.) So, I've been paying half the mortgage for the last 9 months in the hopes that he could refinance in his own name and spare my credit.
Since the house is so far underwater and we weren't married, our only hope seemed to be a HARP refinance. He applied in his own name recently, but I don't see how it's going to fly - from what I've read, he would need proof he was making the payments all by himself for the last 12 months, and I don't think he makes enough to qualify anyway.
At this point I'm ready to just walk away and tell him I'm done paying as of December 31, which is almost assuredly going to mean foreclosure unless he faces facts and agrees to sell or rent it out. It's both a financial issue because I'm scraping bottom, and also an emotional issue because he's holding me hostage and this is the last thing to do before I can be free of him. I know the foreclosure will ruin my credit but I just can't see any other way out. Is this a stupid idea? Are there any other ideas I should pursue? I talked to an attorney and he didn't have any magic ideas. I'm in Minnesota. Thanks!
Before you just accept the inevitability of foreclosure, I would suggest discussing the situation with your bank and a lawyer. There may be options you're not aware of that could preserve your credit. Can't hurt, and might help.
posted by kythuen at 3:58 PM on November 26, 2013 [10 favorites]
posted by kythuen at 3:58 PM on November 26, 2013 [10 favorites]
Are you paying your half directly, or turning the money over to him & assuming he is paying it?
posted by tilde at 4:25 PM on November 26, 2013 [2 favorites]
posted by tilde at 4:25 PM on November 26, 2013 [2 favorites]
Response by poster: tilde: He puts his half in an old joint account of ours and I make the online payment.
posted by fanta_orange at 4:35 PM on November 26, 2013 [2 favorites]
posted by fanta_orange at 4:35 PM on November 26, 2013 [2 favorites]
You need to find a reputable real estate attorney. Like, yesterday.
posted by jeffamaphone at 4:39 PM on November 26, 2013 [1 favorite]
posted by jeffamaphone at 4:39 PM on November 26, 2013 [1 favorite]
Get in a time machine and see a lawyer yesterday. Bankruptcy may be an option, but this will not be a DIY thing for you.
posted by Ruthless Bunny at 4:40 PM on November 26, 2013 [1 favorite]
posted by Ruthless Bunny at 4:40 PM on November 26, 2013 [1 favorite]
My boyfriend had this happen with his ex. He didn't choose to do it, he just didn't know she'd stopped paying the mortgage until he got a frantic phone call from her and a letter from a lawyer, by which point it was too late to do anything (and the house was about 1500 miles away from him at this point). That was about 7 years ago and his credit took a hit but it wasn't a catastrophe. As long as you're not looking to buy a home/car in the near future, it ain't the end of the world.
posted by jabes at 4:49 PM on November 26, 2013
posted by jabes at 4:49 PM on November 26, 2013
Best answer: I wouldn't walk away until he hears back from the refinance people (assuming that that will happen within the next 2-3 months), since that's your only hope of the problem going away by itself.
If that doesn't work out, I'd lay it out to him that he can either move out within 1 month and rent the house out, or you're going to stop paying the mortgage effective immediately. Hopefully he moves out at the point, but if he doesn't I'd sort thinking about how much it's worth to you to avoid a foreclosure on your credit. Because the only other option at that point is to offer to split the post-rent mortgage unevenly. ie, if the mortgage is $1500/month and rent would bring in $1000/month, then you agree to pay $350 of the remainder and he pays $150. It sucks and you shouldn't have to do it, but you'd still be paying $400 less than before and you'd avoid ruining your credit. I definitely wouldn't suggest this to him unless the threat of foreclosure doesn't do anything.
posted by matildatakesovertheworld at 4:52 PM on November 26, 2013
If that doesn't work out, I'd lay it out to him that he can either move out within 1 month and rent the house out, or you're going to stop paying the mortgage effective immediately. Hopefully he moves out at the point, but if he doesn't I'd sort thinking about how much it's worth to you to avoid a foreclosure on your credit. Because the only other option at that point is to offer to split the post-rent mortgage unevenly. ie, if the mortgage is $1500/month and rent would bring in $1000/month, then you agree to pay $350 of the remainder and he pays $150. It sucks and you shouldn't have to do it, but you'd still be paying $400 less than before and you'd avoid ruining your credit. I definitely wouldn't suggest this to him unless the threat of foreclosure doesn't do anything.
posted by matildatakesovertheworld at 4:52 PM on November 26, 2013
Are you planning to give him the house once the mortgage is paid? How long is the mortgage? Another 20 years or so? Are you going to hand over tens of thousands of dollars for the next two decades? At some point, you're going to stop paying and take the foreclosure. Do that now, before you toss another dollar into a house you don't own and will never own.
This situation doesn't get any less crappy by stringing it out for months or years. Take the hit. Rebuild your credit and move on with life.
posted by 26.2 at 5:08 PM on November 26, 2013 [6 favorites]
This situation doesn't get any less crappy by stringing it out for months or years. Take the hit. Rebuild your credit and move on with life.
posted by 26.2 at 5:08 PM on November 26, 2013 [6 favorites]
Often, there aren't any magic ideas. (Wait until the IRS threatens to chain the doors on your business shut. )
Lots missing in your description that may be relevant, but the salient points are that you are in a business relationship with someone you shouldn't be, you have made a series of bad decisions, and (I presume) you are youngish...20's? Late?
If you damage your credit, yes, you'll possibly suffer. You will survive and can rebuild it. Even bankruptcy doesn't last forever. If you've got an uncooperative 'partner' who won't entertain alternatives, your obligation to him anyway, is over. IMO, of course. It's a morality thing, not a legal thing. At a point, you have to draw a line.
Is there a win-win for you both? Maybe. Is it big enough to pursue? Probably not.
I'm in the 'stop paying' camp on this one. You have given him (by your brief account) a large gift in this interim period, but at this point, you're being exploited.
Aside: I've often said I'd marry people I wouldn't go into business with. This act of joining in a 30-year business relationship when you were not equipped for a much shorter emotional one is what you really need to work on. What led to it and how can you avoid it again? You can work around one big mistake like this, but two will do you in. Love/lust/infatuation are powerful inducements to bad decisions. At the very least, rent for a few years together first.
posted by FauxScot at 5:10 PM on November 26, 2013 [4 favorites]
Lots missing in your description that may be relevant, but the salient points are that you are in a business relationship with someone you shouldn't be, you have made a series of bad decisions, and (I presume) you are youngish...20's? Late?
If you damage your credit, yes, you'll possibly suffer. You will survive and can rebuild it. Even bankruptcy doesn't last forever. If you've got an uncooperative 'partner' who won't entertain alternatives, your obligation to him anyway, is over. IMO, of course. It's a morality thing, not a legal thing. At a point, you have to draw a line.
Is there a win-win for you both? Maybe. Is it big enough to pursue? Probably not.
I'm in the 'stop paying' camp on this one. You have given him (by your brief account) a large gift in this interim period, but at this point, you're being exploited.
Aside: I've often said I'd marry people I wouldn't go into business with. This act of joining in a 30-year business relationship when you were not equipped for a much shorter emotional one is what you really need to work on. What led to it and how can you avoid it again? You can work around one big mistake like this, but two will do you in. Love/lust/infatuation are powerful inducements to bad decisions. At the very least, rent for a few years together first.
posted by FauxScot at 5:10 PM on November 26, 2013 [4 favorites]
He's also refused to take full responsibility for the mortgage even though he has full use of the house, claiming that I have an obligation.
If you are a co-obligor on the promissory note, he is 100% correct. I have seen hundreds of promissory notes and mortgages over the course of my practice and haven't yet seen the one that has an exception for lack of use of the property that secures the note. You would still have to pay the note if the house burned to the ground. A lot of people have a hard time understanding that paying a note secured by a house is not "rent" for living in the house. Rather, you borrowed a lot of money so you could buy the house, and as part of the deal you made with the bank, they get to take the house away if you don't pay as promised. If you signed a note with a 30-year term, for example, that means you intended to be an obligor for 30 years. (unless you could satisfy the note sooner e.g. buy selling the house) Your payments to date haven't been a "gift" to the ex or the bank. It was what you had a legal duty to do.
I won't tell you whether it is a good idea for you to keep paying your obligations or not because that would be legal advice, but it should be noted that Minnesota does allow for deficiency judgments. That means that the lender could, if it chooses, sue you and the ex-boyfriend if the parcel sells for less than full market value at auction.
I think you both need to consult with a foreclosure defense attorney. Despite being exes to each other, you are still in a legal relationship because you are both obligors on the same note. (separate lawyers might be needed later if you two decide to unnecessarily give each other a hard time about this)
posted by Tanizaki at 5:18 PM on November 26, 2013 [3 favorites]
If you are a co-obligor on the promissory note, he is 100% correct. I have seen hundreds of promissory notes and mortgages over the course of my practice and haven't yet seen the one that has an exception for lack of use of the property that secures the note. You would still have to pay the note if the house burned to the ground. A lot of people have a hard time understanding that paying a note secured by a house is not "rent" for living in the house. Rather, you borrowed a lot of money so you could buy the house, and as part of the deal you made with the bank, they get to take the house away if you don't pay as promised. If you signed a note with a 30-year term, for example, that means you intended to be an obligor for 30 years. (unless you could satisfy the note sooner e.g. buy selling the house) Your payments to date haven't been a "gift" to the ex or the bank. It was what you had a legal duty to do.
I won't tell you whether it is a good idea for you to keep paying your obligations or not because that would be legal advice, but it should be noted that Minnesota does allow for deficiency judgments. That means that the lender could, if it chooses, sue you and the ex-boyfriend if the parcel sells for less than full market value at auction.
I think you both need to consult with a foreclosure defense attorney. Despite being exes to each other, you are still in a legal relationship because you are both obligors on the same note. (separate lawyers might be needed later if you two decide to unnecessarily give each other a hard time about this)
posted by Tanizaki at 5:18 PM on November 26, 2013 [3 favorites]
Ideally, if he wants to keep the house he needs to buy you out. Even if you don't have any real equity, I assume you helped put down the down payment, even if you want to chalk the mortgage up to basically the "cost of living" for the years you lived there. A real estate attorney might help you sort this out.
Because he's in the house, he has some other options that you don't have. It isn't necessarily "sell or leave and rent". He could, for example, get a roommate (or two) and have the roommate pay rent. Because he's in the house he's got all the options here.
Giving him 30 days notice (Dec 31) is far more courteous that I would have been, frankly.
posted by anastasiav at 5:18 PM on November 26, 2013 [2 favorites]
Because he's in the house, he has some other options that you don't have. It isn't necessarily "sell or leave and rent". He could, for example, get a roommate (or two) and have the roommate pay rent. Because he's in the house he's got all the options here.
Giving him 30 days notice (Dec 31) is far more courteous that I would have been, frankly.
posted by anastasiav at 5:18 PM on November 26, 2013 [2 favorites]
Don't overlook the option of renting the place out, and neither of you living there. It could result in a financial wash (you're neither making nor losing money each month), and buy you time to regroup and figure out a better option.
posted by NotMyselfRightNow at 5:34 PM on November 26, 2013 [2 favorites]
posted by NotMyselfRightNow at 5:34 PM on November 26, 2013 [2 favorites]
Go see a lawyer right away. You might be able to arrange to have him move out and then either you move in and get roommates or you both live out of it and rent it out for now. Please investigate all these options and any others the attorney mentions before defaulting.
posted by Chaussette and the Pussy Cats at 6:14 PM on November 26, 2013
posted by Chaussette and the Pussy Cats at 6:14 PM on November 26, 2013
I see that you've already seen an attorney who had no magic ideas, but was that attorney someone who does a lot of work with foreclosures? Your situation is, unfortunately, not unique these days - there are a lot of underwater mortgages, a lot of foreclosures, and it's not even that unusual to be in this situation with an ex. I would talk to an attorney who really, really knows this area of the law before you decide what to do. The attorney probably won't find a solution to the problem, but s/he should be able to lay out the different options you have and the short- and long- term consequences of each of your options so that you can make an informed decision.
posted by insectosaurus at 6:35 PM on November 26, 2013
posted by insectosaurus at 6:35 PM on November 26, 2013
nthing lawyer (of which I am not one, and TINLA)
One thing that you may not have considered is that (depending on your jurisdiction and the actual facts of your case) as a joint owner of the house you may be entitled to rent from ex-bf because you do not have use of the property. If he is unable to continue to pay his half of the mortgage plus a market rent to you you may be able to evict him (at which point it would be on you to find renters so that you can pay him rent).
I have no idea if that would actually work in practice, but it's just an example of the type of option that you'd be foregoing if you just walked away.
posted by sparklemotion at 7:38 PM on November 26, 2013 [1 favorite]
One thing that you may not have considered is that (depending on your jurisdiction and the actual facts of your case) as a joint owner of the house you may be entitled to rent from ex-bf because you do not have use of the property. If he is unable to continue to pay his half of the mortgage plus a market rent to you you may be able to evict him (at which point it would be on you to find renters so that you can pay him rent).
I have no idea if that would actually work in practice, but it's just an example of the type of option that you'd be foregoing if you just walked away.
posted by sparklemotion at 7:38 PM on November 26, 2013 [1 favorite]
Past the advice to see another lawyer, a real estate lawyer, I would probably tell him that it's his choice whether he buys you out or you rent out your half of the house. Him simply exercising the coward's veto isn't a solution, and he's ignoring that you have a half interest in this home.
But sparklemotion's point about him owing your rent is another good one to consider.
posted by klangklangston at 8:51 PM on November 26, 2013 [2 favorites]
But sparklemotion's point about him owing your rent is another good one to consider.
posted by klangklangston at 8:51 PM on November 26, 2013 [2 favorites]
If you are a co-obligor on the promissory note, he is 100% correct. I have seen hundreds of promissory notes and mortgages over the course of my practice and haven't yet seen the one that has an exception for lack of use of the property that secures the note... A lot of people have a hard time understanding that paying a note secured by a house is not "rent" for living in the house. Rather, you borrowed a lot of money so you could buy the house, and as part of the deal you made with the bank, they get to take the house away if you don't pay as promised.
People, she said in the question that she knows she has an obligation... to the bank. Her ex is obviously being a huge exploitative douchebag about this. Who the hell knows why he think she has an obligation to him to effectively (not literally, as it is not rent) keep paying his rent instead of working together to dissolve the bond now that they no longer live there as a couple.
I think you should speak to a lawyer before you choose a course of action-- but discuss ceasing to pay with the lawyer and see what he/she thinks.
posted by stoneandstar at 9:41 PM on November 26, 2013
People, she said in the question that she knows she has an obligation... to the bank. Her ex is obviously being a huge exploitative douchebag about this. Who the hell knows why he think she has an obligation to him to effectively (not literally, as it is not rent) keep paying his rent instead of working together to dissolve the bond now that they no longer live there as a couple.
I think you should speak to a lawyer before you choose a course of action-- but discuss ceasing to pay with the lawyer and see what he/she thinks.
posted by stoneandstar at 9:41 PM on November 26, 2013
all of this hinges on the specifics of the effects of one action or another, and how it applies to your current goals for the future. this is why you need a lawyer, and not advice from people on the internet.
that said, my understanding is that you don't start really getting negatively impacted if you stop paying for 60 or 90 days. so, take the next mortgage payment and put it towards a good consultation.
if you're worried about the moral thing do to, remember: the bank is suppose to be the expect in this, and they entered into a business relationship with you. if the bank takes the house it's not a failure on your part, it's simply fulfilling the contract.
posted by cupcake1337 at 9:54 PM on November 26, 2013 [1 favorite]
that said, my understanding is that you don't start really getting negatively impacted if you stop paying for 60 or 90 days. so, take the next mortgage payment and put it towards a good consultation.
if you're worried about the moral thing do to, remember: the bank is suppose to be the expect in this, and they entered into a business relationship with you. if the bank takes the house it's not a failure on your part, it's simply fulfilling the contract.
posted by cupcake1337 at 9:54 PM on November 26, 2013 [1 favorite]
Is it un-possible to find a tenant to rent out one of the rooms as a way to help over your half of the mortgage? I mean, it's 50% your house.
posted by Annika Cicada at 9:56 PM on November 26, 2013
posted by Annika Cicada at 9:56 PM on November 26, 2013
Airbnb, anything?
posted by Annika Cicada at 9:57 PM on November 26, 2013
posted by Annika Cicada at 9:57 PM on November 26, 2013
You need a lawyer to force him to sell or refinance (force meaning stern letters and such with legal consequences if he ignores them). You also need to do paperwork like giving him a quitclaim deed so he has the option to refinance.
posted by meepmeow at 10:12 PM on November 26, 2013
posted by meepmeow at 10:12 PM on November 26, 2013
OP: Early on we tried to discuss options but he refused to entertain selling or renting it out.
This seems like a big part of your problem. You aren't on speaking terms, at all? Is there a mutual friend who could sit down with the two of you and mediate? Or just convince him that he absolutely needs to think about renting it out, or things are going to get worse?
posted by coupdefoudre at 6:38 AM on November 27, 2013
This seems like a big part of your problem. You aren't on speaking terms, at all? Is there a mutual friend who could sit down with the two of you and mediate? Or just convince him that he absolutely needs to think about renting it out, or things are going to get worse?
posted by coupdefoudre at 6:38 AM on November 27, 2013
As the OP knows, it is impossible to rent out a house or a room without the cooperation of the primary resident!
I agree that you need to talk to a real estate lawyer. IANYL TINLA. You got into a really serious legal and financial obligation by buying the house together and it's absolutely worth the money for a good lawyer to help you figure out how to make a clean break. The last thing you want is to have this come back and bite you in an unexpected way 2 or 3 or 10 years down the road.
A lawyer may also know options you do not - it sounds like your ex won't do anything you can't force him to do and it may be possible to get the court to order a sale.
So yes, legal consult and maybe even retainer - ASAP! Yesterday! Making of serious decisions with long term consequences - with all due deliberation.
posted by Salamandrous at 7:49 AM on November 27, 2013
I agree that you need to talk to a real estate lawyer. IANYL TINLA. You got into a really serious legal and financial obligation by buying the house together and it's absolutely worth the money for a good lawyer to help you figure out how to make a clean break. The last thing you want is to have this come back and bite you in an unexpected way 2 or 3 or 10 years down the road.
A lawyer may also know options you do not - it sounds like your ex won't do anything you can't force him to do and it may be possible to get the court to order a sale.
So yes, legal consult and maybe even retainer - ASAP! Yesterday! Making of serious decisions with long term consequences - with all due deliberation.
posted by Salamandrous at 7:49 AM on November 27, 2013
Walking away from an underwater mortgage isn't as simple as you make it out to be ( or hope it will be). A foreclosure and sale of the property will not cover the amount of the note, and the bank could go after you (and him) for the remainder. It is obvious from your post that he will not be able to refinance the note alone, and even convincing him to sell may not cover the note, so you need to start talking to the bank about short-selling.
posted by Gungho at 9:32 AM on November 27, 2013
posted by Gungho at 9:32 AM on November 27, 2013
Having been through foreclosure I cannot recommend it to anyone. If you must foreclose, consult a bankruptcy attorney to help you protect yourself from the bank coming after you.
A short sale is a Hail Mary pass.
posted by Annika Cicada at 10:24 AM on November 27, 2013
A short sale is a Hail Mary pass.
posted by Annika Cicada at 10:24 AM on November 27, 2013
You may find that your ex will become more cooperative with selling or renting out the house once you stop paying half of the mortgage. So you could discontinue your payments not with the intention of foreclosure (which will take several months anyway), but with giving yourself some leverage.
posted by Asparagus at 11:16 AM on November 27, 2013
posted by Asparagus at 11:16 AM on November 27, 2013
I co-bought with a 'friend' (some friend) and she refused to cooperate with the sale etc and effectively defrauded me of my lifesavings. The details are too painful to write years later and I still don't really trust people. F**k him. I'm so sick of parasitic people taking advantage of the honest and well intended. I regret not stopping paying the minute I realised she was fleecing me. Check out, for yourself, what it means for your credit record.. it you're black listed for a few years maybe you can stand that? I'm guessing the idea of another mortgage in the near future would scare the bejeebys out of you anyhow...
In solidarity TT
posted by tanktop at 1:18 PM on November 27, 2013
In solidarity TT
posted by tanktop at 1:18 PM on November 27, 2013
Response by poster: Hi everyone, I wanted to post a followup. The ex actually managed to get approved for his refinance without me, and he is closing tonight. Hooray! Thanks for all of your advice, I was so frustrated and at the end of my rope when I posted this but I just needed to hang in there a little longer.
posted by fanta_orange at 12:48 PM on January 30, 2014 [1 favorite]
posted by fanta_orange at 12:48 PM on January 30, 2014 [1 favorite]
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What agreement did you make prior to buying the house together? I suspect you didn't make any, which means there's no reason for him to take full responsibility of the mortgage. If you did make an agreement, follow it here.
At this point I'm ready to just walk away and tell him I'm done paying as of December 31
Why wait until December 31st? If you're going to default on your mortgage, there's no reason to wait to do it; you might as well save yourself one mortgage payment.
I know the foreclosure will ruin my credit but I just can't see any other way out. Is this a stupid idea?
That sounds like the most reasonable thing to do given your situation. There's no reason to put good money towards bad and you aren't getting anything out of the situation. Your credit is valuable, but it doesn't pay your rent. Money does. You need more of the latter and even if it means less of the former.
posted by saeculorum at 3:53 PM on November 26, 2013 [3 favorites]