If you or any of your friends or family members are “under water” here in Florida, that is, your Florida property is currently worth less than the mortgage on it, please let us know – we may be able to help!

From Today’s Orlando Sentinel:

Mortgage meltdown

With Orlando No. 3 in nation in underwater mortgages, homeowners ponder leaving.

Mark and Susan Stone are weighing a decision being echoed across Central Florida: Should we stay in a home worth less than the mortgage – or walk away?

Orlando now leads Florida and most of the nation for underwater mortgages, according to a report released last week by CoreLogic Inc. Only Las Vegas and Phoenix surpass it. The California-based researchers determined that 55 percent, or 285,004, of the area’s mortgaged homes are worth less than their outstanding mortgage.

Industry experts describe the properties as being a “shadow inventory” of bank-repossessed properties and mortgages facing foreclosure.

Central Florida’s home-loan burdens come as no surprise in a metro area where housing stock has lost half its value in three years. Not only did buyers who purchased during the peak get stuck with upside-down mortgages, so did homeowners who refinanced based on values before the housing bubble burst starting in mid-2007.

That has led to more people walking away from their homes. But that decision comes with risks. The homeowner’s credit can be marred, and it could raise thorny ethical questions.

The terms “short sale,” “negative equity” and “strategic default” weren’t part of the Stones’ vocabulary a few years ago. Now, the Wall Streetish terms have become the creaking rafters of their lives.

“That was my dream kitchen. But it’s just a kitchen,” said Susan Stone, who lives in the home with her husband and two sons, ages 7 and 3. “Both kids were there since they were born. It’s all they’ve ever known. … We just want an affordable payment, or they [the bank] can have the house. It will sit vacant for who knows how long.”

Last week, the scales seemed to tip slightly toward struggling owners sticking it out in their homes. Existing-home sales prices for Orlando were up for the third straight month, with a median of $115,000, and foreclosure filings were down by a quarter from the previous month and the previous year.

It wasn’t all good news, though. Though the legal foreclosure filings for homeowners just entering the process had fallen, the pipeline of houses in the latter phases of foreclosure – when banks have taken over properties – had swollen for the fifth straight month.

“The fundamental issue still facing the fragile housing market is that backup of underwater mortgages,” said Daren Blomquist, spokesman for RealtyTrac, which researches foreclosure activity. “In our minds, those are definitely much more susceptible to foreclosure.”

The path leading to the Stones’ possible abandonment of their longtime canal-front home in the Isle of Catalina community in south Orlando took several sharp turns in recent years.

Mark Stone, 42, bought the home 12 years ago for $93,000. Then, about two years later, he took equity out of the appreciating house to open a bar and grill, but the 2004 hurricanes closed the adjacent hotel for six months, and the bar and grill was a casualty. The Stones then took out more equity to launch a vending business, which also failed.

The couple rallied, sometimes working back-to-back jobs, and refinanced their debt in 2006, but their adjustable-rate mortgage soon climbed to $1,850 a month. Even when Deutsche Bank agreed to modify the payments to $1,250 a month, they were slapped with higher premiums for flood insurance.

The payments became insurmountable, even when they cut their cable and necessities such as prescription medications. Finally, in January, their lender denied them any chance at a permanent mortgage modification.

Bottom line: They owe about $208,000, and the midcentury, three-bedroom house is listed for sale at $229,000, which would cover the debt plus real-estate costs. But even with the boat dock and granite counters, the house is unlikely to fetch that price because similar houses in the neighborhood have sold for about $160,000.

“Basically you have to look at it like a business would,” said Susan Stone, 37, a longtime corrections officer. A corporation would not continue to continue pay top dollar for an asset that had lost half its value, she added.

She has her list of pros and cons of walking away.

The case for walking away: She said the house is likely worth about $40,000 less than they owe on it. If they stayed, they would have to face some big-ticket expenses, such as a new roof. After the lender denied them a mortgage modification in January, they stopped making payments, and she estimated they could soon save $10,000 for a down payment on another house.

The case for staying: She said they would lose more than $30,000 they sank into the house for mold remediation and repairs after the 2004 hurricanes. And, most importantly, their credit would be damaged. But Stone noted that the house is in her husband’s name and her credit is intact, allowing her to buy their next house.

Rocky Stubbs, vice president of Homeownership Preservation for JP Morgan Chase, said homeowners need to explore their options before they undertake what he called a noncontested foreclosure. Homeowners who just walk away are still responsible for paying the debt, the lender’s legal bills, unpaid taxes and insurance.

“You start to traverse the ethical obligations of someone trying to keep, to the best of their ability, the terms of the contract,” said Stubbs, who oversees the lender’s Florida market, including two offices in Orlando. “But at the end of the day, there are cases when it’s ultimately unaffordable.”

Homeowners could pursue a short sale, in which the lender agrees to sell the property for less than the mortgage. The owner may still have to pay the debt, but that’s often negotiable. Another option is a deed in lieu of foreclosure. That alternative can relinquish borrowers from debt and allow them to avoid the public notoriety of a foreclosure.

Both of those options save lenders the time and expense of repossessing a house. Another course allows borrowers to lease their house from the lender, at market rates, after they surrendered the deed to the lender.

Mentally, Stone said, she’s ready to move on. She said they could purchase a house with lower monthly payments, higher-rated schools, fewer maintenance costs and closer to family in east Orlando. She said her family would miss living on the canal that feeds Clear Lake.

But what’s the point of living on the water, she asked, when you can’t afford any of the toys to enjoy it?

 
Please let us know if we or any of our Advisory Panel can assist you with any legal, sales, financial or other Florida property related advice.

We have, as you may know, a highly active Orlando-based Estate Agency specialising is assisting UK home owners in Florida.

Sincerely,

Bill Cowie  President

www.BritishHomesGroup.com

Kissimmee Office: 407 396 9914