Subprime And Upside Down
Cheryl is having a big problem with her subprime mortgage, and worries about what to do with the company she's dealing with.
QUESTION: Cheryl and her husband are upside down in their subprime mortgage. What if they can’t get the overage without recourse? Dave gets frustrated when he finds out which company is responsible for their debt consolidation and tells Cheryl that they have to push them to negotiate.
ANSWER: You’re going to end up paying this over time, which is stupid tax. If they won’t do it without recourse, you’ll sign a note for the difference and pay payments for the amount that you’re in the hole for the difference on the loan. You have a couple of options. One of them is that if they won’t settle it without recourse, which they probably will because they realize how big a hurt they have on this deal; if they won’t do that and you walk away, they will do the foreclosure routine and they’ll come after you, but you can settle that for pennies on the dollar. The second option is just a partial recourse.
This is the beginnings of a negotiation, and you’ll have to beat on these people. This is a $70,000 hobby you have now of talking to these people. You have to get them to understand that you have no money, and the house isn’t worth enough. Tell them that you can play nice and sign the note for a portion of it, or you can do it not nice where they take the house from you because you can’t pay it, and in that case they’ll have to chase you for the difference. You need to work this out. Keep talking to them about this. Get up into the management to talk about this.