Upcoming Foreclosures

Short Sale Vs. Foreclosure Vs. Keeping the house?

So here's the situation: My husband and I bought a house with an FHA loan July 2008. It is our first home. We were both working at the time and could afford the house. I quit my job in January this year so I could stay home with my kids and my husband was laid off from his job the next month. He was out of work till June which caused us to get behind on our mortgage. We are only caught up to July on our payments. I called HUD for assistance before we even fell behind one payment. I submitted an application for the modification in April with our previous lender who was Taylor Bean & Whitaker. They went under a few months ago so our loan was transferred to Bank of America and when I called to check on the status of our modification they said they had nothing on record showing we submitted an application so they made me resubmit one. I have since called and checked on the status of the application several times and have been told every time that it is still in review. I don't understand what's taking so long and I'm tired of being shoved off every time I call. No one wants to help. I know with us having an FHA loan we should be getting more help than we are getting. We received a letter of default in September and it expired in October so I know the next step is foreclosure. My question is would it be better to walk away from the house and just let it go into foreclosure, do a short sale, or try to keep it and wait to see if the modification comes through. The only thing is, our house note would have to drop at least 400 dollars a month so that we could afford it because my husband isn't making what he made when we bought the house. Also he was just told today that he would be getting laid off from this job January 1st. He works construction.We can't afford an attorney or we would probably go that route. We are young so we don't know what to do. Any advice would be appreciated.

Public Comments

1. FHA loans are guaranteed by the U.S. government. If you "walk away" or allow it to be foreclosed AND if you live in a state that permits "deficiency judgments", then you will owe the U.S. government for the unpaid amounts. Likewise, if you live in a state that allows deficiency judgments, then the U.S. Government has absolutely no incentive to approve a modification or a short sale. I would discuss your options with a bankruptcy attorney immediately.
2. How about you going back to work? You said you QUIT your job but you never said if you went back to work, you might have avoided this whole situation. Why would you quit your job just after getting home loan anyway?