When you walk away from a mortgage and return your keys to the bank - what do they do to you?

We were approved for a less expensive modular home and made a good downpayment so that we could lower our style of living and reduce debt as part of prepping for my husband's retirement.

Now we can not sell our historically desireable condo - really well built and usually used by wealthy people with huge homes to retire TO when they downsize - and the only one of it's type around.

Now the sale prices are going down like the well-quoted "fire sale" prices and while we're willing to take less profit, even perhaps little or no profit just to get out, what if we can't sell?

I've heard of people mailing in their keys and just leaving but what I'm wondering is what happens to those people?

Would the bank come after our new mod home as payment and then we'd have nothing?

Should we default on the new mod home and lose our hefty deposit and stay put and pray husband keeps his job?

Any advice at all?

(Doesn't mean I'll take it - just wondering what others have to say and think)

Is that supposed to be Paulson and Bernanke?

If you send them the keys and they sell for less than what you owe, then you are on the hook for the difference.

Past that, I'd say speak to a professional. Sounds like you might need more than one (Lawyer, etc.)

for the new loan on the new house. You have to sign documents at closing that nothing has changed from when you applied, and if you sign this after defaulting, that would be fraud, and you could suffer criminal as well as financial penalties.

If you are able to qualify for both loans at the same time, you can sign the new documents and walk away from the old mortgage. Your income would have to be large enough to cover both mortgage payments for you to even qualify, and you'd likely get a higher interest rate on the second loan (if you have that much income, you shouldn't be commiting credit fraud in the first place, though). But you'd already have the second loan, so you wouldn't have to worry about fraud (unless you lied on your credit app about income), or the ten year hit on your credit rating. Don't expect to get a loan on anything else for the next ten years, though.

Finally, if the bank forecloses (even if you mail them your keys, that's what's happening) and they sell the property for less than you owe, you will be responsible for the difference. What they can do to collect depends on the state. In Texas, if you have a homestead declaration on your house, then it can't be siezed to pay any debt other than the mortgage on the house. If it's not your homestead, they can sieze it through the courts to pay your debts. But that varies by state, and exactly how they can sieze your property and under what conditions varies.

It's a bad idea, if it's just a financial decision. It will ruin your credit for the next ten years, lead to possible siezure of all your property to pay any losses the bank suffers, and could result in legal penalties including time in jail if you are lying on your credit app. You'd do better to sell the property at a loss or lease it at a loss, or even hold it until values rise again.

As for the new home deposit, if you could find some way to negate that contract through their fault, you could get your money back. If you've got a real estate agent (and if you don't, why?) or an attorney, have them read the contract for ways out. Sometimes it is very simple--the sale is contingent on you getting credit, for instance, and since you can't sell your condo, you can't qualify for credit--some contracts are written so that this would allow you to break it with impunity. You may or may not lose ernest money, again depending on how the contracts are written.

But any advice you get here is a poor substitute for an attorney, so if you are really considering this option, contact one. Contracts are not all the same.

And I will consult with an attorney. We do already beieve we have a reason to negate the new contract. I was just being stubborn cause we really would rather move there. Leasing the condo at a loss may be a consideration.
Tx again.

Leasing the condo could be an excellent idea, if you can afford it. When the market climbs again, the condo's value will increase. Figure now you have no equity, even a loss. In a few years, maybe sooner, you will have some equity, and all you'll have paid in investment is the difference between your note and the rent--plus any expenses and downtime. That's likely to be an incredibly high yield on that investment.

So what you are looking at now is starting from zero, and either selling and getting no return, or renting and getting the full increase in equity when the market rebounds for the cost of renting expenses--downtime and loss on the monthly note included. That's probably a higher return than you'd get for that same amount of money in any other way.

Of course, landlording has risks and expenses, and it's work, so maybe you'd rather be out of that, but you're actually in a pretty good situation for a good investment, it sounds like.

As for the loan on the new house, if you can line up a renter for the condo you can consider that as income, so your debt load would still be low for the new loan, so you'd get better terms. My real estate agent once suggested we line up a fake renter to sign a fake lease, to "anticipate" the income we'd get when we did find a renter. We sold the property before that was necessary, but I got the idea that this wasn't an uncommon tactic.

Just more ideas, because I'm bored and don't feel like exercising, which is what I should be doing. :)

to choose helping others over mundane tasks like exercising :hug:
I know that feeling way too well!

Interesting info about the fake renter ploy - I'm sure you're right, that it's not uncommon.

for enough to cover the mortgage payments.

didn't want the hassle but it appears to be a lesser hassle at this point.