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Homeowner told to ‘start missing payments’

“The house was $370,000. Zillow says it’s worth $245,000 with a mortgage of $340,000. So you do the math, it’s not pretty,” says a Seattle homeowner who is among the hundreds of thousands in Washington stuck with an underwater mortgage.

ForeclosureSignWe often read numbers that reflect how bad the housing situation is. In King County, 8,913 homes are in foreclosure, according to RealtyTrac. There are another 8,962 foreclosed homes in Pierce and Snohomish Counties combined.

Even more houses are worth less than the loan amount owed on the properties.

Behind each number is someone’s story.

In 2006, housing prices in the Seattle area were going “up and up and up,” recalls Tim Hunter. “I plopped some money down on a home in Bothell. I did what I could do to get in barely so it was a 6.25 percent interest rate. Interest only.”

Later he met a special woman. They got married and bought a house together in Seattle. It was the American dream. True love, two houses, and life was good.

Until the bottom fell out of the local housing market in 2009. Hunter was making an $1,800 a month payment on a house he didn’t need, but couldn’t sell. He rented it out, but didn’t break even. He tried to refinance with several companies.

“One guy kiddingly said, ‘do you think your renter could ever have a fire?’ And another said, ‘there are no programs out there for you, the only way you’re going to get help is to start missing payments,'” says Hunter.

His bank, Bank of America, wouldn’t help him with a refinance either.

“The bank has a sucker who’s paying 6.25 and not missing payments,” he says. “Why would they want to refinance?”

There are programs to help homeowners who are facing foreclosure. Part of the reason Hunter doesn’t qualify for those is that he’s not living in the home he wants to change the loan terms on.

“Here’s my problem. I’ve never missed a payment. There are programs for people who are six months behind or a year behind. I had somebody I knew who just decided to stop making payments because they knew even being so far behind on payments the bank wouldn’t be able to kick them out of their house for at least another year,” says Hunter. “The mentality that that’s the strategy, that’s the smart move, bugs me.”

His friends tell him to turn over the key to some agency and walk away from the house. It is tempting to miss a payment to get rid of his underwater mortgage, even though that would hurt his credit rating.

“Then I start doing the math in my head,” he says. “Let’s see I’m losing $6,000 a year, so in 10 years I’ll have lost $60,000. Is my credit rating worth $60,000? I don’t know.”

Hunter says he won’t default on his mortgage. He ethically couldn’t do that. He has another meeting with Bank of America later this month to try to re-negotiate his loan. He just wants it knocked down a bit so he could break even. By the way, he’s not asking for anyone’s sympathy, he knows there are many people in a situation just like his, or even worse.

He says, “The madness of it all is that for the people that are playing by the rules, or the way it should be played, there’s no help.”

(AP file photo of a Seattle foreclosed property)

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