My Mortgage is Upside Down! What Are My Choices?
Some of us late on our mortgages, some not. Either way, many of us are stuck in mortgages we hate. Many Americans were lured by the attraction of refinancing into low low teaser rates in the ever appreciating market of yesteryear. We were told that when the time came for the payments to go up, we'de simply refinance again and PRESTO! We be in the money again! Well now the banks are in trouble, and nobody is lending money. Our predatory loans are coming back to haunt us, putting incredible strains on our marriages and bank accounts. What are our choices? Who can we trust?
I feel like I'm on a big hamster exercise wheel, running to try to keep up, but not going anywhere. The way I figure it, it will take me a decade of juggling payments just to break even with my original home value when I took out the loan! I need help, and I need it now. So whether they negotiate a deal with me, or I have to walk away from the loans, I need to know all of the options and the possible ramifications of my actions. Sometimes I think they'd be more willing to deal, if I just go ahead and miss a payment!
For me, "the straw that broke the camel's back" was when the home value finally plummeted a $100000 loss from the when I had taken out the loan. If figured that if the market were to suddenly recover tomorrow (yeah right), and the appreciation was at a healthy 8% a year, it would take me 10 years just to break even! In other words, it would take me a decade just to get back to the original appraised value when I took out the loan. It just doesn't make sense to beat myself up for another 10 years, and my dreams of retiring early, are definitely out the door. So what's the best move?
That was the dilemma. My mortgage was upside down, and I was stuck in the loan. Perhaps you are in the same position, and owe way more on your house than its currently worth. I sought out and talked to several real estate attorneys, CPAs and realtors for some professional opinions and to get a handle on my options. Here is what they told me, and I hope this information can help you analyze your personal situation.
1. Keep juggling the payments and keep the faith! This option is really subject to your income and monthly expenses. The question for me was if I was willing to hack it for 10 years. Who knows though . . . . it may take longer depending on when the market actually begins to recover. In reality, it will probably take MUCH longer. You know what they say, "You can't time the market!"
2. Loan Modification is another option. This is a fairly painless process where you contact your bank and they send you a hardship package. This is a big stack of forms where you try to look as poor as possible, documenting your income and expenses. You simply send the package in and wait . . . . . and wait. . . . . .and wait. Finally they'll give you a reply with a possibly lowered interest rate and terms.
3. Short Sale: This is sort of a pre-foreclosure sale. Your late on a few payments, and the bank takes a serious look at you and threatens foreclosure. You find a realtor to represent you and present the hardship package. The realtor prices the home at a substantial discount and finds a buyer. They present the offer to the bank, and the bank usually accepts the deal, which is a positive situation for all. The bank is always interested in short sale instead of foreclosure as it saves them 10s of thousands of dollars in hassle and legal fees, and allow both parties to move on to new business. You should remember that there are still negative ramifications for short sales, even if less damaging than those associated with foreclosures and/or bankruptcy. However, short sales do carry less negative effects than foreclosures. Short sale sellers are widely seen as more credit worthy than foreclosed sellers. Case in point, Fannie Mae recently adjusted their guidelines to dictate only a two year waiting period for a short sale seller to buy another primary residence, while they extended the waiting period for foreclosures to five years.
4. Deed in Lieu of a Foreclosure. This is the second to the last resort for you, and a solution the bank doesn't particularly like. This is an option where you hand over the house and the bank has to sell it to recover their costs. As part of the deal, the bank let's you off the hook for the loan, and promises to never come after you for any outstanding debt. All of this is negotiated by your rep, and it's all settled by contract.
5. Foreclosure: This is the final option and if you like to go to court, then this is the option for you. In foreclosure, the lender first sends you a summons to appear or foreclosure complaint. The borrower responds to prevent foreclosure and explains the problems at a hearing. The borrower can this point you can still pay the full amount and get the house back during this redemption period. After the redemption period is over, the lender sells the property a public sale or auction and getting as much as they can (or settle for). Any excess goes to you, the original owner/borrower. If the sale amount is less than the loan amount, and in your case it probably will be, you will still owe the balance to the lender. This amount is determined as a result of deficiency proceedings.So as you can see, as we go down the line, the options get worse and worse! As far as my situation, I have to walk away from at least 3 houses. I'm losing a hell of a lot of money, but I'm getting my life back.
I feel like I'm on a big hamster exercise wheel, running to try to keep up, but not going anywhere. The way I figure it, it will take me a decade of juggling payments just to break even with my original home value when I took out the loan! I need help, and I need it now. So whether they negotiate a deal with me, or I have to walk away from the loans, I need to know all of the options and the possible ramifications of my actions. Sometimes I think they'd be more willing to deal, if I just go ahead and miss a payment!
For me, "the straw that broke the camel's back" was when the home value finally plummeted a $100000 loss from the when I had taken out the loan. If figured that if the market were to suddenly recover tomorrow (yeah right), and the appreciation was at a healthy 8% a year, it would take me 10 years just to break even! In other words, it would take me a decade just to get back to the original appraised value when I took out the loan. It just doesn't make sense to beat myself up for another 10 years, and my dreams of retiring early, are definitely out the door. So what's the best move?
That was the dilemma. My mortgage was upside down, and I was stuck in the loan. Perhaps you are in the same position, and owe way more on your house than its currently worth. I sought out and talked to several real estate attorneys, CPAs and realtors for some professional opinions and to get a handle on my options. Here is what they told me, and I hope this information can help you analyze your personal situation.
1. Keep juggling the payments and keep the faith! This option is really subject to your income and monthly expenses. The question for me was if I was willing to hack it for 10 years. Who knows though . . . . it may take longer depending on when the market actually begins to recover. In reality, it will probably take MUCH longer. You know what they say, "You can't time the market!"
2. Loan Modification is another option. This is a fairly painless process where you contact your bank and they send you a hardship package. This is a big stack of forms where you try to look as poor as possible, documenting your income and expenses. You simply send the package in and wait . . . . . and wait. . . . . .and wait. Finally they'll give you a reply with a possibly lowered interest rate and terms.
3. Short Sale: This is sort of a pre-foreclosure sale. Your late on a few payments, and the bank takes a serious look at you and threatens foreclosure. You find a realtor to represent you and present the hardship package. The realtor prices the home at a substantial discount and finds a buyer. They present the offer to the bank, and the bank usually accepts the deal, which is a positive situation for all. The bank is always interested in short sale instead of foreclosure as it saves them 10s of thousands of dollars in hassle and legal fees, and allow both parties to move on to new business. You should remember that there are still negative ramifications for short sales, even if less damaging than those associated with foreclosures and/or bankruptcy. However, short sales do carry less negative effects than foreclosures. Short sale sellers are widely seen as more credit worthy than foreclosed sellers. Case in point, Fannie Mae recently adjusted their guidelines to dictate only a two year waiting period for a short sale seller to buy another primary residence, while they extended the waiting period for foreclosures to five years.
4. Deed in Lieu of a Foreclosure. This is the second to the last resort for you, and a solution the bank doesn't particularly like. This is an option where you hand over the house and the bank has to sell it to recover their costs. As part of the deal, the bank let's you off the hook for the loan, and promises to never come after you for any outstanding debt. All of this is negotiated by your rep, and it's all settled by contract.
5. Foreclosure: This is the final option and if you like to go to court, then this is the option for you. In foreclosure, the lender first sends you a summons to appear or foreclosure complaint. The borrower responds to prevent foreclosure and explains the problems at a hearing. The borrower can this point you can still pay the full amount and get the house back during this redemption period. After the redemption period is over, the lender sells the property a public sale or auction and getting as much as they can (or settle for). Any excess goes to you, the original owner/borrower. If the sale amount is less than the loan amount, and in your case it probably will be, you will still owe the balance to the lender. This amount is determined as a result of deficiency proceedings.So as you can see, as we go down the line, the options get worse and worse! As far as my situation, I have to walk away from at least 3 houses. I'm losing a hell of a lot of money, but I'm getting my life back.
About the Author:
Follow my story!? Follow my story and see what happens at HouseShortSale.org. You'll learn lots and find resources for your own situation.
posted by Debt Consolidation Loan at
11:56 AM
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home