Anyone dealing with an upside down mortgage?

[lowry075]

Hi, we bought our house in 2008 when the market was really high. Our family was growing and we needed more space.Anyhow, my house is now worth half of what we paid for it.

I doubt my house will ever acrue any equity. It's a bummer.

My DH gets really depressed about it. We can afford the monthly, but it's going to go up in a few years because we did a fool's loan.

Besides short sales, does anyone have any experience with dealing in modifying a loan, etc. I have heard some different ideas but I wanted to ask everyone on BYC for more perspectives.

 

[twentynine]

What kind of "fool's loan" we talking about.

Interest only payment?

ARM?

Did you take cash out of the mortgage?

 

[chickened]

I am not in one but work with people who are quite a bit lately as I liquidate their assets to help them make the payments and have leaned a few things about them, what exactly is your question?

 

[dewey]

Quote:
I can recommend "Take Charge America" and would strongly encourage any to contact this free (legit) agency to explore possible help available for any distressed homeowners...they do the paperwork filing for you and the repeated filings and repeated appeals and re-submissions on your behalf and keep right on top of every very frustrating step that's been created by the financial institutions. It's no easy battle for the homeowner even with the advocate, but it's virtually impossible without one. Take Charge America (specifically mention the "MakingHomeAffordable.gov" program but there may be other programs available) provides a free, private advocacy program to homeowners that finds any help available and secures modifications and refi's on the homeowners behalf. Their website is http://www.takechargeamerica.org/housing-counseling/foreclosoure-prevention/ phone is 623-302-7203 or 623.266.6382 or 866.987.2008.

Take Charge America is a free, legit, means of obtaining mortgage modifications via a non-profit agency that's approved by the U.S. Department of Housing & Urban Development (HUD) and a partner of the Homeownership Preservation Foundation (HPF). Those with health or income issues may qualify for certain programs regardless of whether it was a traditional or subprime loan. Be warned, something less than 1%-3% actually end up qualifying under those conditions set by the banks, but much of that is due in part to homeowners giving up during the very difficult process or missing filing deadlines (through no fault of their own). It's no easy task and what is offered in the end by the banks can be a hard pill to swallow.

I can say to avoid all for-a-fee offers of help. They promise results but they are all scams and ripoffs. Legit programs never charge the homeowner a penny, ever.

All that being said, my mortgage was a traditional prime qualifying fixed 30 year mortgage with a $40K cash down payment, which, ironically, come to find out is something that can actually work against a homeowner regarding a modification. I had a lot to fight for to modify my mortgage for reasons I'll mention later on. But some of my friends and family got into houses via subprime loans with zero or little down, so many of those in that situation with ARM's have/had nothing to lose and just walked away taking the credit hit if they were in a state that does not hold them liable for the remaining original mortgage balance after auction and/or bankruptcy.

Many people I know of with ARM's and other "creative" financing found their payments almost doubling or huge balloons coming due without any hope of paying them when the time arrived. Short sales are a huge hassle and can take forever, if at all, but SS's were in the best interest to many people I knew of, if that was possible to do in time. Many I know of lost all cash savings making anywhere from $1500-$10K+ per month mortgage payments while waiting for short sales that never came about. Keeping what cash one can hold onto is optimal and the only chance for survival for many once the writing's on the wall otherwise.

Just my thoughts, but my line of thinking is that if a loan modification, even with crazy costs tacked on to the back end of it, will allow one to live more affordably than the cost of renting after a forclosure (not easy to do once credit is shot and rental costs are crazy high), it'd be the way to go because of lowered monthly costs and the tax advantages of owning. It's true that being way upside down in a mortgage (with lowered payments) is unlikely to see any equity in our lifetime, but neither will renting gain any equity and with renting there's no tax advantages. Holding onto cash is usually in the best interest if the future's writing is on the wall...if all will be lost there's no reason to toss good money after bad.

I would suggest than anybody facing possible foreclosure for any reason seek out a qualified financial advisor/attorney sooner rather than later for their best interest in the long run.

eta: Personally, I hope all would seek qualified financial counseling before liquidating any assets to pay on a liability that is almost sure to be lost without a modification. Keeping what assets one can is usually advised in the face of such conditions.

My best wishes for us all.

 

[lowry075]

Twentynine- interest only
Chickened- it wasn't a question so much as wondering what others in similar situations had heard of doing to deal with this issue.
Dewey- thank you so much for the time you put into your reply. I will look into the company you mentioned. It means alot that you would give so much detail to try and help out.

I have known people who got ripped off from bad companies, short saled their home and are renting from a relative until their credit and debt recover. I also know someone who stopped making house payments and lived in his condo a year and a half before they sold it out from under him.

I don't want to be in either of those situations. I don't want anyone else to be in eithor of those situations either. I thought that since this seems to be a fairly common problem, and that others are most likely feeling overwhelmed and discouraged, it would be good to get good information out to anyone who was interested in reading this thread. There are so many companies who claim to want to help, but are only out to steal your money, I had hoped some of you would know of some ideas that were positive. It may be counting my chickens...but it seems like it may have worked.

 

[key west chick]

We are kinda in your boat, but we dont really own the house. We filed bancrupcy many years ago and lost our house. We had a good friend that also needed a place to stay. Since her credit was better than ours, she bought a little fixer upper that we all moved into, splitting rent and utilities. She moved out about 2 years ago and we have been paying for everything since then. But the fixer upper was a money pit and never got fixed. Now its not worth a pot to piss in. we have always wanted to buy land and have a small farm, and we have been looking. The friend really doesnt want this house. She owes so much on it that if she tried to sell it, she would end up owing more to the bank than when she bought it. I think when the time comes, she will simply walk away and let the bank have it and file bancruptcy also. Im sure thats not something you want to hear, but thats the advise of an attorney she talked to about the situation.

 

[chickened]

One thing I have learned is all these companies that sprang to life since the mortage crisis are doing it to make money and that money comes from someone either the lender, the buyer or the government. Be careful which ever one you choose, most want to have you sign your property over to them and then you pay a rent to the company and in the end they own your property and you still owe the note. If you hear something that sounds pleasant to you it most likely is intended to. I would just make your payment and stay away from these companies. If you do go to one of these rescue mortage companies make them be upfront on how to get out of the deals and the cost of doing so.
Quote:

 

[dewey]

Quote:
"Mortgage rescue" companies are scams regarding anything like that as far as "loan modifications."

A legit loan modification is simply the bank itself making an adjustment to their own original loan without any other outside parties being involved (UNlike reverse mortgages which are a different thing altogether). Legit non-profit organizations are simply free homeowner advocates working with the bank on behalf of the homeowner for a loan modification, and they are totally free, they do not have homeowners sign property over to them, and they do not charge nor collect rent. The government site MakingHomeAffordable.gov is legit.

Few homeowners qualify for loan modification under the conditions and programs that the government has in place. Even then, it's usually still up to the banks to choose if they want to participate in the programs. Even the banks that claim to participate often make it almost impossible for the homeowner to navigate through it on their own. I have seen banks extend pitiful offers to homeowners for modifications that would almost double the monthly payment. Some modification, eh?

Making Home Affordable (MakingHomeAffordable.gov) is the best starting point for anybody wondering if there's a program that might help them (and to avoid scammers).

 

[cassie]

I am not sure you would want to do this, but I just the bank foreclose. In my case the decision was easy. My husband died, I could not make the payments without his income, there was far more owed on the property than it was worth so I couldn't sell it, and the bank would not talk to me because the loan was in his name. So I let them have it. I was able to stay on the property for a full year after I quit making payments. I think there are programs out there to lower the principal owed. Beware of any business that contacts you rather than the reverse.

 

[chickened]

Another thing that has changed in the banking system is when Obama allowed banks to invest money from the Federal Reserve in the stock market was increased to 100% from a lesser percentage as previously allowed, I cannot remember the percentage but now banks can deny credit to borrowers for a smaller return but a safer one than home loans from the stock market. That I believe is why banks will not loan.
Quote:
"Mortgage rescue" companies are scams regarding anything like that as far as "loan modifications."

A legit loan modification is simply the bank itself making an adjustment to their own original loan without any other outside parties being involved (UNlike reverse mortgages which are a different thing altogether). Legit non-profit organizations are simply free homeowner advocates working with the bank on behalf of the homeowner for a loan modification, and they are totally free, they do not have homeowners sign property over to them, and they do not charge nor collect rent. The government site MakingHomeAffordable.gov is legit.

Few homeowners qualify for loan modification under the conditions and programs that the government has in place. Even then, it's usually still up to the banks to choose if they want to participate in the programs. Even the banks that claim to participate often make it almost impossible for the homeowner to navigate through it on their own. I have seen banks extend pitiful offers to homeowners for modifications that would almost double the monthly payment. Some modification, eh?

Making Home Affordable (MakingHomeAffordable.gov) is the best starting point for anybody wondering if there's a program that might help them (and to avoid scammers).