I am upside down on my mortgage what can I do?
I am upside down on my current home.
Can I bring it down to fair market Value?
The answer to that is Maybe. It depends on your circumstances. Typically if you just have one loan on your property the chances of you reducing the principle down are not very good. Most banks will not reduce the first lien on a home.
EXCEPTIONS for properties with one loan.
An investment property or non-owner occupied property.
UNDER OBAHMA’s Home Affordability Plan Principal forgiveness can be used on a stand alone basis before any step in the Standard WaterFall Process. This is the process used in calculating your income to reduce your payment down to 31% of your gross income by working under the parameters of this program. Otherwise known as a front end ratio. IF it is determined that in order to drop you down to a 31% by reducing the principle, AFTER they have dropped you down to the 2% interest rate AND extended your mortgage terms to a 40 year term, THEN you can be eligible to reduce the principle. Know that the reduction to 2% is temporary it will adjust after 5 year for 1% a year until it reaches the rate set at the time of the modification as the current market rate.
A government sponsored value finder or a Broker price opinion (BPO) can be used to determine value. So listing a Short sale will get this information to you through your Broker, however the appraiser is order by your loan servicer. So when you are in contact with them, you can ask when this will be done and what the value comes in at. The second lien is considered a back end ratio, not a front end ratio. A back end ratio includes your debts on top of your modified mortgage. If the value comes in lower than your liens, and your front end ratio is at 31% without the second, then you can certainly request a reduction in your mortgage. Don’t let the calculations scare you, that is what our system helps you with. Don’t fluff up your gross income to try and fit in, let them come down to you. The lender then figures out the benefit of your modification vs. letting the property go into foreclosure.
IF you have a situation where you can prove Respa (Real Estate Settlement Procedure Act) or TIL (Truth in Lending Act) violations than you can use this to your advantage. From what I have been told by several Attorneys in this field is that if you have refinanced into a negative arm or adjustable mortgage that has these violations on them, then you will have a better chance to fight the balance down. Just because your values have dropped is not considered a hardship.
Now, there is nothing stopping you from buying your home back at your own trustee sale, but you will be up against other investors and you will have to pay cash.
Here is a reality check for you. These figures are from companies who research loans for these violations.
All loans prior to January 1st 2007
90%-99% of all pay option ARMS HAVE TIL(truth in Lending) VIOLATIONS
80%-95% of all negative amortization loans HAVE TIL(truth in Lending) VIOLATIONS
60%-80% of all 3 year/5 year/ 7year Fixed to Arms HAVE TIL(truth in Lending) VIOLATIONS
30%-60% of all Arm loans HAVE TIL(truth in Lending)
0-10% of all Fixed loans HAVE TIL(truth in Lending)
Chances are you are sitting back in your chair with your jaw dropped. Understand this is one of the many reasons why the past recklessness of our mortgage industry has sent the lending industry scrambling. The GOVERNMENT is forcing them to find ways to stabilize these past loans as well as offering these programs to you. Many people have already been able to refinance with the new programs hitting the market, and we are seeing preparation for the new wave of adjustments in the Jumbo loan market coming soon.
Now we are not telling you to immediately run out and go to an attorney to file a lawsuit. Getting court orders to fight your lenders to reduce your loan amount is a VERY difficult battle to win. It will cost you thousands in attorney fees. So if you are hell bent on this, know your chances of winning these suites are 1 out of every 100. It is possible, but it will tear you apart. The best thing to do is use this as a tool when you are re-modifying your loan. If your first is around 125% of its current value, it is not worth it. Fight for a re-modification of your loan, request a reduction with an advocacy group, and see what your lender comes back with. Some lenders are making adjustments to their loans already. These reports can be obtained through a broker or attorney. There is no guarantee they will find anything there, so you need to evaluate your circumstances to find out if it is REALLY necessary. These reports are detailed and could help to save you thousands. If you are filing Chapter 13, your attorney should be able to do this for you in their fees.
Is it perfect, NO. Has all of the money given to the Mortgage industry been actually geared to the homeowner, not really NO. Will it get better, eventually YES. We have already seen some stabilization in the market place. Granted we will still have spot recessions continuing in some areas, but we are going to come out of it. Americans are a highly resilient as a nation. We have had to face for more than we bargained for. Honestly we need to stop ambulance chasing and start rolling up our sleeves so we can start seeing our home values return. We all need to take a stand for our tomorrow.
NOW SECOND MORTAGES have additional options available.
If you have a first and a second, here is something that not many people know. You can restructure your loan under a Bankruptcy Chapter 13 depending on your circumstances, and request for the under-secured second to be legally removed.
That’s right. Since we are NOT Bankruptcy Attorney’s we can not go into the specifics, but we can tell you that a good Attorney can go in under a Bankruptcy restructure, modify your loan for you and request the removal of the under secured second or a portion of there of. Seconds are Junior loans. Most of these loans carry insurance that covers the loan in the event of a default. Under this type of bankruptcy, on your PRIMARY residence ONLY, you can request the lien removed.
Now you can file your own bankruptcy under these circumstances. But in this particular situation, we strongly advise you to hire a Bankruptcy Attorney to prepare the legal documents, coordinate the banks internal value with an external appraisal if you are disputing the value that the bank thinks your home is worth, and save you the head aches and frustrations of the legal court documents. Judges have their own language, and when you are going in under a Federal Protection under a court of law, it is better you have good backing behind you.
Under the Obahma’s plan you can request the seconds to be removes as part of the total debt to income ratios. Again, most lenders are cooperating with this, but may fight you under the technicalities of the program itself.