So your home mortgage is underwater and you are barely making payments. If you could only hold on until property values come back up. Maybe you have it under control for the moment but there is an adjustment on the horizon or a balloon payment coming up or there may be some point in the future when you don’t know what is going to happen. What if you miss a payment and trigger an increase to your ARM? What then? What can you do? You may have had these thoughts while watching your mortgage go underwater as your property value plunged.
Now is the time to take action before your credit is ruined, but if you are already behind on your payments, do something before your lender does. You have solutions now that you won’t when it is too late. Get the Upside Down Mortgage Help you need.
Why can’t I get a new loan on a mortgage for an underwater home?
As you turn negative on a house, refinancing turns risky for a lender. From the lenders perspective, they extend you a mortgage and then sell your mortgage on the secondary market. The investor who bought your contract assumes the risk, the lender has the money back and gets paid for servicing the loan. You deal with your lender but an investor now holds your contract.
The lender makes income from creating a loan, servicing the mortgage and repeating the process over and over with the same money. Once the loan goes upside down the investor is at risk of losing money. He wants you to get refinanced by a new contract. He gets his money back, makes a profit and gets out of an unsecured investment.
The problem is why would another investor buy a loan on an upside down home. The investor would be exposing himself to unsecured risk for a low return. With a higher interest rate he might willingly take that risk, but then why would you want to refinance to a higher interest rate and larger monthly payment.
Let’s say a lender does refinance even though you are upside down on your mortgage. You get a lower interest rate and monthly payment. The lender turns to the secondary market to sell your underwater loan. Who is going to buy it? I wouldn’t. Would you? If your mortgage is negative by $100k, that is like paying $450k for a $350k house. A professional investor will pass.
The lender is in the business of writing mortgages, selling them, servicing them and making income on the same money repeatedly. If the lender can not sell your mortgage, they will turn you down. That is the brutal reality of an underwater mortgage.
What About Government Home Mortgage Help?
The government has not come up with incentive for an investor to take such an unsecured risk for little return. Unless the government creates enough incentive or removes the unsecured risk, investors will not invest in these loans.
There is an option to refinancing that is working, mortgage loan modification or forbearance (even when you are not late on your mortgage payments). Technically they are different.
Mortgage modification is a permanent change of the mortgage. Usually from adjustable interest rate to fixed interest rate or possibly to a lowered interest rate or the term of the loan may be extended to lower monthly payments. A permanent change to a lower interest rate and monthly payment does happen but takes more work to negotiate.
Again look at it from the lender and investor view point. Financially the lender is not much affected as they already sold the loan and will service it. The investor takes a bigger loss on future profits but not as much as he would for a principle reduction, short sale or foreclosure. The investor does not make as much profit but does not lose all his investment.
Forbearance in this instance is a temporary mortgage restructuring, lowering interest, lowering monthly payments or restructuring to interest only payment for a period of time. At the end of that period the loan reverts to the original terms of the mortgage contract. This is the most common of the modifications.
Look at forbearance from the investors point of view, he makes less money for a number of years. The investment is not being paid back but he is getting some money. After the reduction period the investment continues at the original terms he purchased. Much better than losing his investment and the original investment stays intact. For the investor this is the best of the residential mortgage solutions.
The TARP Mortgage Assistance Programs – Oct 2008, the US Secretary of the Treasury stated that 70% of US home owners qualified for the TARP Mortgage Assistance Programs. Not just those in deep financial distress{/spin] but [spin]those current on their mortgage payments. If 70% of US home owners had a lower monthly loan payment, more money would be injected back into the economy creating economic growth. The Stimulus Plan.
We compiled a data base of modifications we settled since Oct 2008 under the TARP Mortgage Assistance Program. We know what modifications lenders approve and the criteria that must be present to approve those modifications.
The Author, Dan North, is making this database available to find out for yourself what you qualify for on a loan modification. This is a free service available to all US home owners.
Find out if you are one of the 70% who qualify under the Government TARP Mortgage Reduction Program.
Call Dan at 406-546-2517 or email Dan@Mortgage-Upside-Down.com and ask if you qualify.
(c) Copyright — Dan North. All Rights Reserved Worldwide
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