Is Your Home Mortgage Upside Down? Need Upside Down Mortgage Help?
By Dan North
So you are upside down on your mortgage and you are behind in mortgage payments. If you can only hold on till the market reverts. Possibly things are under control for the moment but there is an adjustment on the horizon or a balloon payment coming due or a point is coming in the future when you don’t know what is going to happen. What if you miss an installment and set off an adjustment to your ARM? What will you do then? What can you do? Perhaps you had these thoughts while you watched your mortgage turn upside down as your property value plunged.
Now is the time to do something before your credit takes a hit, but if you are already behind on your payments, take action before your lender does. You have options now that you won’t when it is too late. Get the Home Mortgae Help you need.
Why can’t I get a new loan on a mortgage for an upside down property?
As you go underwater on a mortgage, refinancing turns risky for a lender. From the lenders view point, they make you a loan then turn around to sell your mortgage on the secondary market. The investor who bought the loan assumes the risk, the lender has thier investment back and gets paid for servicing the loan. You deal with your lender but an investor owns your mortgage.
The lender makes income from creating a loan, servicing the mortgage and repeating the process over and over again with the same money. Once the home loan goes upside down the investor is at risk of losing his money. He wants you to get refinanced with a new loan. He gets his investment back, profits and gets out of an unsecured investment.
The problem is why would another investor buy a mortgage on an underwater house. The investor would be exposing himself to unsecured risk for a low return. With a higher return 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 though you are underwater on your mortgage. You get a lower rate and monthly payment. The lender goes to the secondary market to sell your upside down contract. Who is going to buy it? I wouldn’t. Would you? If your loan to value is negative by $100k, that is like paying $450k for a $350k house. A professional investor will pass.
The lender is in business to write mortgages, selling them, servicing them and making a profit on the same money repeatedly. If they can not sell your loan, they will turn you down. That is the brutal reality of an upside down mortgage.
What About Government Mortgage Help Now?
The government has not provided incentive for an investor to take that much risk for so little return. Unless the government comes up with enough incentive or removes the risk, investors will not purchase these loans.
There is an option to refinancing thatworks, home mortgage loan modification or forbearance (even when you are not behind on payments). Technically there is a difference.
Loan modification is a permanent change of the loan contract. Usually from adjustable interest rate to fixed interest or possibly to a lowered interest rate or the term of the loan may be extended to lower 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 point of view. Financially the lender is not much impacted as they already sold the loan and will continue to 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 income but does not lose all his investment.
Forbearance in this instance is a temporary mortgage reduction, lowering mortgage interest rate, lowering mortgage 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 commonly approved of the residential mortgage solutions.
Look at forbearance from the investors point of view, the investor 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 mortgage assistance programs.
The TARP Mortgage Reduction Program – Oct 2008, the US Secretary of the Treasury stated that 70% of US home owners qualified for the TARP Mortgage Assistance Program. Not just those in financial also those current on their loan. If 70% of US home owners had a lower mortgage payment, more cash 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 Programs. 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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Posted by Carlos Sagastume on September 27, 2009. Filed under HUD Homes.
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This is a Great article. I couldn’t agree more! There’s so much misinformation out there that people don’t really know what is and is not. It’s refreshing to see people that know what they’re talking about. You have an Informed commentary seems to be a rare commodity these days. Keep it coming.
Principle Reduction