I have been seeing on the news quite a bit lately how the economic recovery is underway (I read something about Green Shoots months ago now, so logic dictates we are on our way to recovery, right?) but I am still being asked the question of “So what exactly is keeping me current on my mortgage?” more than just a few times a week from people living in many different states, not just here in Arizona.
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Consider a local business leader here in Arizona who posed this question earlier this week as he thought about this problem. Derek is a local community leader, small business owner and has an abnormally large dose of common sense loaded into his neocortex:
The above person might qualify for the Obama 125% refinance plan, but at best that might only make their payment $1300/mo. Not to mention that the banks are not just making the refinances happen. They refuse to live up to their side of the bailout. If instead a plan was in place to force lenders to readjust principle balances (not interest rates) to a point where the home owner was not completely underwater then perhaps the home owner might full well consider staying in their home. At this point, I think someone in the above situation has NO SENSIBLE reason to stay in the home. They have far more to gain crushing their credit and walking away.
Regardless of your loan amount, if you are having trouble making your mortgage payments and contact your lender about what your options are, these are generally the options you have in front of you:
- Continue paying as agreed
- Apply for a loan modification
- Start the process of doing a short sale
- Negotiate for a deed-in-lieu of foreclosure
- Foreclosure
If your loan balance is below 417,000, the Making Home Affordable plan has pretty well outlined what can and cannot be done. You can read through it (or hire help if needed) and know what to reasonably expect as an outcome. But keep in mind, each situation will be different – and each outcome will be different.
And if your loan balance is above $417,000 – this means that there is not currently a standard set of guidelines as to what to expect – which means anything can happen.
Regardless of what your loan amount is – or what your overall personal financial situation is…
I haven’t seen a plan that can help you if you find yourself in a situation where your house is worth 50% of what you bought it for and you now owe 150% or more of what it is worth.
But I will keep you posted if I hear of anything.
About the Author: Justin McHood is a mortgage broker with VanDyk Mortgage Corporation. You can find him at Arizona Mortgage Team, on the Zillow’s Mortgages Unzipped Blog, and at most East Valley Friday Nights gatherings. He’s the one in the blue shirt.
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