Can’t afford your mortgage? Call your lender and ask them to modify the loan to a payment you can afford. The lender representative will ask you for a stack of paperwork and try to get you to keep paying “something…as a sign of good faith”. After three or four months, you may receive an offer to reduce your rate to 2-3%, for a five year period, to “get you over the hump”.
You still owe the money you borrowed, though.
The house is worth less than what you borrowed? Ask for a principal reduction. I tried helping distressed borrowers with the Hope For Homeowners Program; my efforts failed miserably. Andrew Adams told me it would flop and it did. We did SOME good (without the H4H program)…for about half the borrowers but the program was a flop. Now, President Obama is trying to “entice” lenders to refinance your loan to 105% of its current value and empower bankruptcy judges to “cram a reduced loan amount” down the lenders’ throats.
I’m not so certain that will work, either.
The social ramifications of what Greg Swann calls middle class welfare are far reaching. An angry cauldron, fueled by the resentment of the folks who are current on their mortgage, is bubbling over today. Let me give you an example:
Two houses, on the same street in Santee, CA, were bought for
$500,000, in the summer of 2006. Eileen was a move-up buyer who
plunked $150,000 down on her home. Lou bought the home with zero-down
financing. Eileen refinanced her home loan to 4.75% last month,
bringing about $35,000 to the closing. Lou hasn’t made a payment in
three months, has had his foreclosure stalled, and is hoping that March
4 will bestow a bailout upon him.
Eileen is pissed off and she ain’t alone. What worries me isn’t whether or not the Obama mortgage plan is fair, it’s that the implementation of it could result in civil unrest. Don’t get me wrong, the bailouts of the stupid banks who financed you are perhaps the greatest evil foisted upon our economy but now we’re pitting neighbor against neighbor.
Let me recap the “bailout” for you; not the banks but YOU. The government tried to mitigate with a program that offered hope; FLOP. Now, you can get your mortgage refinanced….maybe…IF, you can demonstrate that you can’t make your payment and miss a few of them. If the lenders won’t play ball with this plan, you can voluntarily file bankruptcy and hold your breath that you get a compassionate judge to force the banks to give give you another shot.
There is another option. Let me show you an example of what I see in the same street:
Lou is paying $3,500/month for those mortgages (which he can’t afford). Tanya is renting the house next door for $1,500/month.
Here’s the solution, Lou; walk from the mortgage. Mail your keys to the bank and rent the house down the street. If the “teaser” payment was $2,500 (and you could afford that), save the $1,000 each month, for the next three years, and buy back your old house in 2012. The FHA 203-b loan program allows borrowers, who have a foreclosure that is older than 36 months and have re-established credit , to obtain an approval.
Walk today and buy that same house back in 2012. Do you really think it’s going to cost a whole lot more than it’s worth today?
Consider a comeback if you will. It’s a great American tradition.
