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UnderWater Loans

Question: Should this person foreclose or not?

Please don't answer this question unless you are a CPA, a financial consultant, a lawyer or other professional!

Situation - Loan underwater - 550k now worth 300k. Payment is 3200. Has good job and the home is not threatened. The loan is non recourse.

1) Should / can this person foreclose the property and just not pay?

2) Idea - Get another "vacation home" down the street then foreclose on our primary, save a payment of $1,200 and invest the difference elsewhere? If the housing values do come back then the appreciation would not be lost and if they don't then you saved $1,200 each month right? Property is in California. Beyond ruined credit, what would be some of the significant downsides or any other ideas?

The only reason I would not do it is if you could pay back the money amortized over 7 years. If your loss is greater than that then bankruptcy makes good since right or wrong?

Answer: Everything about your "solutions" are wrong. Morally and mathematically. Answer to the first question: Yes, anyone can be foreclosed on if they do not pay their mortgage. Should they not pay for the mortgage just because they are upside down? OF COURSE NOT!!! You entered into a contract with a lender on which you need to make good. Your job is not at risk, and if you're not planning on being forced to move moving or being forced to sell, you should not be thinking about foreclosure. You will not qualify for a second mortgage on a "vacation home." Lending standards are still far to stringent to allow that kind of behavior (thank goodness for situations like this).
Here is the solution: Continue to pay your mortgage, live you life, and wait for real estate to rebound. It may not rebound all the way up to your mortgage value, but at least you'll be "closer to the surface."
Just because a bad decision was made when buying the home (I know, I will pay some stupid tax as well because of all of this) does not mean that we throw our obligations and good morals out the window.

TheRealDeal - Underwater loans pressure owners

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Underwater Mortgage Bailout

Question: Who does the homeowner bailout really help?

Doing some research, I came to the realization it will not help out the majority of the homeowners. It will help people in places where the real estate market has dipped less than 5-10%. Where in America is that? It helps out people with subprime loans that really bought homes they could not afford. (Those people who cannot make the payments anyway. They will default even after they modify their loans. ) It will not help out people who can continue to make payments on their underwater mortgages. The homeowners with good income and good credit are shut out. So where is all the money going? To the banks!

Answer: The lenders are the beneficiary, and the sad fact is that a lot this money is going to executive salaries, not to bring funds into the lending stream, allowing people to borrow and buy.

I was hopeful that lenders would relax their standards a bit, put funds into the lending pool and get the housing market in gear. Still waiting.

PETITION FOR MORTGAGE MORATORIUM PART II

Underwater Mortgage Calculator

A grinding recession has put already struggling homeowners in a position where household debt loads are quickly becoming unmanageable. Loan modification has become a well known remedy for those experiencing hardships including toxic mortgages, job losses, being underwater on the house, divorce, etc. It has been widely reported that fully half of these modifications end up back in default within six months. Recently Fitch Ratings published estimates that the re-default rates on mortgages would rise to 70% by yearend 2009 due to inadequate terms on the loan modifications and additional household debt that isn’t included in calculating a what a homeowner can actually afford to pay on the monthly mortgage payments.

Once a homeowner has engaged a firm to negotiate a loan modification on his behalf, entering a debt settlement process can double or triple the decrease in monthly payments gained from a loan modification by itself. The debt settlement aspect of this combination has several advantages in terms of the loan modification and the benefits that would accrue outside of it:

1) Monthly consumer debt/credit card payments are typically cut by 50% within one month of starting the process.

2) The documented decrease in consumer debt payments makes the overall financial picture of the homeowner look much better. As lenders broaden their scope to account for consumer debt and ability to pay after a loan modification, the decreased payment as a result of the debt settlement could be the difference between getting a loan modification and being denied.

3) Engaging in a debt settlement will hurt the credit score of the consumer/homeowner but credit scores aren’t a major factor in determining whether a loan modification will be accepted or not. Acceptance for the loan modification is mostly contingent on ability to pay meaning that a debt settlement, even accompanied by a declining credit score, can help make the case for a modification.

4) The timing for completion of debt settlements varies from eighteen to forty-eight months during which time the credit score of the borrower will decline. Over time, as each account is paid off in the settlement the borrower’s credit score will begin to increase. Concurrently, initial interest rates on a new loan modification are typically set for three to five years before payment increases start to go into effect. An attorney negotiating the terms of a loan modification to coincide with completion of a debt settlement can put his client in a position where the homeowner could apply for a refinance at a time when his credit scores are on the upswing.

5) Even if a refinance is not available to the homeowner, timing the conclusion of the debt settlement process to precede the first interest rate bump on the modified loan proves to be advantageous as the homeowner/consumer would have additional cash flow as he finishes his payments to the debt settlement.

For consumer/homeowners with burdensome mortgage and consumer debt payments, combining the two processes can make a significant difference in cash flowing out of the household, the difficulty in managing the debt, and dealing with the possibility of foreclosure. Have attorney assess your total financial picture so that the two processes can be synchronized for optimal results.              

About the Author:

The Feldman Law Center was founded for the purpose of negotiating loan modifications on behalf of their clients. These negotiations have two major goals; to reduce monthly mortgage payments to a level of affordability for the homeowner and to either stop or avoid foreclosure proceedings. The mission at The Feldman Law Center is to provide the highest level of professional service while delivering the best possible result on each loan modification we negotiate on the behalf of the families we represent.

800-588-0425
www.feldmanlawcenter.com

Article Source: ArticlesBase.com - Saving Thousands with a Loan Modification – Debt Settlement Combination - Felmdan Law Center