The headlines report that Half-priced homes are attracting a bevy of buyers. But, you don’t want to sell your home. However, the balance of your mortgage is greater than the value of your home. What to do?The first question to be answered is how much more is that balance: 5%, 10%, 20%… It may boil down to strictly a financial decision on whether it is a prudent move to stay in or move out of your home, and let the chips fall where they may. Today’s Economic Update will present those two alternatives with the steps for you to follow. If you want to stay in your home1. Review the loan documents you signed when you purchased or refinanced your home to ensure that the lender dotted all the “i’s” and crossed all the “t’s” from a compliance perspective. If there were errors (e.g. 3 day right of recession, lack of other disclosures…) then the lender will be at your mercy to negotiate a change in the terms of your loan to your benefit. 2. Refinance. The FHA is now offering the FHASecure loan program. Even if you are delinquent in your current mortgage payments, you may be able to refinance 97% of your home’s value under this government insured loan program. And, if your current mortgage balance is greater than 97% of your home’s value, the lender may forgive the difference. Call me for more information, to see if this refinance option is doable for you.3. Modifying the terms of your loan. The cost to a lender to foreclose on your loan can be 20%-25% of the principal balance. Use this to your advantage. If there were no errors in your loan documents and you cannot refinance your mortgage, then you should write a compelling letter to your lender explaining why you cannot continue to make the mortgage payment. Sit down, face-to-face, with your lender to come to a mutual agreement in modifying the terms (monthly payment) of your mortgage. You would be surprised at how receptive your lender will be. In addition to avoiding the costs of foreclosure, with the unfortunately large number of potential foreclosure lenders are facing at this time, they are in a much more favorable mood to negotiate with you. If you are behind on your mortgage payments, you should ask the lender for some forbearance on the amount past due (add the delinquent payment amount to the mortgage balance). However, you still want to pursue a loan modification to reduce the monthly payment, so as you do not continue to get behind (forbearance is a one-time option). If your decision is not to stay in your home, then your choices are:1. A Deed in lieu of Foreclosure. Asking the lender to take the home (the security of the mortgage), and release you from the mortgage obligation. 2. A short sale. Trying to sell your home by taking an offer on it for less than the mortgage balance. When you receive an offer on your home the real estate agent would open negotiations with the lender to persuade them to accept this lower purchase amount. This will take some time (60+ days) to complete. 3. Foreclosure. If you cannot afford to make the mortgage payments any longer and a notice of default is issued, then the lender may elect to foreclose on your home and take it from you. I know none of these options sound simple. If you are having problems with your current mortgage then the first thing you should do is contact a HUD Approved Housing Counselor (1-888-995-HOPE). There is a unique office set up in San Diego to help distressed homeowners. It is the Housing Opportunities Collaborative (www.housingcollaborative.org) where I attending a seminar just last week. Don’t be shy to call me or them for assistance.

This entry was posted on Saturday, April 12th, 2008 at 10:44 am and is filed under Housing News, Market News, Real Estate, Stimulus Package. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.