Negative Equity and an Upside Down Mortgage

Posted on October 29, 2009
Filed Under Unemployment Will Cause The Most Foreclosures In 2009! |

Its bad if you own a house that is not worth what you paid for it. A mortgage with a combined balance or individual balance that is greater than the value of your home only makes matters worse.  If this is the case then you have a negative equity mortgage or an upside down mortgage, whichever you prefer.

 

Most people who have a negative equity mortgage or an upside down mortgage don’t know what to do so often times, they do nothing. If you are looking for ways to reduce your mortgage balance be prepared for some heartache, it’s not going to happen easily. There is no easy way to handle an upside down mortgage so just be patient.

 

Balance reduction requires leverage and one of the only leverages pieces that homeowners have is the payment they pay to their lender. continue] to make your [mortgage payment. You would be in luck if you started missing your payments. Get your lender to work with you and gain some leverage.  This is why you hear from many different sources that missing your payments is the only way to get your lender to work with you.  Missing payments equals gaining leverage.

 

Now I can’t tell you to miss your mortgage payment but if you decide to do so you are heading down a path where you begin walking that fine line between foreclosure and homeownership.  You just need to know that there is a chance you could lose your home if you can’t generate the desired leverage.

 

The best chance you have at getting your lender to work with you is to have two mortgages.  The second mortgage is more prone to risk and exposure if you were to foreclose on your property.  Focusing your attention here could result in a settlement of the balance or a balance charge off which is a good thing.  The charge off will require additional attention down the road as the account will turn into a collection account but you won’t have any further payments to that mortgage and the lien on your property will disappear.

 

When you look at refinancing your upside down mortgage you need to look only at the first mortgage only.  Start by looking at who services and who insures your mortgage.  If it is either Fannie Mae or Freddie Mac you could potentially have the ability to refinance. There is a very good opportunity to reduce your rate or change your mortgage terms but beware there are additional guidelines and criteria that need to be met.

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