On February 23, 2010 First American CoreLogic released its report for the fourth quarter 2009 on negative equity in the U.S. (http://www.loanperformance.com/aboutus/first-american.aspx). For Arizona the news should have come as no surprise but the numbers are nevertheless startling. Just over 50% of the homes in the state with mortgages are upside down or “underwater”. In addition, 30% of homes with mortgages are at least 25% or more upside down. We are second only to Nevada’s 70% of homes underwater. Obviously these numbers represent a serious problem for the housing industry in our state. The question for a lot of homeowners then is what should they do?
There are several choices and all have consequences. The only way to know for certain is investigate each one and make the best, informed decision you can.
· Foreclosure: This is where the homeowner simply cannot make the payments, tosses in the towel and says here Mr. Banker take the house back I don’t want it any more. The bank will eventually sell the home and take their lumps while you will have a black mark on your credit for 5 years and possibly more.
· Short sale: Here you negotiate with the bank to allow you to sell the home for less than is owed on it. The bank still takes a loss on the loan but your credit is not hurt as bad as a foreclosure.
· Loan modification: Lots of noise out there about loan mods but don’t listen. Pick up the phone and call your lender. Tell them you request a loan modification application. The process will likely be difficult, time consuming and frustrating but you can save up to 40% of your mortgage payment in a successful modification.
· Strategic default: The only difference between a Strategic Default and a foreclosure is that in the Strategic Default the homeowner can still make all of their payments including the mortgage but doesn’t want to because of being upside down in the home. Do this and it will look like a foreclosure on your credit.
· Stay: If you have a good loan, love your home, neighbors and neighborhood and can make the payment even though you are under water you can always stay.
It’s amazing what information can do for the soul. It can help you make a decision. It can help you live with the decision. It can free you from the guilt and other negative feelings that come with making the decision to leave your home. Don’t be afraid to act but be informed before you do! To help you the following is a partial list of resources that can help you navigate the murky waters of deciding what to do or not do with your home. If you have any questions I can be reached at firstname.lastname@example.org. Finally, if you would like to get my weekly Mortgage and Business Update e-mail me at email@example.com. The update is FREE!
P.S. I successfully modified my loan last September and saved almost 40% on my monthly payment but am still $150,000 upside down.
HOPE NOW (HUD Hotline) (888) 995-4673 or www.hopenow.com
Neighborhood Assistance Corporation of America (NACA) (602) 248-4408 or www.naca.com
Arizona Foreclosure Hotline (877) 448-1211
Chase Home Loan Retention (602) 943-7013 (Chase loans only)
www.makinghomeaffordable.gov (The government’s loan modification program)
Borrower Help Center/NHS Phoenix (602) 258-1659 (Freddie Mac loans only)
Local network news media consumer advocates
Senators and Congressional representatives
The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com
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