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I’m Underwater With My Mortgage. Household Refuses to Help Me Modify My Loan. What Do I Do? – Robert

“Dear Andy,

Underwater Mortgage

Household Finance (Beneficial) conventional mortgage taken out four years ago with current balance of $114,000.00 with a value $72,000.00

Household refuse to modify, refinance or reduce interest rate. Current FICO 690 anticipate higher after paying down two credit cards.

No late payments, bankruptcy or collection. Interest rate 9.5% has not been reduced as indicated during closing. We were also offered and used a line of credit $15,000.00 (not a second mortgage) with a balance of $13,000.00 (used for improvements on property) with Household. Household reorganized and the Beneficial Finance company closed shortly after we completed closing.

FICO is negatively affected by Household reducing the limit on the line of credit to the balance due each month.

I’ve completed an extensive search trying to obtain underwater loan assistance or refinance however the only assistance availabe is for FHA or VA loans. I’m a disabled veteran and could use a VA finance however the VA want touch it because of the debt/value ratio.

1. I just want to get out from under this high interest rate 9.5

Is there a program available for on time conventional mortgages that are underwater?

Can you provide the source(s) or recommend action(s)?

Any assistance is appreciated.

Robert”

Robert,

This is a tough situation to be in, especially when the lender is HFC. They do not participate in the Home Affordable Modification Program so those options won’t be available. They no longer originate new loans, so refinancing directly with them will not work either.

HFC does offer hardship plans which can reduce the interest rate, but they only last for six months, and after that the interest rate goes back to where it was. You can reapply every six months and if you still qualify they may extend the hardship plan. HFC says that you don’t have to be behind on payments to qualify for a hardship plan, but that is somewhat questionable. I’ve seen many times where an otherwise qualified borrower is denied, and the only logical reason is that they were current. To apply for these plans you will want to speak with collections at HFC.

HFC does consider short refi’s, where they accept less than the full balance owed on the loan as a payoff, but since they no longer originate loans themselves, you would have to arrange outside financing with another lender yourself. This may be difficult. Based on what you said, the home is worth 63% of the 1st mortgage and if you were to include the additional line of credit you’re looking at about 56%. Originating new loans is not my area of expertise, but I’m not sure if there are any lenders out there willing to touch that. In order to refi I believe that you are stuck either waiting for the value of the home to come up, or until you have enough cash to make up the difference in value. The number for the short refi dept at HFC is 800-300-4349, if you ever need for more info.

If you find that you can no longer afford the mortgage payments or get tired of waiting for a refi, you can always look into a short sale. This can allow you to sell the home for less than you owe and like a short refi, requires the approval of HFC. You can get started with a short sale easily, just contact a local real estate broker and let them know what’s going on. A short sale can also have a negative impact on your credit rating and can have tax consequences as a result of the forgiven debt. Make sure that the real estate broker you choose has a good understanding and working knowledge of short sales and you should be alright. If you would like to speak with HFC in regards to short sale the phone number for that dept is 800-617-0531.

I wish I had better advice for you Robert, but I don’t believe that there is any silver bullet solution that exists. I’m afraid at the moment all viable options come with some sort of damage to either your wallet or credit score. I think you’re best off looking to minimize your damages as much as possible by going with the solution that best fits your budget and your goals with the property.

Best Regards,

Andy

Im Underwater With My Mortgage. Household Refuses to Help Me Modify My Loan. What Do I Do?   RobertAndy is a licensed real estate broker in Massachusetts and is the founder of Northeast Properties in Norton, Massachusetts. His brokerage is designed to help homeowners in today’s difficult real estate market, specializing in short sales. Andy speaks with Massachusetts homeowners every day, helping them to address their questions or issues with short sale or loan modification. He enjoys helping consumers arrive at the correct solution to their problem, and believes that the only way to correctly do that is by presenting them with all of their options in an un-biased manner.

If you have a mortgage, short sale, real estate, or loan modification question you’d like to ask just use the online form. I’m happy to help you totally for free.

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About Andy Faria

Andy Faria
Broker/Owner of Northeast Properties – real estate brokerage President/Owner of Northeast Settlement Group – performance based debt relief
  • Sleepless

    Any advice on how to get Fulton Financial/Fulton Mortgage to refinance to a single loan?I’m ~15% upside down in pre-2009 time-of-purchase 1st(5.75%) & 2nd(6.99%) mortgages that are not Freddie/Fannie/FHA/VA/USDA.  I’m VA eligible with excellent credit, but the numbers just don’t work.  I put 20+% down and have made continuous improvements hoping to increase the value, with virtually no result.  The appraisals(3) are just coming in too low – the home could not be built for the appraised value.  BTW, the appraisals vary so widely that it’s difficult to believe they actually mean anything.  But, there are obvious market reasons for the low appraisals and there are also not so obvious reasons. The home is in an “almost” rural area with virtually no sales comparables and the FHA has artificially put the county loan limits too low for a DC suburb.  This last point will negate any possibility of taking advantage of BHO’s newest mortgage relief proposal because I owe more than the county loan limit AND it makes all properties in my part of the county impossible to sell without a significant loss.  Additionally, most of the relief proposals I’ve seen involve principal reduction – this is not my preference because someone, somewhere has to pay for that.  I’m simply looking to refinance the entire amount I owe into a single mortgage at the available lower rate.  My current lender (Fulton), who holds both loans, will not negotiate or subordinate.  I don’t get it – all things being equal, except the appraised value, the risk is actually and realistically less if I’m paying less on the same money with the same physical collateral.   I’ve called and written agencies, I’ve called lenders, I’ve called realtors – there is no help if you pay your bills. 

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