We Can’t Get a Loan Modification or Refi Our Mortgage. What Can We Do? – Sabrina

“Dear Steve,

Steve…just came across your site. Must say very informative.

I recently received a mailer in regards to the law firm Fieldstone Law out of Newport Beach, CA. I have always been skeptical about these mailers and contacts. Not to mention, I have never contacted them back.

I am in dire need of help or suggestions on how to refi my home. I bought a new home in 2005. Loan is a fixed 30yr at 6.375. I have excellent credit, never missed a payment and the only debt is the house and a new car.

I have tried the loan modifications and have been denied. I have attempted to refi and been denied.

While all my neighbors are taking the easy way out and walking away from the home or are one of the lucky ones able to refi.

In short, the reason I have been denied the loan mod’s are due to no income hardship. We make good money and pay all our bills. Yet, cannot refi cause we have no equity. We currently owe more than our home is worth give or take 40K. I really would like to stay in the home and just want to refi so I can lower the payment and be on the same level playing field as all my new neighbors. Do you have any suggestions or other avenues I can pursue? Thank you.


Dear Sabrina,

Do You Have a Question You'd Like Help With? Contact Debt Coach Damon Day. Click here to reach Damon.

The underlying problem with the mortgages like yours that many have is there is no requirement for a lender to do anything. For whatever reason they have created a profile of who they will and won’t help. It doesn’t have to make sense. It just is what it is.

And while you want to keep ahold of your property, their unwillingness to help indicates that for them the numbers don’t align to fit their formula. For you, your desires and emotional attachment to the property don’t align to fit your financial obligation.

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As you observed, for some the idea of a strategic default, where they walk away from the home, can make sense when there are no other options. A strategic default approach makes no sense for the masses but can make perfect financial and mathematical sense for the individual.

I am not aware of any mortgage lender that would refinance a property as you describe. The only option I can think of that has a chance of working would be to buy down that part of your mortgage above the current qualification guidelines.

You could use a LendingClub.com unsecured loan to pay down up to $35,000 of the current mortgage if that would help. Of course you wind up with another loan but it is not secured by the house which would give you the flexibility of doing a refi for a lower amount.

Please post your responses and follow-up messages to me on this in the comments section below.

Damon Day - Pro Debt Coach

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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