Upside Down Mortgages Can Be Refinanced at Their Current Value!
A homeowner has an ‘upside down’ or ‘underwater’ mortgage when they owe more on their home than the home is worth on the open market.
Until the Hope for Homeowners program was announced, most homeowners that were upside down on their mortgage had no realistic way to refinance their home. Even if they still had good credit and had no hardship, they couldn’t afford to bring tens of thousands of dollars to the closing table.
Hope for Homeowners is designed for any homeowner whos wants to refinance their existing upside down mortgage(s). Of course there are strict guidelines to follow so I will lay out some of them here straight from the HUD website and help you understand what they actually mean to you:
- You must have originated your loan prior to January 2008.
- You must NOT be able to afford your current loan payment(s).
- You need to have made at least six payments on your loan and not intentionally missed payments.
- You CANNOT own a second home.
- Your debt-to-income ratio needs to EXCEED 31% (front end). See H4H Income Calculation
- You must qualify for this loan using full income documentation, which will vary person to person.
- You must agree to share equity created at the beginning of your “Hope for Homeowners” mortgage and any future appreciation in the value of your home.
- Any existing liens on the property must be removed prior to the completion of this transaction or through this transaction.
- Your new debt-to-income ration must be below 31% of your income.
- You have until September 30, 2011 to complete your transaction but you are subject to interest rate fluctuation.
- You existing lender must agree to participate in a “write down” or “short pay” on any existing liens.
Oh…this program has been around since October 2008…you may have heard about it on the news. I’ve been waiting to post this until I knew that most banks had developed their internal guidance and processes to handle these types of loans. The loan is a FHA loan, so you need to work with a FHA-certified lender and the services of a loss mitigator are highly recommended, although definitely not required.
It is still undetermined whether or not you would be able to refinance this new loan at some point in the future should you want to. I’ll be posting more on this in a few days, but it looks like Fannie Mae and Freddie Mac have said they will not refinance loans that have been modified…more to come.
There are obviously a lot of minute details that we can’t go over in a post like this, which is why Todd and I will be holding a teleconference next Tuesday (February 3, 2009) to discuss Hope for Homeowners as well as other ways you can refinance your way out of foreclosure. If you’d like details on how to sign up for the call, click here now.
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