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Six things to consider if your mortgage is underwater


First, you probably know what it means, but just to be sure… You are underwater if first, you took out a mortgage on your home and you still owe money on it. And second, your home value – what it would fetch on the market – is less than the amount that you owe on the mortgage.

Being underwater means that if you were to sell the home, you would need to bring money to the closing to pay off the loan.

If you own your home outright with no mortgage, you may have lots of concerns about home values, but this is not one of them. And if you are not far underwater, it may not be much of a problem – your home value might be rising fast enough to get you into the clear soon.

But the calculation depends on how much you still owe, how much equity you have in the property and the trajectory of home value in your area.

A state program with federal money drew more than 4,000 applications by the deadline for applying earlier this week.

In any event, if you are underwater enough to be concerned, here are six things you should consider:

1. The federal Home Affordable Refinance Program, or HARP.

That federal program lets you refinance a loan. But there are some criteria, including your own credit history.

Also, to be eligible, your loan must be greater than 80 percent of your home’s value. You must also not be delinquent in your payments during the past year. For eligibility rules, click here.

And, either Fannie Mae or Freddie Mac must now own the loan.

2. The federal Home Affordable Modification Program, also known as HAMP.

That is something you can get through a mortgage lenders. And for HAMP you need to prove that you are in danger of defaulting.

Your mortgage here too must be owned by Fannie Mae, Freddie Mac or a few other lenders who have signed up for the program.

HAMP changes the terms of your loan agreement, which can lower monthly payments, perhaps for five years.

3. Home Safe. Like Underwater Georgia, Home Safe is a federally-funded program that is administered by the Department of Community Affairs. The program is aimed at people who are in danger of losing their homes and can subsidize the owner’s monthly payments.

However, you cannot also be in bankruptcy.

4. Short sale. Depending on how deep underwater you are – and on the attitude of your lender – you might be allowed a short sale. In that situation, your lender agrees to take whatever you get in the sale of your home in exchange for ripping up the mortgage.

5. Renegotiate. Again, your mileage may vary, but some lenders will agree to a refinancing or a change in terms. After all, foreclosures are unpleasant for the homeowner but they are also expensive for the bank.

6. Wait. The housing market in general has been improving since 2012, some neighborhoods coming back faster than others.

If you don’t need to move, if you are not having trouble making the monthly payments, if the value of homes in your area are rising, if you are not very deep beneath the waves, it might make sense to just keep on keepin’ on.


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