Upside Down Homeowners Have Refinancing Options in 2012

Many homeowners want to take advantage of the current low interest rates this year, but since 2005 the real estate market has been on a steady decline in most areas.  The plunge in values causes problems for homeowners who are either upside down on their mortgage or the home equity has fallen below twenty percent requiring the need for private mortgage insurance (PMI).  Either scenario is bad news for refinancing a mortgage these days.  The first scenario would generally prevent refinancing and the latter would add PMI which would defeat the purpose of refinancing with a goal of lowering the total payment.
My Home Is Upside Down, What Are My Options?
Try to take advantage of the Making Home Affordable Program, HARP 2.0.  If your loan was originated prior to May 31, 2009, is owned by Fannie Mae or Freddie Mac, and you have been current on your mortgage payments, you may be eligible for a HARP 2.0 refinance.  I say “may” because even though you may appear to meet the guidelines, you will still need an automated approval from the underwriting system and some loans do not get approved for a number of reasons.  I still encourage all homeowners to try because it doesn’t cost anything to check and the benefits could be huge.  Use the following steps to try to lower your mortgage rate / payment and put yourself in a better financial position.

Step 1. Find Out Who Owns Your Loan?

Fannie Mae Loan Look-Up Tool

Freddie Mac Loan Look-Up Tool

Step 2.  Contact Me With Your Results

If you have a Fannie or Freddie loan, you are closer to being able to qualify for a HARP 2.0 refinance, if your loan is not held with Fannie or Freddie, all hope is not lost, you may still be able to refinance with a different program or “if” the HARP 2.0 program becomes available to other loan ownership types.  Either way, contact me to explore your options.

Step 3. A Loan Modification May Be The Answer

If you have tried to refinance, but for whatever reason, have not made any progress, you may consider a loan modification.  Beware of scams in the modification world.  Start with your current lender by calling and letting them know you want to try to modify your loan to take advantage of the low interest rates.  They should take it from there with some qualifying questions to see if a hardship exists.  You can find more information on the HARP 2.0 program and loan modification at The site will walk you through your options and tell you how to apply for a loan modification as well as other Government programs.

Step 4. Sell Your Home With a Short Sale

If you are unable to modify your current loan and are just not able to make the mortgage payments, you should consider a short sale over a foreclosure.  A short sale is a sale of real estate in which the proceeds from the sale of the property will not cover what is owed on it.  As a result, the property owner cannot afford to repay the lien’s full amount. The lien holder then agrees to release their lien on the real estate and accept less than the amount owed.  Any unpaid balance owed to the creditors is known as a deficiency.  Short sale agreements don’t always release borrowers from their obligations to repay any deficiencies of the loans, unless specifically agreed to between the parties.  Your home then goes on the market, usually with a real estate agent and once a buyer is found, the lien holder will either approve or deny the sale based upon the price and terms of the offer.  We have relationships with real estate agents who specialize in listing short sales.  If you are interested in finding out what your home could sell for, please contact us for a detailed market analysis.

Mike Dell’Ovo has been helping his clients finance real estate since 2003.  To purchase a home or refinance your existing mortgage with Mike Dell’Ovo, please use our Secure Loan Application.


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2 Responses to Upside Down Homeowners Have Refinancing Options in 2012

  1. Brian says:

    My ex-wife and I are coborrowers on a loan through beneficial. They are not willing to refi or modify the loan (currently at 11.9% interest). They have essentially stopped doing mortgage lending and have asked us to walk away so they can foreclose. My new wife and I have tried to refi the loan and have first been denied based on my 500 credit score (had child support arrears for over a year) now we’ve been denied by a bank claiming refi regardless of credit score because they value the house at $75k we owe $83k and they will only lend $60k. We can’t pay $23k to refi and making the payments has reduced our loan balance by only $1500 over 2 years. Please tell me you have an idea! I am court ordered to get my ex-wife’s name off this loan and I feel like my hands are tied!

    • moderator says:

      I am sorry to hear about your situation, it does sound like you are in a tough spot. Theses days in order to get financing, you typically need a 640 credit score or higher. I think the best thing you can do is to start cleaning up your credit by settling your open derogatory items and re-establish your credit. That will start the process of improving your credit score / history. You should start by obtaining your free annual credit report from which is the legit site to request the credit report for free.

      You may be able to settle some of your collections for less than what is owed. As for the home being upside down, I don’t know of any lenders who will do that with regular financing. You should try to request a loan modification using the website, which is owned by the Government and has all the available programs relating to loan modification.

      I hope this helps. Remember that if you do the necessary steps, it will only be a matter of time before you improve you credit and will be able to refinance or buy a home.

      Good Luck!

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