Many homeowners across the country have a mortgage balance that is more than what their home is worth. This phenomenon is known as an “upside-down mortgage” or an “underwater mortgage.” Refinancing the mortgage is typically not the solution because a lender does not want to lend more money than the home is worth. Because underwater mortgages are a problem nationwide, several options are available to homeowners that are in this situation – options that allow the homeowner to stay in their home and the lender to continue receiving the mortgage payments due.
Mortgage Modification
The first option that underwater mortgage borrowers should start with is a mortgage modification request. You request a mortgage modification with your current lender. When you contact the lender, ask to speak to a representative in the loss mitigation department. Representatives in the loss mitigation department are the only ones who can assist you with your mortgage modification options.
Essentially, a mortgage modification changes or modifies the terms and conditions of an existing mortgage. Lenders have the option to approve or deny the mortgage modification according to their own set of qualifying criteria. A mortgage modification can include a reduction in your mortgage balance, a change in your interest rate, an adjustment to your monthly payment, or a change in the term (i.e. number of years left on your mortgage).
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HARPThe Home Affordable Refinance Program (HARP) is a federal government mortgage assistance program. This particular program allows certain borrowers to refinance their mortgage, even if the mortgage amount is more than the market value of the home. To qualify for this program, the first requirement is that you have a Fannie Mae or Freddie Mac mortgage. To find out if your mortgage is owned by Fannie Mae or Freddie Mac, you can contact your lender or look it up online.
To apply for HARP, contact the mortgage company that services your loan.
Other Assistance Program
Because underwater mortgages are a growing problem and stopping foreclosure is the reason for implementing assistance programs, many other home assistance programs exist. Again, start with your existing mortgage lender to see which options may be available to you. The goal of each of the programs is to save your home, so your existing lender can guide you to some or all of the programs you may be eligible to apply.
If you owe more money on your mortgage than your home is worth, then you have an underwater mortgage. In a traditional lending market, refinancing an underwater mortgage has odds that are slim to none. Since it is a widespread problem across the country, numerous programs are available to help homeowners save their homes from foreclosure. While you may not qualify for all of the programs, it is likely that you may be able to qualify for at least one program that is available.
Always start with your current lender, rather than responding to offers you receive from unknown solicitors in the mail. Your lender is the most qualified to guide you in the right direction.
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