Coping with an Upside Down Mortgage: Understanding Your Options – Voluntary Remedies

A Few more days to the Official release date of our new blog on Coping With Upside Down Loans: A Legal Perspective

If you or anyone you know is faced with losing their home, the information available on this site is a must read.

Plus you’ll find unique resources such as Steve’s e-book, Coping with Upside Down Real Estate

There are Four voluntary remedies when you’re Upside Down on your Mortgage:

Do Nothing
Buy Time
Sell the Property
Give the Property Back to the Lender

Do Nothing: We are at the end of a very long cycle.The fact that there are so many real estate owned (REO) properties currently on the market is keeping real estate prices down because the lenders have placed them on the market at fire sale prices. Until these REO’s are off the market, prices will remain low and the downward pressure on the marketplace will continue.

Most economists believe that by the summer of 2010 or the beginning of 2011, the real estate market will begin to improve. Perhaps you can wait it out.

Buy Time: Unfortunately, waiting it out is not a viable strategy for most people who are upside down. Buying time involves contacting the lender and trying to work out some kind of a change in the payment structure or term of the loan which will enable the borrower to continue making his loan payments. In other words, you are attempting to negotiate a modification of your loan. While lenders have not been receptive to this, the new Obama Real Estate Recovery Plan is already getting Lenders to reconsider. Lenders are not in the business of owning property; they are in the business of making loans and collecting payments. Lenders don’t want to foreclose, but do so because of their economic interests. If seeking a modification, you must convince the Lender that it is in their best interests to work with you. This is done through your Hardship Letter and your financial statements.

Selling the Property: In today’s market, selling the Property generally requires a “short sale” because the owner owes more to the Lender than the property is worth. So the property cannot be sold without Lender consent and willingness to take some or all of the loss. Again, the key is your Hardship Letter and your financial statements… convincing the Lender that they should take the hit because you cannot afford to do so.

Give the Property Back: Lots of people talk about sending the lender “jingle mail”, literally mailing the keys to the property to the lender and walking away under the mistaken notion that that’s the end of it. For the lender, though, things are far from over. Giving the lender “possession” does not give the lender “ownership”. And the lender must be willing to take title, something they won’t do if there are junior liens. Giving the property back requires a “Deed in Lieu of Foreclosure” which is to be recorded. While such Deeds are rare and complicated, they are becoming more common. All this information is helpful for an Upside Down Mortgage Refinance 2009 as many people are now turning to this option. Today everyone is looking for upside down mortgage relief and are finding it in hands of professionals.