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Will New Policies Help Underwater Homeowners? Not Me

Will New Policies Help Underwater Homeowners? Not Me

While President Barack Obama did fundraising across the West Coast last week, he did add one policy talk while on the road, in this case a renewed call for help for underwater home owners while meeting with a couple in Nevada.  His proposals continue to focus on helping those who owe more on their homes than the home is worth but are still current on their payments, by offering ability to refinance their loans and save hundreds of dollars a month in payments.

I always watch the homeowner discussion avidly, because I’m one of the struggling homeowners each proposal is supposed to assist.  Every time a program is proposed, or regulations are loosened, or I hear that this version would allow even more homeowners to participate I get excited, thinking maybe, finally, it will be my turn.

It never is.

I was a homeowner who bought my first home in 2005 with a second mortgage acting as a down payment, and a ridiculously overpriced home that was comparable to every other ridiculously overpriced home in the neighborhood.  Within a matter of three years, our house value tumbled, until despite having paid over $25,000 in principle off, our home is only worth slightly more than half of what we still owe.  Our interest is high, our debt to value ratio abysmal, and we had no hope of a refinance despite near perfect credit records, reliable income, and no other outside debt.

With the last version of HARP, it stopped mattering how underwater our home was — as long as we were current, we should be able to refinance, we were told.  The owner of our first mortgage, one of the largest mortgage holders in the country, contacted us to tell us we were pre-approved.  An hour long phone call filling out the paperwork with a representative confirmed it, and we were told to take the next steps: pay the non0refundable fees, complete the next batch of paperwork, and provide the documents we would need to to prove our identities and income.

A few weeks later we were told everything was good to go.  Our appraisal had just barely made it in at an amount high enough to allow us to refinance without additional points, since they were only refinancing our initial mortgage, not the full amount we still owed due to the second mortgage on the house.  All we needed to do was send a cashier’s check to the title company they had picked, and they would contact our second mortgage company for a subordination letter.  We would soon have a new loan that was nearly $300 a month less than what we were currently paying.

Weeks passed.  At first, I would get an update every Friday telling me that they were still waiting to hear back from our second mortgage owner.  Then I received an email stating that the deadline for the subordination was the following week day and that they would follow up with them then.

Then nothing.

After two more Fridays passed, I contacted them to see if they had heard anything.  Within 20 minutes I received an email from the title company saying I had been turned down because the second mortgage holder refused to subordinate their loan. They decided the debt to value ratio on our house was too high and they didn’t want to take the risk.

Two months, 20 odd hours of paper work and phone calls, and nearly $800 in fees, and my loan was suddenly turned down because there is no federal rule or guideline to make the second mortgage owner agree to a refinance.

As the market continues to deal with shadow inventory and more Americans shy away from purchasing homes, eventually even those who are current on their payments will begin to struggle, especially if value sink much lower.  Without a way to address mortgages that all owners can participate in, and not just those who have a certain amount of value, or have their loans held by the right owners, or don’t have a second mortgage attached to their home, solutions aren’t going to be effective enough to keep us in our homes.

 

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9:07PM PDT on May 16, 2012

Robin, although you don't say it in your story (probably for legal reasons), I'm betting you're talking about Bank of America. It sounds exactly like what we went through. Here's what we did; we found a non-profit mediator who didn't charge us a dime, and weren't affiliated with any financial institution. They helped us get our mortgage away from BOA and we are now back to working with our small, hometown bank, who have known our family for all their lives. My advice, do the same. CBS news just did a piece on a small-town banker who's integrity and trust of his fellow citizens has put their town on the road to recovery. Go small.

5:12PM PDT on May 16, 2012

Please dont' tell me that Bank of America is the holder of your second mortgage. I am currently trying to refi and Bank of America has to agree to subordinate my second before my refi will be approved. Please don't be Bank of America! They Suck!

11:40AM PDT on May 16, 2012

Gary A I don't disagree with your comment but there is more too what you say. The current housing market was caused by unethical practices by the banks and other housing lenders; these were criminal acts that I might add have yet to be prosecuted.

I was on target, in fact in 2006 I was offer $416K for my home but I was still working making good money and was only a couple of years from retirement. My goal was to reach full retirement, sell my house which would have given me a $200K+ profit and move back home. I lost my job in 2007, 18 mos. away from full retirement. Paid my mortgage, bills and lived on my saving for 6 months before I could take early retirement at 65. I was going to sell my home and then I found in that short period of a year my house had lost $100K in value. My home has now lost over $200K in value. The positive side is my work ethic did gardner me two pensions and SS and I can hold out and wait for the market to turn.
I did all I was supposed to do, I save, invested in 401K's which are also gone thanks to WS, invested in a home and work my ass off for 43 years. No these are not normal economic turn of events and those who had nothing to do with the criminal causes are paying for those causes of the unscrupulous, greedy and unethical business people.

11:13AM PDT on May 16, 2012

What the govenment needs to do is have the banks and other lenders open up and start refinancing the loans not only to their customers but to their non-customers; because they caused the problem for the rest of us.

I am flip also but my loan is with a private lender and therefore I have no where to go and she has refused to do anything like lowering our 6% rate. I am not asking anyone to reduce my mortgage amount; that is what I encurred and agreed to pay. However, I did not cause the down-turn in the market that brought the value of my home down over 200K unethical banks and the folks on Wall Street did that and I had no input. When I retired I could have sold my house with a $200K+ profit had the banks and WS not act unethically, now I am sitting here in this godawful place called Arizona waiting for the market to change so I can get the hell out.

I don't want any favors; I just want to be treated fairly now that I am in a position I didn't cause.

5:37AM PDT on May 16, 2012

This whole thing is disgusting. The only people paying for the mess that the banks and Wall St created are the little people. I did everything right. I bought a modest house in 2003 within my budget with a 15 yr mrtg so I could pay it off sooner. I have never borrowed against it and now when I need a new roof and some other major fix-ups I can't borrow because the majority of houses in my neighborhood have been boarded up starting in 2008 and the ones that sell are sold for $300-$5000. The few of us that have maintained our homes are being punished. Our mortgages should be completely forgiven. Why pay on a home that is now worth nothing?

8:24PM PDT on May 15, 2012

Not so sure things will ever go back to ' Normal " this time around. There has been to much corporate Greed and politicians who are owned by Corporations and Wall Street and have no concern for the average homeowner. Too many have already lost their homes and everything else with little or no help available to them. This includes many of our nations military and veterans. Most of the losses are through No Fault of the homeowner like too many in Washington and many of the current States Governors will have you believe, those Americans are Not Bums. I know first hand of the problems and I am worried things will get much worse including the fact more are becoming desperate with nothing else to lose, including veterans. Homelessness is Up for vets, suicide and crime is Up for vets and too many have claims for service connected issues with a backlog of claims / appeals in the millions and the VA plays games with paper work, hoping vets will give up or die. This has been going on for many years, even before Iraq, but the VA like the corporations are above the law. As long as there is no accountability for violations of Rights, The Law and Due Process by the US Government and the 1 % , Nothing can or will change. That is until We the People Have Had Enough....

4:11PM PDT on May 15, 2012

Robin I empathise with you. You, along with far too many other people, are the victim of a system which saw property prices rise far, far too quickly. This is not the first time that this has happened of course, I bought my first house in 1981 (in the UK) and saw the 'value' of it rise with a rocket like speed. Seeing this happen the banks (and other mortgage lenders) increased the rate of earnings to salary from 150% to 600% (basically you could borrow 4 times what you were earning) all based on the fact that if you defaulted they could re-possess the property, sell it for more than you owed them, and get their money back. Many fell for this and found themselves owing huge amounts of money, albeit against a property that was worth so much more than they paid for it - the banks (who really should have known better) allowed this to continue, indeed they encourage it offering those in this 'fortunate' position the chance to borrow even more money. The simple fact was that it didn't matter how much your property was worth (actually what you could sell it for) that was important it was how much you could afford to pay back; they got around this one by offering increasing terms for mortgages - when I first took out a mortgage a 20 year term was about the maximum, this rapidly increased to 25 years, then 30 years and even 35 or 40 years. All this allowed those holding mortgages to borrow even more money, all bouyed up by the fact that the 'value' of the property was out stripping

3:26PM PDT on May 15, 2012

Raise taxes on the rich please!

1:52PM PDT on May 15, 2012

too little too late too few

1:18PM PDT on May 15, 2012

Robin Marty
Historically, housing prices rise and fall, depending on economic conditions. People used to just hang on during the down times and made their money back in the up times, because, as some wag once noted, we keep making more people but we can't make more land to put them on. So, housing prices(in the most desirable areas) keep going up. Eventually.

Were some people encouraged to buy houses they weren't capable of paying for? Of course and the people who lent that money should be the ones who get burned. On the other hand, as long as you can make your payments, eventually, you'll get back what you paid in. Hang in there...

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