Any ideas on the solutions to this mortgage problem?

Question

Someone is saying that their mortgage is adjustable and the rate will rise in December of this year, and then they believe they will not be able to afford it at that point and

that they will be forced out?

Is this truthful, and what can they do, to :

A.) keep their home

b.) or possibly sell it?

c.) Still have some place to live ?

How can this affect their credit if they are forced out ?

They have good credit and good jobs , but they say that they have already tried to ask for a refinance and that they can't be offered one because the property is too low in equity to qualify? They have only asked one company so far, is it possible that another company might offer a refinance ?

Answer 1

They should check with a Mortgage Lender who is familiar with an FHA Rescue Loan. I'm not sure if this was officially approved as of yet, but they still should inquire. Unfortunately, this is happening to many people today and it certainly is not fair because this can have devastating effects on them if they don't get help fast!

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Answer 2

If they have good credit then it is possible that they might not have a big increase in their payment.  Tell them to look at their mortgage note.  It will explain how their payment will adjust.  The indexes that many payments were set against have gone DOWN in the last 6 months.  

It depends on how much value they've lost, as to whether they can refinance.  FHA might be their safest bet.  They might also talk to the finance company to see if they can fix their interest rate.

Have them contact me if they need specific advice.

Answer 3

It is possible to try another company. Have them go to bigger lenders that are doing FHA loans. (BofA or Wells Fargo perhaps)  They may be able to qualify that way.

Otherwise, yes, they may need to look at selling their house.

There are programs now in place to help this situation. If they have not been late on their payments and they know it will adjust, they can talk to an FHA loan officer and they can help them.

Good luck!

Answer 4

There are places that will help them.  On our news in St. Louis they talk about what places to call.  See if there is anywhere in your area offering help.

Answer 5

a). to keep the home, they need to keep making payments

b). the can sell it if they can afford to, but it sounds like they owe more than it is worth so a short sale may be the only option.

c). Back to a). the only way to stay in the home is to keep making payments. If they do a short sale or go in to foreclosure, they will have to leave.

I would have someone who knows what they are doing look at the paper work from their closing. It is possible that they are freaking out over nothing. Just because it is an ARM does not mean that they will not be able to afford the new payments.

Chances are if they owe more than the home is worth, no one can refinance them. A workout with the current lender may be the only option. It is possible that they may keep there same rate at the lenders discretion or if they qualify according to some of the new legislation that has been enacted.

They should be talking to their servicer now about what their options are.

Good luck.

Answer 6

Definitely check to see if they can afford the payments when it adjusts. There might be 1 mortgage company that will refinance their loan, the government. They can do whatever they want, isn't that great. FHA here to save the day. No banks will touch that loan because of the equity issue. If the company servicing the loan does not want to do anything to lock in a rate for them then its time to get creative. You should tell them to see if they can get approved on a new home loan while still making payments on this one if they still have until Decemeber. Tell them to find a cheaper home than what they have (shouldn't be hard in this market regardless of where they live). Mortgage companies really like to stick it to themselves on this one. What they do is assume the next house you are buying will be your primary residence and the one they are moving out of will become a rental property now. To qualify on a new loan they find rent schedules in the area, take an average of what rents are going for and include that number in your ratios. Its ridiculous, but they do it. They are assuming you are going to find somebody to rent the home you can't afford. If somebody approves you on a loan for something cheaper than do it. Tell them to find the new home and close on it right around the time their current ARM adjusts. Then stop making payments on the old home. The old one goes into forclosure while they just closed on a new one probably saving them a couple $100 a month in payments and will have a lower mortgage balance. Their credit will get jacked but tell them to have whatever credit cards they might need opened and if they are going to need a new car to lease or buy before they let the home go into foreclosure. It will take two years for your credit to improve but as long as you don't plan on financing anything new than who cares. If they are getting no love from their bank than there is no reason to show the bank any love. Let them be the property owner and ring in the New Year with a new home and a much lower mortgage payment. I'm not promoting this idea but if their back is up against the wall its always an option.

Answer 7

If they have an adjustable rate, it means they bought a house they couldn't afford.  They probably "expected" that their wages would rise to the point where they could afford it when it re-sets.  As with millions of others, they were wrong.

They should sell the house and buy one they can afford.  You say they have good jobs/credit... but good jobs and good credit doesn't translate to good decisions.  

If they can't refinance soon, they need to sell ASAP, because if they default the home will be taken and all the money they put into it will be gone.  Plus their credit will be ruined meaning they won't be able to get a mortgage for anything for a few years.

Answer 8

unfortunately this is what's happening to a lot of people right now. they signed or refinanced when the rates we're crazy low but never locked in the rate.

if no one will refinance them, they will need to try and sell but with the market the way it is, it's hard to sell.

they should try making even looking for a part time 2nd job. anything!

if they do have a foreclosure, it will really s***w up their credit!

Answer 9

Tell them to research "short sales".