do i have any options?

[Anonymous]

Hello...just about 3 years ago my husband and i bought a condo, just prior to the market taking a down turn (in Ma).  We got one of those initerest only mortgages with a very high interest rate.  we refinanced one year later and extended our 2 year arm to  a 4 year arm.  so currently we have an 80/20 mortgage at 8.75% and 10.5% respectively.  The arm is not due to start adjusting for 2 years from now, however we are now in about $30,000 negative equity.  Who knows if the prices will continue to drop over the next two years. we expect to have about $20,000 in savings by next year at this time, all while trying to aggresively pay off some bills.  my credit score is 720 and the condo is under my name.  we would love to buy a house and would hope to be out of our condo withinthe next two years, depending upon how the market goes.  is there any options for us, should the market continue to decrease in value and if we don't have enough to make up our negative equity when it comes time to refinance?  i just get worried that prices will continue to drop and we will be stuck with an adjusting rate mortgage, and unable to come up with enough cash to cover the negative equity.  any help qwould be much appreciated.  thanks!

[ShanetheMortgageMan]

If you live in the home, since you have negative equity, then in order to refinance you would either need to bring in your own funds or your mortgage lender would need to agree to a "short refinance", where your mortgage lender would accept less than what they are owed.  A reason a mortgage lender would do that is if you are in danger of defaulting on the mortgage, with if your scores are 720 it's not too likely.  They might also do that if you are in an ARM, like you are, and are trying to avoid future defaults or missed payments.  So it wouldn't be a bad idea to contact your mortgage lender and see if they have any options for a loan modification.  The other route is the short refinance, and there aren't a lot of new mortgage lenders who are OK with it - since they see it's "settling" your previous mortgage debt they frown upon that.  There is a new program put out by HUD though, called HOPE for Homeowners or H4H, it's an FHA loan that allows a short refinance.  Your current mortgage lender still must cooperate though.  You can find a post of mine a week or so ago that goes over some details, or just get them for yourself at http://www.hud.gov/hopeforhomeowners/index.cfm or http://portal.hud.gov/portal/page?_pageid=73,7601299&_dad=portal&_schema=PORTAL.

[BrianB_The_Loan_Professor]

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@Anonymous wrote:
Hello...just about 3 years ago my husband and i bought a condo, just prior to the market taking a down turn (in Ma).  We got one of those initerest only mortgages with a very high interest rate.  we refinanced one year later and extended our 2 year arm to  a 4 year arm.  so currently we have an 80/20 mortgage at 8.75% and 10.5% respectively.  The arm is not due to start adjusting for 2 years from now, however we are now in about $30,000 negative equity.  Who knows if the prices will continue to drop over the next two years. we expect to have about $20,000 in savings by next year at this time, all while trying to aggresively pay off some bills.  my credit score is 720 and the condo is under my name.  we would love to buy a house and would hope to be out of our condo withinthe next two years, depending upon how the market goes.  is there any options for us, should the market continue to decrease in value and if we don't have enough to make up our negative equity when it comes time to refinance?  i just get worried that prices will continue to drop and we will be stuck with an adjusting rate mortgage, and unable to come up with enough cash to cover the negative equity.  any help qwould be much appreciated.  thanks!

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Eric - you find yourseld in an all oo common scenario right now. You are going to have to ride it out. Unless the market turns around you wont be able to buy up in a couple of years. Your best bet for now is to contact the lender(s) and ask them to help put you into a fixed rate you can afford - they would rather you make payments than it adjust and you stop making payments.

Good Luck

Brian