svb4jb

should I try to refi or miss mortgage payments

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Hello everyone out there, I am a new and nervous forum user! I am in the state of Nevada and struggling to keep my mortgage current. Our mortgage is with IndyMac, now OBW, fixed at 6.85%. We do not qualify for the loan modifications according to terms at government website. Our mortgage is 29% of gross income. What are people doing who are a little upside down in house AND are making current payments? Is there a possibility of refinancing? I believe we owe 300k and value is about 280K. do we have a chance or do we gamble and miss payments to see if they will renegotiate our loan terms? We haven't had any major hits financially, but lessened hours and maternity leave have taken enough of a hit to hurt us monthly! Help, we're stretched to the max!

Edited by svb4jb
not, instead of now

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Sorry, not a mortgage expert (wait a minute - I'm not an anything expert, lol)but thought I'd give you a *bump* and a welcome! :D

Hopefully Denita will be by soon, she may have an answer for you.

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Find someone REPUTABLE to assist you. I tried and tried to work out a loan mod with my mortgage servicing company after struggling for a few years. I also heard of countless stories about people saying that servicers were unwilling to work with them unless they were behind on their payments. What a gamble! Well, I decided to skip one payment (only one) to see if they would work with me. I also found a reputable agent to assist me. Fortunately for me it was a winning combination. My house payment was reduced by $640 per month permanently. No trial period, and no five year plan either. It is for the remainder of the loan.

Try subscribing to the following for up to date information. It is extremely helpful: http://www.mortgagenewsdaily.com/

Best wishes!

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Just a quick question- you state that your mortgage payment is 29% of gross income. That's a very healthy ratio- much lower than others. Why is it that you cannot make the monthly payments? Lenders will ask you this so you need to address this.

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Hello everyone out there, I am a new and nervous forum user! I am in the state of Nevada and struggling to keep my mortgage current. Our mortgage is with IndyMac, now OBW, fixed at 6.85%. We do not qualify for the loan modifications according to terms at government website. Our mortgage is 29% of gross income. What are people doing who are a little upside down in house AND are making current payments? Is there a possibility of refinancing? I believe we owe 300k and value is about 280K. do we have a chance or do we gamble and miss payments to see if they will renegotiate our loan terms? We haven't had any major hits financially, but lessened hours and maternity leave have taken enough of a hit to hurt us monthly! Help, we're stretched to the max!

Hey SV, let me tone in here...

Out of the entire country, your area is the worst hit for decreasing value. I'm not looking to sell you but give you some helpful information. I work for an Attorney Law Firm that does modifications. I speak to people in 41 states that are in trouble with their house payment. I understand what you are going thought, it's a mess.

Here's one of the value check sites I use to determine value ... http://www.cyberhomes.com/

You have a good interest rate, your not behind, and your income is less than the 31% requirement to qualify for a mortgage modification. Using the link above, you will probably find yourself up side down. You do not qualify for a mortgage.

One thing I am seeing with people that did their own modifications, and get turned down. People are being to honest to air their dirty laundry. You need to mention on the original application, describe your situation bad, bad, bad.... Default is Imminent.

I not saying for you to lie, you need to realize what you say, how you say, and when you say, will determine getting approved.

Tonight I just spoke with a homeowner who has Chase Mortgage - last year his lender told him he had to be behind three months on his mortgage before they would work with him. Which he did and he started sending in paperwork, which was lost 5 times. Now ten months later he finally received his modification at the same rate with his arrears on the back end of his loan. His payment went up $100 more per month. Their $2700 per month income, is more than enough for a $2200 per month mortgage payment. Now they really can't afford the payment.

Right now because you are not behind, nobody can help you. I want you to think you will be taking a serious gamble if you go late just to qualify. It will drop you credit score, and open your self up to possible financial ruin. That's what keeps Attorney Firms like us in business.

Realize your lender is not your friend, anything and everything will be used against you. Any modification their them is going to benefit them.

You can wait a few months and try again. Next time be lighter on the income and heavier on the expenses. Again I'm trying to give you a few words of advice.

Good Luck....

Edited by 2ndTimeAround

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JQ has a very good point. If your front end ratio is 29% then the issue could be other unseen expenses. I am assuming that your taxes, insurance and mortgage insurance (if any) are included in your housing payment. Is your current mortgage a conventional mortgage or an FHA mortgage?

Also, have you looked at how much you have taken out in withholding? If you are getting a large refund every year, reduce the amount of withholding so you pay in what you owe and take home the rest. Don't let Uncle Sam hold your money. This will help with cash flow. Even if you can free up a couple of hundred a month, it will help.

Have you taken a look to see where the rest of your funds are going? Sometimes "holes" in your budget develop over time that you don't really see unless you sit down and log each and every expense for the past three months. You might be surprised at what you find. I got rid of my DirecTV about 18 mths ago and all kinds of little things that eat up the budget. Got rid of two car payments within the past yr (Aug and Nov). Not having car payments is a big help. If you want, you can post some of your expenses and we might be able to help formulate a little plan.

The hard part about this is that you are only slightly upside down right now and if you could refi at a lower rate that would really help. But I haven't really seen that option available anywhere without you having to bring in the difference in cash to close. Maybe Morrow or one of the other loan officers on the board knows if that is possible.

Stopping payments is a bad idea. The servicers like it because then you are in default and they make more money to service a loan in default. It is one of the reasons their first suggestion is to stop making payments. It will poisen your credit report and the servicers know it. Now, if you are in a desperate situation and you are giving the house back, that is a different thing altogether, but it does not sound like that from your post.

The process that I am talking about is finding a few dollars here and there that add up to enough to not only give you breathing room, but actually to have your money work for you. You have to be brutal with your budget when you are cutting things out. In fact, when I started I started with zero and added just what needed to be added. You will be surprised if you do this method on how much money just gets pi$$ed away on piddley stuff. Try it. :)

Edited by Denita

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Thank you for all of your replies. Very informative.

To answer some questions: We are struggling for many reasons.

1. My husband went FT grad student to keep a scholarship and had to decrease his hours. I took only a small time off for maternity and subsequently have lower monthly checks for the remainder of my fiscal year. :( This will get better starting next August, assuming I am still employed in this horrid economy.

2. We have too much unsecured debt! I know our mistake and no it was not on totally frivilous things. Much of it was due to living expenses while putting my husband through undergrad . . . Plus we had 3 kids in the meantime.

3. we bit off a little more than we could chew when we bought our house 6 years ago. I believe we are still 105% with our home, but we know we need to get out of debt.

We feel like we are stuck. I have seen people around me with many tangible things, you know, like horse trailers, snowmobiles, boats, and much bigger homes now with mortgages way lower than ours because they stopped their payments and now have lower interest rates.

Then there are people like us who, Yes, haven't made the smartest choices or CHANGEs and have too much debt, but are doing our best to make our payments and stay current AND can't lower our interest rate any because we weren't stupid enough to get a rate with an ARM anyway.

I am looking toward my husbands grad school schedule this winter and wondering how we're going to manage with increased daycare costs that come with increased school hours and decreased work hours. With that, I have made some changes with things like internet, dish, home phone, etc. Now, it's just staying afloat with the credit card bills.

P.S. I read I'm not supposed to write long messages. Sorry, still learning about forum blogging and how to balance a checkbook.

Thanks for listening and helping!

SV4JB

Edited by svb4jb
not complete

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Denita, we have a fixed loan, not FHA, it does include our taxes and insurance. IN addition, I keep most of my money from witholding a higher amount. Is that what you mean?

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2nd time around

In response to "next time be lighter on the income and heavier on the expenses " We haven't applied for any modifications yet. Also, do you work for one of those law firms that finds things wrong with our original loan docs and then works out a deal for the borrower through the lender? If this is correct, do those things work? We got a notice in the mail for one of those and I called to see what the deal was, but it makes me super nervous. Plus they want money up front. They say it is fully refundable, but do you think that's safe? Does anyone know if those law firms help? They say based on minimal verbiage over the phone about income and price of house that they can get us 4% for sure. What do you think?

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I had a gut feeling. But you know when they have an A+ rating with BBB, etc. . . hard to know what to believe anymore!

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Denita, we have a fixed loan, not FHA, it does include our taxes and insurance. IN addition, I keep most of my money from witholding a higher amount. Is that what you mean?

Merrybucks is right. Don't give money up front to one of those programs...most are scams anyway looking to grab off a few thousand from you. Ignore those post cards.

Loans can either be FHA loans or Conventional type loans. Fixed is either an FHA loan or a conventional loan. Look at your actual note and mortgage documents that you signed at closing, it will say if its FHA. If it does not say FHA, it is conventional. I am asking because you might be able to do a streamline refi if its an FHA loan depending upon the actual value of the house. One of the current loan officers that frequent this site would have a better idea of the underwriting guidelines to see if that is possible. There have been loads of changes made since Oct 2009.

As to withholding being higher - you need to adjust your withholding to the MINIUMUM amount you need to have withheld that pays your tax obligation. Don't have the government hold your money when you need it! Go to your HR person and they should be able to calculate a more accurate number for you.

Based on your situation, you have an income issue more than a mortgage issue. Right now you need to find as much to cut in your budget as possible AND find a way to increase your income. It is hard when your husband is working minimal hours while he is attending grad school. Don't look at the neighbors "stuff", you don't know what is actually going on with them unless you were to look at their financials directly. Looks can be deceiving. :shock:

It sounds like your real issue is other debt in relation to your current reduced income. Do you have car payments? What is your other debt? If you post a little detail, maybe we can help you come up with a plan without messing with your mortgage.

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Do you work for one of those law firms that finds things wrong with our original loan docs and then works out a deal for the borrower through the lender?

What you are referring to is a forensic audit, which is an examination of the 1003 Loan Application and GFE paperwork, that you received at your last closing.

A set is ordered from the closing attorney/title company that did your closing. Plus a set is ordered from the lender.

These three copies are reviewed for 1500 various banking/state violations. If one is found, the lender could be responsible to pay you back all the interest charge to date on your loan.

Sometimes it is beneficial to do a loan audit at the same time you are requesting a loan modification.

Here's the catch on the paperwork you have been receiving- again if a violation is found, you are still responsible for contacting an attorney to sue the lender.

I currently have a case going on right now - a violation was found on this 66 yr old lady living in a three family property in NY City. Years ago a broker talked her into taking cash out of her property to fix up it up. The put her into a 2/28 adjustable stated income loan. They inflated (lied) about her income, which was totally incorrect since she was collecting Social Security Income. Once you are collecting SS income - you cannot do a stated loan. A year went by - she was borrowing against the money she had taken to make the payments. Now the money had dried up. She is facing foreclosure.

Honestly if you have an interest rate lower that 7%, chances are your loan is free of violations. As for putting money up front for an audit, that money is not refundable. I've dealt with 1000's of people one on one - honestly I do not feel you need an audit (although I don't know your full story). If you feel you do, sent me a personal message and I can discuss with you.

You ask if law firms work - every request for modification is different. The person, the location, the lender, the loan, etc.. I have regularly seen completed mods coming back with interest rates at 2%, 2.5%, 3%, 4%, not higher than 5% (including investment properties). Doing a modifications is not just knowing about and understanding loans. It is the method thing are done, which is different for each lender.

In this last year one of my mods we gave back their money. The guy had'nt made is payment in a year, due to three kidney transplants (the first two his body rejected). The day before his sale date his lender agreed to modify his loan, but had the come up with $3000 for back taxes. We did not want him to lose his home so we refunded his money.

You mention value, I do not know one bank that is reducing principles. Value is a factor of a modification, if you are upside down, it can work for you. If you have equity, doing a modification can work against you. Modifications are awarded to help people that are in provable hardships. If a person has a lots of equity and behind on their payments, chances are a lender would move to foreclose because they could sell the property to get back to money that is owed on the loan. On the other hand if a person is behind on the mortgage, and is upside down. Chances are the bank will not do anything, because it will cost more to them.

I have a call team that does live transfers to me. One on one I speak to home owners in 41 states about their individual problems. It's so hard not to get involved.

My advise to you right now - do not speak to anybody, because they will talk you out of your money. You lender will reject your modification because you already have a good interest and you are not late. The bank is getting their money and you are not proving you are in a hardship. Understand you lender is in business to get your money. Going to them now they will turn you down.

..

Again wait a few months,

Edited by 2ndTimeAround

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T

We have too much unsecured debt!

For you information - you can negotiate yourself what you owe on your unsecured debt. Call them saying you are facing financial hard ship, mentioning you might be filing bankruptcy (not actually doing so). Start with 7% of what you owe, they come back with a lower amount, go up to 15%, they come down again, you settle at 25% of what you owe. The negative thing is you will have to come up with a lump sum payment.

I just spoke to a man with $200k in revolving dept - discussed him doing a chapter 7, which completely washes the debt away.

If you have $30k - $40k debt, suggest working with an honest debt reduction company. The way they work is you stop paying on your credit cards, you pay into a trustee account. Much smaller payments then what you were making before to the CC company. You pick the payment, one year to five years all the debts can by cleared up. By making the minimum payment on your credit cards, it takes up to 30 years to pay them off.

The negative thing going through a debt reduction company is they get paid for what they do. If you have $30k in debt, you settle for $10k, saving you $20,000. They put you into a payment plan so your don't have to come up with a lump sum. Expect to pay $4k to $6k over the repayment plan. You can still save $12,000 plus, with a payment that isn't going backward. I have seen this method work - you want to deal with an honest company, many people have been scammed.

Again I work for an Attorney firm - we do not do revolving debt reduction, but can recommend a company if asked.

Doing a bankruptcy you will regret doing for many years after the debt had been paid off. Having one on your credit report will cause you to pay higher payments for many things.

Good Luck

:)

Edited by 2ndTimeAround

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Don't go to a professional debt settlement company. IF you are going to go in that direction (and I'm not saying its the right thing for you because you have not posted your unsecured info yet) then it is something you can do yourself. This entire board is here to help you so you don't have to get involved with a potential scam.

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I am amazed with how quickly you all have responded and with how you so readily share your knowledge. Thanks again.

Okay, well, I suppose whoever wrote that it sounds like a credit issue, you're probably right. I just thought with so many people around me getting DEALS with loan mods, etc. . . I could try to go that route in order to stay abreast of our bills. I have been reading on this site on another thread that you can call the credit card companies yourself. I tried this once and they said "no." Not sure what I need to do exactly and was having a hard time finding it through my research thus far under "credit repair."

However, here it is:

We are dug deep in unsecured debt.

Am Ex with a 2.9%fixed at it's limit 24K

Schools Financial credit union with a fixed 9.9% with 9,500.

Capitol One with 15% $1600.

Citibank with 9.9%Fixed at it's max 24K as well.

Car payment $499.

We went without a car payment during my second baby maternity leave, until one of those cars crapped out on us. We own one car that we are praying stays with us for awhile and have the one huge payment. Still owe for 2.5 years.

On top of this, we have medical bills from my last pregnancy, daycare, and other normal bills.

I have read on the other threads about NOT doing debt settlement. I'd prefer not to. I'd like to try to be disciplined enough to do this on my own (husband too, of course). I know we can do it, but need some help on what we should do. Frankly, BK has never crossed my mind. I want to be responsible and believe I should be responsible for paying all that I owe, but need some help climbing out of the hole.

Thanks again and look forward to reading more responses.

P.S. Just figured out there was a page #2

SVB4JB

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Looks like you have apprx $60k + of debt right now + your house and car. Do you also have student loans? Have you considered BK? Look at the stickies in the BK forum. You can keep your house if you want to and if you are current when you file if you are going to file a Ch 7. With the outstanding debt you have you might consider it. I don't know your income so it is difficult to tell which would be better for you, Ch 7 or Ch 13 or no BK at all. Read that forum's stickies just to get an idea of what is involved. Look here for NV exemptions: www.legalconsumer.com Please note that student loans are not dischargeable in BK.

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Denita is right. As long as you have little or no equity in your home and you are CURRENT on your payments, the BK estate has no interest in your home. And see how much equity you have in your vehicle. If you are like most similarly-situated folks, you have less than what would trigger non-exempt equity. If this is the case, then consider BK7. You would dump all unsecured debt- credit cards, medical bills, etc. Would this put you in a better situation?

Keep in mind that student loans, secured debts, and a select few other debts would remain. Your credit would also be shot for 2-3 years, but that seems likely in your situation anyway. And it would remain on your credit report for 10 years for prospective employers and potential creditors to see. But in recent years, the stigma has greatly diminished.

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So we owe 300k on house and and it's value is only about 280K, not that we could sell right now anyway. We owe about 18,000 on car still and have about 19K in student loans that I currently have on forebearance. I filled out one of those Ch. 7 median thingys to see if we qualify. If I did it correctly (quickly though), we barely qualify. We make about 92K combined income and the median for nevada is $71K.

Here is the thing. We know my husband will make more money when he finishes grad school 2011 Spring as a Nurse Practitioner. I would still work for at least a year. We were thinking that if we then live off of his income and use all of mine to start paying down the debts and building a small safety net of a savings, assuming I still have a job, then we'd better have a handle on things. However, there are variables. I am a teacher, but school district is declining due to declining enrollment. You never know how secure a job is in this economic downfall. Also, this is if he gets the job he thinks he can get with the contacts he's made, etc. There are a lot of avenues as NP in this area, especially male ones. AND, if he passes grad school. Not an option, he will!

If this is the case, it seems to me BK might be a little drastic? Debt Settlement? What is your best suggestion given this new information!? Still BK?

I am still reading the stickies! I'll read more tonight. Thanks for the insight.

Edited by svb4jb
typo

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How much is your car worth? You need to know how much equity you have in the vehicle. BK may be drastic, but you have a TON of unsecured debt. So maybe your situation is drastic and you don't know it because it is simmering under the surface.

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Trying to do the right thing is not always a good thing, and a fresh start would relieve so much pressure from that debt load.

If you kept your house and your car + the SL's that are defered,.....would you be able to keep things under control?

2011, is a world away right now, and you need help yesterday........you should at least go see a Bk lawyer to discuss this.

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Yes, We could stay afloat with car payment House payment and student loans. I need to read more about BK before making any decisions. I'd still like to find another way. Why do you think that is better than Debt Settlement?

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Debt settlement takes much, much longer to recover from if you are settling a lot of debt. It is treated about the same as BK by the creditors - but you get none of the BK advantages. Once you are discharged from BK, you will begin to recover immediately. this does not happen with debt settlement. Also with debt settlement you will receive a 1099 for the 'forgiven' debt. With BK you do not pay taxes on forgiven debt. The question you need to ask yourself is "Do *we* have the money to fund the debt settlement?" Most debt settlement involves stopping payment on your unsecured debt and negotiating for a lump sum pay off with each creditor. It is a credit killer.

If you want to try to pay off your debt without filing you can try the debt snowball. You would have a good start by selling your car and buying a beater outright. This gets rid of the high car payment, and probably reduces your insurance and gives you a little extra cash to pay off something else. If you go on the debt snowball plan you do not settle your debt you pay everything off. You cut up your cards, and close the accounts. You can put your cards on a hardship plan (zero interest or 2% is common). This will negatively impact your score too. This is a viable solution but it involves a lot of self discipline.

Note, if you are going to file BK, this is usually not the correct strategy for over median income filers. There are different strategies for each method. If you are over median you can file a Ch 7 if your disposable montly income is less than X. I don't remember the number, it is somewhere around $105/mth, but you would need to check with an experienced BK attorney for your specific situation. Look here for your exemptions in your state: www.legalconsumer.com BTW, your car's value is usually not worth anywhere close to the private party value shown in KBB or Edmonds etc. The market has impacted vehicle sales too.

BTW, there is a HARP program for refinancing your home. You can refinance up to a max of 125% of value with a streamline refi where you do not have to income qualify as long as 1) your payments are the same or less than your current payment and 2) you refi exactly what you owe. That means no cash out. That also means you bring closing costs to the table, they are not financed in with the new mortgage. Check with various lenders in your area if you decide to go in this direction.

Edited by Denita

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