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ARM Mortgage trouble – need opinions on what to do in troubled situation?
March 15, 2010 by admin
Filed under Michigan Refinance
We got into an ARM 3 years ago. We have two loans. $120,000 and $30,000. Both are no interest. We have negative equity in the house because we live in MIchigan and the housing market is plunging. Also, our ARM is about to adjust and will raise our payment $350 a month now, and again in January. We can’t afford that. We tried putting our house on the market for even less than what we owed to get out from underneath it. It was on the market for a year and we had no bites. We are OK right now, but when this thing adjusts, we’re not going to be O.K. We are trying to do the right thing, but not sure what that is. We also tried to refinance, but we need to spend $12,000 to do that because of closing costs and negative equity. We can’t afford to stay here, and we can’t leave because we can’t sell our home. We can’t do a short sale because we are not in foreclosure. We feel stuck. Does anyone have any ideas?
I meant interest only, not no interest. We can’t sell the house for market value. We tried to sell it below market value and couldn’t….no one is buying in Michigan right now. We’d have to sell the house for $100,000 – $50,000 less than what we owe for it to sell it.
Your situation sounds like a classic textbook situation. One recommendation is to sell the house for the current market value (market value is the price that a buyer is actually willing to pay) and use the proceeds to pay down the ARMs, move out to a rented residence, and pay the remainder of the ARM balances in monthly payments. The monthly payments (and your financial situation) would be more manageable. Many other options are less desirable.
Also, try working out a solution with your mortgage company. Many mortgage companies are willing to negotiate in order to avoid foreclosure. Or, contact your local nonprofit community organizations that specialize in helping people in your situation. Many of these organizations have popped up in recent years due to the housing market.
As a short-term solution, you can try renting out your house and staying somewhere else temporarily. But this short-term solution would depend on the rental market in your area.
Your situation sounds like a classic textbook situation. One recommendation is to sell the house for the current market value (market value is the price that a buyer is actually willing to pay) and use the proceeds to pay down the ARMs, move out to a rented residence, and pay the remainder of the ARM balances in monthly payments. The monthly payments (and your financial situation) would be more manageable. Many other options are less desirable.
Also, try working out a solution with your mortgage company. Many mortgage companies are willing to negotiate in order to avoid foreclosure. Or, contact your local nonprofit community organizations that specialize in helping people in your situation. Many of these organizations have popped up in recent years due to the housing market.
As a short-term solution, you can try renting out your house and staying somewhere else temporarily. But this short-term solution would depend on the rental market in your area.
References :
Trust me I feel your pain…I too have a house on the market in Michigan for the last 6 months…it hasn’t sold and it has only shown once…We had to move for work, so now we are paying the mortgage plus rent…we can’t buy a new house because of our DTI with the current mortgage!
I would recomend calling your mortgage company and asking what your options are. I know you think they won’t help, but they may be more helpful then you realize due to the housing market in MI right now. If you tell them that once the payments go up you will be looking at forclosure they may work with you now as if it were in forclosure…they are required to offer Housing Counseling and other services to people who are in forclosure, they are even required to look at adjusting the loan to avoid forclosure. You may even consider asking for a deed in lieu of forclosure (where you essencially give the house back, they still bill you for the deficiancy balacne, but it doesn’t show up as forclosed.
You do not have to be in forclosure for the bank to agree to a short sale, you just have to come up with a good reason…
here is a link to HUD Housing Counsleors in Michigan…Greenpath is really good, we used them a few years ago to avoid forclosure.
http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?webListAction=search&searchstate=MI
Here is also a link to HUD’s website on avoiding forclosure.
http://www.hud.gov/foreclosure/index.cfm
PS…start looking out of state! We moved to Colorado and the economy out here is GREAT…all the businesses are hiring, I don’t feel like the cost of living is that much higher than it is in MI, and the weather is GREAT!
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You might be able to renegotiate your payments. The ARM crisis presents problems to lenders as well. Many do not want bad loans on their books, so they might be willing to renegotiate your payment structure. They may delay your reset or hold down the payments. Keep in mind, however, that you probably will have to pay extra at some point—with higher future rates or additional payments down the road.
See if you can take out a “bridge” loan. Some lenders allow their customers to take out loan for the period until they are able to refinance or they sell the home. With its own rates and fees, the bridge loan does not have to be repaid until the house is refinanced or sold.
Apply for government assistance. Some counties are making money available to homeowners to help cover the difference in their new payments. State governments are also looking into the mortgage crisis, as is the federal government. The programs in place are not a long-term solution, but they could help cope with higher payments in the short run.
Good luck!
References :
http://www.road2you.com/articles/refinance/refinance-leads.htm