60 Minutes aired a segment Sunday night covering Cleveland, OH and its foreclosure situation. You can see the story here THERE GOES THE NEIGHBORHOOD
Many homeowners in Ohio have seen their homes value decline by up to 50% over the last couple of years. Continuing to pay a mortgage on a home that is now worth 50% less than 3 years ago is tough for some to stomach. So what options does a homeowner have that is underwater.
REFINANCE
Refinance utilizing one of the government programs designed to assist homeowners that are underwater. Many people have been utilizing these programs to refinance into a shorter term at a much lower interest rate, thus paying their balance down quicker at a similar (or cheaper) payment than they currently make. In order to take advanatage of these programs your home must be insured by either Fannie Mae or Freddie Mac.
You can check whether either one of the Government Sponsored Enterprises (GSEs) insures your mortgage with the following links:
Fannie Mae – www.fanniemae.com/loanlookup/
Freddie Mac – www.freddiemac.com/mymortgage/
Also, your mortgage must have been sold to one of the GSEs by 5/31/2009, which means you must have closed on your loan at least a month or more before that date
WORK WITH YOUR CURRENT LENDER
Contact your mortgage lender. One thing to remember is that banks are not in business to own homes. There are considerable expenses associated with maintaining and selling your home. More and more banks are beginning to understand that it is better to work with a homeowner before the foreclosure process has begun. When contacting your mortgage lender, ask to speak to someone in the Modification or Retention division. And be forewarned, there will be alot of paperwork.
WALK AWAY
Walk away. I will never advocate that someone that can make their mortgage payment should walk away from their home, but it happens. A few things to keep in mind.
Your credit report will reflect a foreclosure, and that will stick with you for at least 7 years.
Depending on the loan program, you will be prohibited from obtaining another mortgage for a minimum of 2 years and a maximum of 7 years
Your decision to walk away, will affect your neighborhoods property values, as your foreclosed home will be used as a comparable when your neighbors get an appraisal completed.
