Many homeowners in the state of Arizona are up to 50% upside down on their current mortgage. That means they owe more than the current home is worth under current market conditions. Many of them took out what is called an interest only loan or negative amortization loan for temporary reasons until the market went up to refinance out of those loans. Well, that did not happen and many people have been foreclosed on their home. Many homeowners continue to lose their home and have given up hope.
It was announced in the local paper that HUD will allow people who are 25% upside down in their current mortgage to refinance into a fixed loan guaranteed by the Federal Government. Again, the Government is trying to stop foreclosures to get the economy back on track. An estimated 200,000 of the 4 million to 5 million Americans struggling to save their homes have enrolled in the program, HUD says. About 10 percent, or 20,000, are refinancing. cited http://www.azcentral.com/business/realestate/articles/2009/07/04/20090704biz-refinance0704.html The borrower must not have missed a payment in the last 30 days in order to qualify for this program. However, this program will not stop unemployment rate. Many companies here in the Valley continue to lay off people from their work.
Furthermore, more and more people are keeping their job with a decrease in pay. Employers are slashing wages to keep people working. I have a friend who was approached by her employer stating that her wages will be cut due to slow times. She went back to the employer to negotiate less hours with the same pay rate per hour. Her employer agreed to the arrangement. I have several other examples that I have witnessed. What would you do if your employer lowered your wages right now?