Current Mortgage Rates: Options for Owing More Money Than Your Home Value: Part 1

There are a few options if you owe more than your home is worth although not all may be preferred options.   1. Find out if Fannie Mae or Freddie Mac own your mortgage.  Both of these agencies allow for refinancing your current 1st mortgage up to 125% of the value of your home.    Fannie Mae has their Durefiplus program and Freddie Mac has their Relief Refinance Mortgage Open Access" program which they recently opened up to allow the borrower to refinance with a lender other than their current servicer.  Originally Freddie's program was restrictive to only the current servicer of your mortgage.  The restricted the borrowers from being able to obtain the most competitive rates since they were at the mercy of the current servicer.      You didn't mention if owe more than the home was worth was this "owing" more with just a 1st mortgage, one mortgage  or was the "owing" more than the home was worth determined by more than one mortgage (ie: a 1st and 2nd mortgage where the 2nd mortgage put the house underwater.  The reason why this is vital is because with the agency's programs mentioned above, they do not have any CLTV restrictions.  The cltv is the "combined loan to value of all mortgages encompassing the home.   ie:  if your home is worth 150,000 and the first mortgage on your property is 150,000 and you also have a 2nd mortgage of 60,000 your ltv will be 100% and your cltv  will be 140% which technically will be allowed with the programs above.  With saying that both Fannie and Freddie have what they call an AUS system (Automated Underwriting System) which your loan application has to be run thru to determine if it would be an acceptable scenario for a refi.   Note:  Both Fannie and Freddie also have version of the above program called refi plus and relief refinance same servicer which would be a manual underwrite but the borrower would be restricted to their current servicer and will be at the mercy of their current servicer to determine eligibility or not based on their own internal guidelines.     Also if the borrower does have a 1st and 2nd mortgage on their property the 2nd mortgage holder will have to approve/allow them to subordinate the current second so they may refinance their 1st mortgage.  Mortgages or liens on a property are like standing in line.  Your 1st mortgage is in line first and your second mortgageis next in line behind the 1st mortgage. If you refinance or pay off the 1st mortgage then the 2nd mortgage moves up in the line to the 1st position so the 2nd mortgage holder has to agree to Subordinate Or in other words allow the "new" refinanced 1st mortgage to cut ahead of them in line into the 1st position.   2. Another option would be to call your current mortgage rates company and request a loan modification. A loan modification is where the current mortgage company may offer you some payment relief, re amortize your current mortgage rates to a longer term, a lower interest rate or forgive some of the principle balance of your loan.  The challenges with this is:   a.       Getting a hold of someone at your current mortgage rates company who can actually assist you since it appears most of the mortgage companies either are understaffed or really do not care and may actually prefer to let them foreclose on your home (even if they will never admit it) b.       There are companies for a fee, who may also be able to assist you with a loan modification although hey will generally charge you 1-2 months of a mortgage payment.  If you go directly to your mortgage company requesting a loan modification it shouldn't cost you anything upfront but then you may never get a hold of anyone who will help you. c.       They usually force you to be delinquent 30-60-90 days on your current mortgage before they will entertain the notion of trying to help you.  This can destroy your credit if you are not or haven't been delinquent on your mortgage payment history up until this point in time d.       A lot of the time (not always) with loan modifications the relief or modification offered may not be permanently but for a period of 3-5 years then your loan will revert back to the original terms.  When they give you a modification with some forgiveness of your principle balance, unless the value of your property increases at some point in time in the future to cover any balance forgiveness amount, you generally will not be able to refinance at a later date to a possibly lower rate until the current lender is paid back.   Continue to Part 2