Just got a call yesterday from a past client in a bind. They had refianced their home two years ago and it appraised at $265,000 - so they took $60,000 cash out- paid off some bills, bought a car and went on vacation. Now, he has lost his job- they owe $205,000 and the new appraisal just came in at $180,000. Seems unreal to have that large of a "swing" in just two years.
I explained to him that lenders who did homeowner re-fiances- asked the homeowners what they thought their home was worth and ran with it. So when they guessed(hoped) their home was worth $265,000 and the lender said ok- I am sure you know what it is worth Mr. Homeowner. ...the loan was made.
Who's fault was it? The lenders? The appraisers? The homeowner for using their home as a ATM?
The choices are now 1) Sell the home and bring a substantial amount of money to the closing to satisfy the difference. 2) Call your lender and see if they can maybe forego a couple of months of mortgage payments and attach them to the end of your loan to give you time to catch up. 3) If the interest rate is what is making your home unaffordable ask for a loan modification with a new interest rate. 4) sell your home on a short sale- where the bank takes what the home can actually sell for and forgives the rest. (a top real estate agent in your area should be able to help with this) 5) Let the home go into foreclosure.
The bottom line is the lender had a BIG hand in getting you into this spot- so most likely will work with you to avoid foreclosure. But, you have to ask - send certified hardship letters. I have some sample ones I can post if you need them. You will probably have to send more than one- but persistance should pay off.
Best of luck. Tamara O'Connor
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