Shedding a bad mortgage
by Jacques Ambron
Dec 31, 2019 | 6274 views | 0 0 comments | 703 703 recommendations | email to a friend | print
Jacques Ambron is executive director of sales for Brown Harris Stevens Forest Hills, LLC.
Jacques Ambron is executive director of sales for Brown Harris Stevens Forest Hills, LLC.
Q. I am behind on my mortgage and the value of my property is lower than what I owe. How can I get out from under?

A. This is not an uncommon problem, and the best thing you can do to help yourself is to find a workable solution as soon as possible. The federal government is helping people in your situation by assisting the banks that are lending to you. There are several choices depending on your situation and qualifications.

1. Loan Modification: If you are qualified, the bank will consolidate your mortgage debt and interest rate to a more favorable rate. The following conditions apply:

• The household or mortgagor(s) has experienced a verifiable loss of income or increase in living expenses;

• One or more mortgagors receives “continuous income” in the form of employment income (e.g., wages, salary, or self-employment earnings), Social Security, disability, Veterans benefits, child support, survivor benefits, and/or pensions;

• The mortgagor’s surplus income is at least $300 and at least 15 percent of his/her net monthly income;

• 85 percent of the mortgagor’s surplus income is insufficient to cure arrearages (balance owed) within six months;

• The mortgagor’s monthly PITI (Principal Interest, Taxes & Insurance) mortgage payment can be reduced by the greater of 10 percent of the original monthly mortgage payment amount and $100, or using the Market Rate and amortizing the new loan over 30 years;

• The mortgagor has successfully completed a three-month Trial Payment Plan based on the reduced mortgage payment amount or a four-month Trial Payment Plan in cases of imminent default; and

• The mortgagor has not received a Loan Modification or FHA-HAMP

2. Short Sale: Here, the holder of your mortgage will allow you, the mortgagor(s), to sell the property for less than the amount owed. You may also be given a small moving fee to help you with your move. This process requires that the holder of the note agree to the price accepted.

Just be aware that you could be liable for income tax on the amount forgiven. Talk to your accountant for more details.

3. Deed in Lieu of Foreclosure: In this case, the noteholder will allow you to sign over your home and walk away with no more liability.

4. Foreclosure: If you fail to take one of the above steps, then the noteholder’s only recourse is to foreclose on your home. The home will be sold at the courthouse for whatever price the noteholder is willing to take.

If they cannot get a price that satisfies them, the bank/noteholder will assume ownership and sell it as they wish. You will be required to leave the property or face eviction.

Regarding your credit status, a loan modification or short sale is your best option. Don’t allow it to go as far as the foreclosure step. For best results, speak to an agent with experience in the short sale arena.

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