Negative Equity and an Upside Down Mortgage

Oct. 3, 2009 - PRLog -- Owning a home that is worth less than you paid for it is bad.  Making matters worse you could have a mortgage that has a balance or a combined balance that is greater then the value of your home.  If this is the case then you have a negative equity mortgage or an upside down mortgage, whichever you prefer.

Most people who have a mortgage with negative equity or an upside down mortgage don't know what to do so often times, they do nothing.  When looking for ways to handle these situations homeowners often start out looking for ways to reduce their mortgage balances. To say that handling an negative equity mortgage is difficult would be an understatement.

Balance reduction requires leverage and one of the only leverages pieces that homeowners have is the payment they pay to their lender. There is no incentive for the lender to help you if you [always. Missing your [mortgage payments. Get your lender to work with you and gain some leverage. I am sure you heard that missing payments on your mortgage is the only way to get your lender to work with you. If you want leverage, miss some mortgage payments.

Now I can't tell you to miss your mortgage payment but if you decide to do so you are heading down a path where you begin walking that fine line between foreclosure and homeownership. Generating the desired leverage is tough and you need to know that you are potentially facing foreclosure.

The best chance you have at getting your lender to work with you is to have two mortgages. If you are headed to a foreclosure on your home the second mortgage company is in a bad position.  Focusing your attention here could result in a settlement of the balance or a balance charge off which is a good thing.  The charge off will require additional attention down the road as the account will turn into a collection account but you won't have any further payments to that mortgage and the lien on your property will disappear.

When you look at upside down mortgage refinance you need to look only at the first mortgage only. Look at who insures your loan and who services it, typically who you make your payments to.  If it is either Fannie Mae or Freddie Mac you could potentially have the ability to refinance.  There are additional guideline and criteria that need to be met but this is a very good opportunity to reduce your interest rate and solidify your mortgage terms.

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Brent Lane is a Mortgage Professional. He writes about Upside Down Mortgage issues including negative equity mortgage and upside down mortgage refinance.