Families across the country are struggling to afford their home payments as a direct result of the rise and collapse of the housing bubble. Many of these homes were purchased at the height of the bubble, meaning that their prices are not just high, but inflated far above their true value. When the market collapsed, demand suddenly fell, and prices returned to normal in an exceedingly short period of time. This crash led to a large number of homeowners not just struggling to pay a fair cost, but actually owing more than the property is worth. This tragic situation imposes an unrealistic burden on the property owner. If you face this kind of challenge, there are several things you can do to get help.
Option 1: Refinancing
Completing a refinance is one of the most common ways to get help for underwater mortgages. Los Angeles has a fair number of homes in this situation, so the banks and courts in the area are usually open to trying for negotiations. However, it is wise to approach them with the assistance of an attorney. There are a lot of cases where the banks may attempt to negotiate something that is more in their favor by playing on the relative inexperience of property owners. A lawyer will know what they’re likely to do and how they’re likely to react.
Option 2: Lien Stripping
Orange County homes with two mortgages may find that lien stripping provides a good alternative for them. Lien stripping is the process of converting a second mortgage from secured to unsecured debt. The theory behind it is relatively simple. At the time the mortgage was issued, it was covered by the value of the home. Now, however, falling prices have led the property to become so undervalued that the sale of it would not be enough to pay off both mortgages. In that sense, there is no security in the second one mortgage because it isn’t guaranteed by anything. Converting it to unsecured can have substantial financial benefits, by reducing payments and changing the required repayment overall.
Option 3: Bank Related Settlements
The government has been working with banks to attempt to provide relief to borrowers who are the most severely impacted. The banks have been given specific funds by the government earmarked for use to help reduce costs for those who are the most behind or the furthest underwater. Ally Bank, Bank of America, Citibank, JPMorgan Chase, and Wells Fargo are all included in this deal.
Remember, before you decide on any of these or take any action to pursue them, contact a qualified lawyer. All of these require substantial negotiation, and some may even require that you go through a court to make it happen. A lawyer’s advice can make the difference between a fair settlement and something that benefits your lender without helping you.
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