For the lucky ones that are not living in the areas with home values falling like rocks, refinancing might be the answer to their troubles. If a home owner bought their home when mortgage rates were high, then they might be able to refinance their loan at a lower rate. This would bring the payments down and for some this is just what they need.
But lenders are very squeamish to refinance anyone who has been laid off in the recent past. Even with a new steady job, their credit rating may have been affected by past due payments. But there is one point of good news. The federal government has released billions of dollars in aid to help these banks get over their nerves and to provide mortgage help to those that need it.
Then there are the unlucky ones. Millions of people live in houses that are located in areas where home values have plummeted like rocks off a cliff. In some areas values have fallen over 20% in the last two years. For those people who bought when prices were high, the luck ran out. Many of them owe more on their mortgage than what the house itself is now worth.
And then there is a pesky bit of business with mortgage lenders. They usually want to get all of their money back with interest. If one of the unlucky home owners falls behind in their payments, they have few options. Selling their home won’t bring in enough money to pay off the lender. For them, mortgage help needs to come in the way of mortgage modification. This is when the lender changes the terms of the loan to help the home owner.
What other types of mortgage help are out there? Well, if the home owner can find someone willing to buy their home, but not at a price that will pay the lender, they might be able to negotiate a short sale. A short sale is when a lender agrees to forgive any amount of money still owed on a mortgage once a home sale is final. Most lenders will not agree to this unless they have few other options. But the costs of eviction and foreclosure can be a good way to argue for it. And there are consequences to the home owner. Taxes can be due to the IRS for the amount forgiven by the bank. Another option might be to see if they can rent the home out for an amount that will cover their mortgage and taxes. But that can be tricky since many people don’t know the first thing about being a landlord.