Millions of Americans have experienced hardships that have caused them to fall behind on their mortgage payments for a variety of reasons. Events like loss of employment, getting divorced and trying to maintain the entire household without the former spouses income, or a medical problem that prevents the homeowner from earning the living they're accustomed to, are common.
On November 6, 2015, a Texas jury awarded Mary Ellen and David Wolf $5.38 million because Wells Fargo Bank and Carrington Mortgage services submitted forged documents to foreclose on the couple's home. You read that right, a $5.38 million settlement for one home! Journalist David Dayen points out that if you multiply that amount by the roughly six million homes that have been foreclosed since the financial crisis began in 2008, you get $32 trillion. Compared to the $25 billion the banks paid as part of the National Mortgage Settlement, and the continuing foreclosure fraud, it sure seems like the banks got off easy.
The rate of American homeowners with negative equity fell to 13.4% in the third quarter of 2015, according to real estate company Zillow. That's down one percentage point from the second quarter of 2015 and represents the 14th consecutive quarter of falling negative equity rates.
It's good news that the positive trend continues, but millions of homeowners remain in negative equity and in need of a solution.
Negative equity is also called being underwater or upside down, and it means that the market value of your home is less than the amount you owe on the loan. That means the home can't be sold unless you pay the difference between the home's sale price and what you owe on the loan. If you don't have that much cash, you're stuck in the home.
Foreclosure is so stressful that you'll find yourself experiencing powerful emotions when you are faced with it. Your home is the most expensive, and most important purchase you will ever make, so the possibility of losing it is tough to reckon with. How do people do it?
If you can afford to pay off your mortgage early, should you?
So your mortgage payment has become more expensive than you would like it to be, and the house isn't worth what it used to be.
What are your options to improve things?
It depends on the specifics of your situation and what your goals are. If you want to keep your home, you can try to get the monthly payment lowered to a more affordable level. There are a couple ways to do that. Two of the most common are refinancing and loan modification. But which is right for your situation?
The Home Affordable Modification Program (HAMP) was introduced by the Obama administration in 2009 with the goal of helping distressed homeowners keep their homes. That help was and is badly needed. The ongoing mortgage crisis and recession has left millions of Americans owing more on their home than it is worth and without enough income to afford their monthly payment. Something needed to be done, and Uncle Sam stepped up with HAMP.
So you've had some problems that made it difficult or impossible for you to pay your mortgage. Now you want to get a loan modification so the monthly payment is reduced to an affordable level and the threat of foreclosure goes away. But how do you go about applying... and will your lender support you?
Most people don't plan for it, but about half of all marriages end in divorce. And when a couple decides to go their separate ways, their property has to be divided up or sold. Some property is easier to divide than others. A couple's Beanie Baby collection is relatively easy to deal with in divorce. It has some positive value, can be sold, and easily carved into two pieces. Your underwater home, on the other hand, is the opposite. It can't be cut in two or immediately sold and is harder to deal with because of that.
