Home values have been rising and many borrowers are using the equity that's helped to give them to take money out of their homes with cash-out refinances. But they're choosing to take out much less than they could. People seem to have learned how drastically home values can drop and erase their equity and then some, and they don't want to be stuck in that situation ever again.
Home equity is how much more your home is worth than what you owe on it. Negative equity, also called being underwater or upside down, means you owe more on your mortgage loan than the home is worth. The value of a home changes based on things like supply and demand for real estate and the health of the economy.
Obviously everyone wants equity in their home. If you have enough, you have the option of selling your home for a profit. Negative equity is bad and most homeowners never anticipated having it.
If you need help with your mortgage, you're not alone. Millions of Americans have experienced hardships caused by factors beyond their control that made their mortgage payment unaffordable.
If that's happened to you, there is assistance available that can help you keep your home and avoid foreclosure. But to get that assistance, you'll need to complete a Request for Mortgage Assistance.
Goldman Sachs recently announced that it has reached an agreement in principle to pay $5.1 billion to settle an investigation by the government into its activities involving residential mortgage-backed securities in the years leading up to the 2008 financial crisis.
$1.8 billion of the money is supposed to go to providing consumer relief. Goldman's press release states:
"The consumer relief will be in the form of principal forgiveness for underwater homeowners and distressed borrowers; financing for construction, rehabilitation and preservation of affordable housing; and support for debt restructuring, foreclosure prevention and housing quality improvement programs, as well as land banks.”
If you've never heard of force-placed insurance, consider yourself lucky. If everything goes perfectly with your home and mortgage, there's a lot you'll never hear much about, like default, deficiency judgment, request for modification assistance, or deed in lieu of foreclosure. But things don't always go perfectly, and a lot of things that used to be rare are more common now because of the housing market crash and recession.
What Is Force-Placed Insurance?
Force-placed insurance (also called creditor-placed or lender placed) is an insurance policy a lender or loan servicer places on a property when the owners' insurance is insufficient or nonexistent. The lender does this not to protect your investment, but theirs. Without insurance, a fire, flood, or accident could cause damage to or destroy the property, and it wouldn't be covered. A home is worth too much, and insurance is required, so the lender will get coverage if you don't.
You've probably heard that the Federal Reserve Bank announced plans to raise interest rates in December 2015 for the first time in nearly a decade. But that doesn't mean mortgage interest rates will be high anytime in the near future. Not by any stretch of the imagination.
The two words that have most commonly, and most appropriately, been used to describe mortgage rates in recent years are historically low. How low is historically low? They're currently at about 4%. The lowest they've ever been is about 3%, and they couldn't realistically go much lower. So, yes, very low.
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.
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?
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?
