Question on mortgage 5 yr arm please (help)?

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When we bought our first home 3.5 yrs ago, We had wantd to live for 3yrs then move for personal needs…Our Mortgage officer insisted this was the best bet for a 5yr arm. It sounded good, and we could afford the payments. Insurance (health), gas, and HOA went way up and put us over the edge. The medical payment went up but the service degraded, so we are now contending with huge bills and basically we live pay check to paycheck and can barely afford food, (actually cant go shopping) But we dont qualify for assistance….Any savings has been depleted. It seems like a downward spiral, and it is just gettnig worse. So were juggling bills and doing the best we can, working overtime as much as we can however thats mostly on a freeze as well…
Now we have zero in our account and cannot pay our mortgageyet this month…. I called my bank to inquire with any options, but they refuse to talk with me till im 30-60 days in default. (how the heck does that make sense?) Can any one tell me what options there are? Iv e heard about a new legislation where a home-owner can (refinance) for lack of better word, to the actual value of the home. Ours is valued at more than half of what we paid, or are trying to pay. There is something else I heard of where the bank lets you skip a few payments and puts them at the tail end of our loan. I dont want to walk away, just frustrated that I need help and bank wont talk to me??? any options and advice would really be appreciated. thanks

  1. Reply
    Biggie @ Arbor Mortgage
    May 16, 2011 at 5:47 am

    I would not worry about your medical bills at this point. You have to make your mortgage you number 1 priority. The banks will not defer your payments until you are behind. You won’t be able to refinance your home now because your ARM has not adjusted. Unless you can get an interest of 2% less than what you are at currently, it will not make sense.

  2. Reply
    I Buy And Sell Houses
    May 16, 2011 at 5:52 am

    You can ask your lender for either a loan restructuring or forebearance. A loan restructuring changes the terms and conditions of the loan. A forebearance moves some of the missed payments to the end of the loan.

    While there was a lot of mortgage abuse and bad loans made in the past few years, I really can’t fault your mortgage officer for the type of loan he put you into. (And I recognize that you’re not really blaming him.) If the plan was to move after 3 years, a 5 year ARM wasn’t a bad choice.

    The legislation you’re referring to–refinancing to the actual value of the home–isn’t law. In fact, I’m not even sure it’s been introduced. So I wouldn’t pin my hopes on that one.

    One possibility is to consider a short sale. It’ll injure your credit, but not as badly as a foreclosure. In a short sale, you sell the property for less than you owe. The sale is contingent on the lender’s approval; it’s the lender who’ll take the loss on a short sale. A short sale is something you can try immediately. You will have to demonstrate a hardship to the bank, but based on your question (medical bills, depleted savings, etc.) you probably would be able to do so.

    If you were able to rent out your property for approximately your mortgage payment (even somewhat less), there are a number of possible options. They range from a straight rental to a lease-option to using a land trust. On a lease-option or land trust, you’d be able to get somewhat above-market rent. And while you’d be making up the difference, that wouldn’t be as bad as your current situation.

    Search for some good Realtors in your area. Look for ones who work with investors; that’s at least a clue that they understand creative financing. (Or–not a pitch–e-mail me and I’ll refer some to you.) You need some “out of the box” thinking, along with solid numbers on your present home’s value, rental income potention, and other items.

    Hope that helps.

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