Due to the economy, I took a 25k pay cut in the last 2 years, depleted my savings, maxed my credit cards, and now I am getting dangerously close to not being able to make my mortgage payments. I am current on everything and have a 750 fico score...

When I purchased the house 2 years ago, my W2 showed I made 80K in 2006. My wifes salary was about 20K in 2006, but since she had credit issues, we did not put her on the loan.

For background...

337,000 owed on 1st mort (6.125%), 43,000 owed on second mort (7.125%) = 380,000
House purchased for 435,000, currently worth about 400,000 as per zillow.
= 20,000 equity.

2008 I made 54K, wifey made 28K.

This year I will make 54K, wifey making 49K. (Whew, getting better , go wifey!!!!)

I have a 2959 payment on the first mortgage, I also have an interest only HELOC loan as my second mortgage for 277 a month, but I am sure this does not matter.

So, currently I am making 4500 per month... wifey makes 4200 per month.

2959 / 4500 = 65% of my salary.
2959 / 8700 = 34% of both salaries.

Based on the HAMP guidelines I qualify because... Primary residence, Fanny Backed, Current, Before 2009, more than 31%.

Just not sure if the bank (chase) will look at both salaries or only mine? If they only look at mine, they will certainly deny me because I don't make enough by myself to pay for this house.

I tried to refi to no avail via HARP cause they say even if I put wifey on the mortgage, the combination of both mortgages does not give me 15% equity, therefore it makes no sense, my total nut will still be where it is today.

So... should I even bother trying to go the HAMP route, try to get reduced to 31% of our monthly combined salaries? Every little bit will help right now.

My only other options are... I guess I could either default my Credit Cards (35K total - 900 per month minimums), mess up my credit in the process... Or I could consolidate the credit cards.

Either way I would like to stay in the house, the economy will rebound, I am trustworthy enought to eventually pay everyone everything owed. We are just in a little funk right now.

My friend just did the HAMP thing, he HAD to miss two payments to qualify as per his lender. I'd rather not do this because I am worried about foreclosure if I don't get approved.

Any help would be appreciated.

How does your $2,959 payment break down and what state are you in?


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OOPS, I forgot to break it out, silly me. The New Jersey air polution is getting to my brain.

2959 is the total payment, of which 2114 is principal and interest, 845 is escrow for tax and insurance.

So 2114 / 4500 would be 47% ???

Is this the figure thay would try to work down to 31% ???

Do they also try to reduce the property taxes?

I am confused. With so many people complaining about being denied, I just get the feeling that it is not worth even trying. I am looking for a second job, unfortunately even the local supermarkets are not hiring right now.

That's funny about the NJ air quality

This post will be a little winded, so bear with me…

A lot of people on here focus on just the 31% front load rate.
In fact, it is a complicated formula that the servicers use to determine eligibility.
In addition to your mortgage payments and gross income, this formula includes your current home value, current and modified interest rates, foreclosure scenario costs etc. to determine the NPV (Net Present Value).
If this value is positive, the servicer is required to modify, if negative, it’s up to their discretion. In addition to the NPV, they also may take into account your other “necessary” monthly expenses.

Now to your specifics.

First, Zillow may or may not be an accurate gage of your current home value. The servicer will use its own automated appraisal or a "drive by" one.

I assume you don’t have any HOA fees and your total 1st payments are $2114 PI and $845 TI and that the $4500 and $4200 are your gross monthly incomes.

The above figures put you in a “catch 22” situation.
Ordinarily, you're only required to count all the income of the person(s) whose name is on the mortgage. You may voluntarily include the spouse’s income that is not on the mortgage. In many cases it may be advantageous to do so.

In your case, if you included only your income, the likelihood of you qualifying for a mod is practically nil. And here’s why…

31% of $4500 is $1395, which would be your total modified payments, including taxes and insurance. Which means your PI would be 1395-845=$550

So, even if they reduced your interest rate to 2% and extended the term to 40 years, the resulting PI would be $1021.
In other words, there is no way for them to modify your loan without reducing your loan amount down to about $182,000. And they will not do that; even if your house was worth only say $300,000

Even in the states like FL, NV and CA, where home values are sharply lower, principal forbearance is rare. They would rather people short sale their homes or foreclose. And in no case can they reduce the loan amount to below the current house value.
So even in the above states, if a $435,000 house is now worth only $200,000, the lender most likely will not reduce the loan amount to $182,000 in order to do the mod.

So now you find yourself in a position where it is to your advantage to include your wife’s income to qualify for a mod.
The total modified payments would not be drastically lower at $2,697 (8700x.31) and a new rate of about 5.2%, but at least it may get you the mod and that’s still about $3,144 saving per year.
The above assumes you meet other modification eligibility criteria.

Your second and possibly better/quicker option may be the HARP (the refinance) option.
Since your modified payment is less by about $262, if you can refinance at 5% or lower, your refinanced payments will decline by about $305, for annual savings of $3,660

Bottom line, look into both options.
Modification is usually a long process and you may or may not get a permanent mod. You may also be reported as being late at the end of the trial period and have to pay back the shortfall, if you were not approved for the final mod.
The HARP refinance does not require as much paperwork as regular refinance. There may still be some costs involved, but most of them are usually added to the loan amount.

You can also try to refinance (or combine) the 2nd mortgage for even greater savings.

Cheers


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Thanks a lot for the info CB... awesome that you would take time out to help me!!! Sems like I have a million questions, I would appreciate it if you could help further. (next time you are in NJ I can buy you a beer, and we can get high on the coal stacks in newark) Hehe!!!

I did try recently to refi with a couple of different lenders... According to them, a Refi where I roll both up into one is not an option, there is not enough equity...

Comps in the area (Zillow) have me at 5% equity (1st and 2nd) - 16% equity (1st only)

Now... I do believe that my house is worth more than zillow says, simply because I saw lots of houses of the same style in this area when looking, my house was totally remodeled before I purchased, and I did a ton of additional work myself ( I know it is not always the best idea to have one of the nicer homes in the area, but we like it

More realistic is that the house is worth 415K - 420K in my opnion.
So perhaps 10% equity (1st and 2nd) - 20% equity (1st only)

So why don't I just get a normal refi done and get off these boards???

When I tried to refi with one lender, they asked what my W2 was from 2008, when I told them 54K, they said I did not qualify for that mortgage with that salary. I said OK... what if we add Wifey to the loan, they said great, what is her social, when I gave it to them they saw her credit report and said no way.

So I am between a rock and a hard place here... Refi just the first saves me about 300 a month (which is awesome), but I can do it without my wife on the loan, and they wont put her on the loan because of her credit score.

So... can I just lie and tell them I make more? I work for a small family owned business, no pay stubs, just checks, and I can have someone write a letter with my fake salary on it. Do you think this would work?

Does doing a TARP mortgage make it more lenient or something in terms of wifeys credit score or my lower salary?

From what I understand, even TARP wants there to be at least 15% equity, do you know if this is correct?

If I called my current lender (chase), would they be more apt to refi me via TARP? Do they have to by law if I qualify?

Does TARP limit the rate to the current prime, or can chase set the rate higher?

Should I contact chase first to see what they offer me if anything, or just shop around?

I understand if you do qualify for TARP, you can actually take $$ out of the equity, is this correct? (Credit card bills piling up)

How long would it take to refi typically? 2 months, 3 months, 6 months?

All of this is a pain in the a$$... I should have just rented!!!

Thanks again CB, you are the man.

Thanks for the offer of beer and air pollution, Frank. Sounds like a nice combo!

Sounds like your wife needs to clean up her credit file. There is a lot of good information on the other forums on this board on how to do that.

I would never advocate lying on any of the applications. "Fudging" the numbers was not only expected but actually encouraged by most brokers and lenders during this real estate ponzi scheme, and I think it is one of the main reasons this country finds itself in this financial mess.

But since you're self employed, you have some flexibility on how you report your income.

If you go with HARP (not TARP) refinance, their requirements are a lot less stringent and are designed to help people whose home values have declined. You can be as much as 25% in the "hole" and still get a refi.

As far as I know, the only "cash out" you can get with the HARP is to cover your upfront refi costs.

You can get most of your questions answered and find a lot more information at these two links:

http://makinghomeaffordable.gov/refinance_eligibility.html

http://makinghomeaffordable.gov/borrower-faqs.html

Good luck


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Thanks again CB...

I called chase, they refi'd me at 5.5 from 6.125. They did this through HARP... They said my home was worth 370,000, not sure where they got this from... but I digress... The refi saves me 125 a month, they fast tracked me, meaning that they are not doing a income verification, wifey's salary and credit score don't matter. I got a 5.5 rate instead of 5.375 that they originally quoted because my credit score dropped from 688 from 747, not sure how, probably too many maxed CC accounts... They say that the refi will pay for itself in 16 months, and I'm not going anywhere so... all in all it worked out pretty well. An added benefit is that I get to skip a payment, and they also gave me a credit card with 4000 limit interest free for 1 year that I can take one of my 28% cards and tranfer the balance. NICE!!! Chase gets to keep me as a customer (wage slave), I get a lower payment, and I am HAPPY!!! Thaks again for the advice, and thanks to the Obama admin!!! Let me know when you want to cash in on the beer!!!

Congrats!
Every little bit helps. Now see if you can refinance your 2nd.
The 0% is a nice bonus, just use it wisely.
Thanks for the invite to the beer summit, I may take you up on it some day.


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I'm not familiar with this HARP refinance - you owed 380 and they said it was worth 370 and you got the refinance? I'm not doubting you, just trying to learn. I'd love to refi but I owe $635 and Zillow says my house is worth $569, and I've found that the lender's appraiser typically places the house value at much less than Zillow, so I'm not optimistic. I have a 40 year mortgage (fixed) at 6.3 and at today's rates, I could get a 30 year at a lower interest rate and keep my payment the same. I didn't think I had any options being upside down. Do I? DTI is at about 39% but we are not behind.

I'm also curious as to what your wife does that's increased her salary so much in the past 3 years??

Hey Snookums...

HARP is the Obama plan that passed congress earlier this year.

I owe a total of 380k between both mortgages. 337k on the first. Zillow has me at 400k, Chase has me at 370k. I believe the home is worth at least 410... Neither here nor there...

The whole point of th HARP plan is to help people who are underwater and who cannot refi conventionally. My lender (Chase) said that I could only refi the first, and only through them. ??? I believe your lender has to refi you if you meed the criterion. There is some formula they use, and I think that the refi can take place if you are underwater by a certain amount only (IE... I believe if your first mortgage is under or at 105% of the home's value). You have to be current on your mortgage, has to be your primary residence, you have to had purchased before Jan 2009, can be no liens on the property etc etc etc...

The best way to do it is to just call your bank and see, it can't hurt. BTW... DTI did not matter in my case, they did not ask me to verify income, or ask what other debt I had, they did do a credit check however, and this affected my new rate.

At 6.3%, if you meet the criterion, at the size of your mortgage, you should be able to save a few hundred dollars a month at the new rates if you keep it at 40 years, I got 5.5% down from 6.125%. If you want to go to 30 years, not sure if you payment would stay the same, your lender will do the math for you.

Hope this helps!!! Good luck to you.

PS... My wife took a year off after our first child, worked part time, took another 6 months off after our second child, worked part time again, finally was able to get back full time since then hence the salary increase.

105% (going by Zillow, again) would put the max loan value at 597,000, however we owe around $635. That's first and second combined though - does that make a difference? First is at $601...close but still $4000 off. I guess it's worth a call but the appraiser would have to put it at above Zillow. Two foreclosure sales in my neighborhood for $480 each (same floor plan) probably won't help me though. Are foreclosure sales used as comparables?

It does, HARP only allows you to refi the first mortgage. So if the loan amount / value is under 105% then you should be OK.

I talked to a lender last week, he said my house was worth 390K.

I checked Zillow that day, it had me at 400K.

When I called my lender for the refi this week, he had me at 360K.

They use the latest comps, figure out price per square foot, get your square footage and multiply. Not sure if they look at the foreclosures as part of the comps though.

Just call your lender, they can help you through it, and it can't hurt, the worst thing they can tell you is no.

Good luck, and keep us posted.

So I finally looked into this. The good news is that the cap is now at 125%. The bad news is that at the time we got the loan we have now (in 2007), it was considered a jumbo loan, and was never bought by Fannie or Freddie. I just contacted both. So therefore, I don't qualify for the HARP refinance program. Even though the jumbo limit is higher than my loan amount now, my loan remains as a jumbo loan and is owned by Countrywide/BofA. The HARP program is only for loans owned by Fannie or Freddie, which apparently most are, but mine is not.

So guess this program really leaves some otherwise qualified borrowers out.

WHATEVER.