dcsimg
We research, you save.
Got Questions On Rates? (855) 610-2972

  Has your housing market recovered value since the crash? See our update on price trends, and try our local Home Value Estimator tool.

Are there any relief programs for underwater mortgages NOT backed by the FHA, Freddie Mac or Fannie Mae?

By   |  Posted in Ask The Expert

Q: Do you foresee any future relief programs for underwater mortgages that are NOT backed by FHA, Freddie Mac or Fannie Mae? My mortgage is through my local credit union.  I am $25,000 underwater, I pay my mortgage on time, and I would like to take advantage of the low refinance rates too.

A: You should first make certain that your loan isn't owned or backed by Fannie Mae or Freddie Mac. A loan can be sold to those entities but still be serviced by your local credit union. It doesn't hurt to check.

If not, and at the moment, the answer is "probably not." That is, unless your credit union was interested in writing down the balance of your loan and allowing you to refinance into the FHA's "Short Refi" program. Unfortunately, a lender with a good, performing loan on the books like yours probably isn't interested in taking the principal and profitability hit which would accompany such a move. Shareholders and members would likely balk at such an offer.

While there are presently no "programmed" responses backed by the government for your situation, any given lender might be able to offer you a "private" loan modification of some form. Any such arrangement would be negotiated on a one-off basis, but it doesn't hurt to inquire. Perhaps you might be able to negotiate an arrangement where you can cover the lender's amount of required writedown in order to be eligible for a Short Refinance, for example. However, the out-of-pocket expense might be considerable, diminishing the value of any refinance.

The bottom line is that you probably won't be able to take advantage of today's low interest rate environment, and it's cold comfort to know that there are probably hundreds of thousands (if not millions) of other homeowners in the same situation as you are.

More help from HSH.com

  • 10 best states for home buyers

    HSH.com recently created a database of the home-buying-assistance programs in every state. From that database, we have assembled a list of the states which offer the most robust set of programs to its residents.
  • Home price recovery index: Which metros have improved the most, least?

    Have home prices in your area fully recovered from the declines suffered during the Great Recession, or are they still struggling to make it back to the peak it reached before the crisis?
  • 10 metros where a home costs about $1,000/month

    HSH.com identifies 10 metro areas where you can afford the principal, interest, taxes and insurance payments on a median-priced home for only around $1,000 per month.
  • 1000 month - tab names

  • The salary you must earn to buy a home in 50 metros

    Here’s how much salary you would need to earn in order to afford the median-priced home in your metro area.