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Underwater after a bankruptcy 3.5 years ago. Can I refinance?


Q: Can I find someone to refinance? We filed bankruptcy 3.5 years ago after a failed business. We were never late and never missed a payment on our mortgages (1st & 2nd) or our cars and did not include these in the filing. Since the filing we have paid off one of the two cars. We have an adjustable rate first mortgage that is set to adjust in 2013 - currently it is at about 6%. The second mortgage is fixed at 9.9%. Looking at both mortgages, we are slightly under water. Since the filing we have not taken out any credit at all. Is there any hope of re-financing?

A: The bad news is that the combination of your issues - being underwater and having a fairly recent bankruptcy - means finding new financing will be next to impossible. Fannie and Freddie require "credit recovery" periods after bankruptcy of up to four years, and being underwater leaves fewer options outside of a Home Affordable Refinance -- available only if your loan is owned by Fannie or Freddie in the first place. You can check with your existing first mortgage lender to see if help might be available, but it does seem unlikely at the present moment.

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