Foreclosure University Refinancing

Question: We have an interest only mortgage on a house that is now worth about half of what the the mortgage is. We have not missed a payment and there is a penalty to refinance. What is the best way to handle this situation.
Frank in Florida.

Answer: This seems to be the ongoing trend these days…houses worth a lot less then the mortgage.  Unfortunately, even if you threaten them you’re going to foreclose, they typically want you to “prove it” or show them your hardships for needing help.  Only after you stop making payments to they become motivated to do something.  But then your credit has been hit and refinancing becomes very tough to do.  So then you try a loan modification and still it’s not 100% your lender will do a modification.  So I guess you need to weight out what it’s going to cost you in penalties and fees to refinance and see how long you need to stay in your home at the new interest rate to make it worth your while.  My guess is that it could be 6 -10 years before you even hit a break-even point depending on your penalties.

Question: If the total LTV between the 1st and 2nd liens add up to 100% or less, if the 1st lien is up to date and the 2nd lien is past due for more than 2 months, is there any way to add the 2nd to the first, even if they are with two different lien holders?

Answer: -NO. You’ll have to refinance. If the property is at 100% LTV already and the lending industry being what it is now plus having a few lates on your credit, chances are it will be very challenging to refinance this property into 1 loan.