Your Mortgage or Your Life (Savings)

I own a home with a 1st mortgage of 550,000 and a home equity line of credit with balance of 95,000. my 1st is at 7.750% with apayment of 4000 and my 2nd is at 8% with apayment of 500. The current value of the home is only approx 580,000.

I am current on the loans but my income as a sales man in home improvement has plummetted to less than 80,000.

I have 150,000 in annuities that I could tap into to keep paying the mortgage, but I’m single and really don’ t need the house.

What would you do.? go into foreclosure, take out my life savings and hang in there or any other advice?

Mervyn

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Hello Mervyn,

I would check your states statutes to determine whether or not your annuities are protected from creditors.  If you find that they are protected, then I wouldn’t use them to pay the mortgage payment/s.

How does a HELOC with a $95k balance at 8% equal a payment of $500? 

In any regard, you are a candidate for a loan modification.  Given the fact that you have an income and assets, it will be difficult for you to obtain a loan modification while you are current.  I would first investigate whether or not loan violations exist on your mortgages.  A qualified written request could be used to produce the necessary items.  The TILA’s extended right to rescind (if it applies) would be the ideal sword for negotiating with your lender.  Any of the other violations of the TILA or the RESPA would only provide a shield or ‘annoyance’ to the lender in your negotiations; nevertheless that could be helpful. 

The objective would be to negotiate the first and second mortgages down to a 3% rate.  That would be the equivalent of P & I of around $2,300 per month.  With taxes and insurance that might be closer to the 38% housing-to-payment ratio that the FDIC set as what may likely become an industry standard.  Will the lender/s fall over and give you your loan modification at first request?  I’ll answer, probably not while you are current. 

The HELOC is in outer space and you will have an easier time negotiating new terms with them than with the first.  Check for violations, be persistent, and remember that they are less likely to listen while you are current.

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.