I am always on the lookout for options that will help my clients avoid bankruptcy or help make the process a little easier. A government program called HARP caught my eye as a possibility for homeowners stuck with negative equity who have been unable to refinance.

I recently attended a very informative presentation given by Marylou Edwards with Diversified Mortgage Group. She explained the newly announced refinance program for homes that are underwater and provided details on who qualifies for HARP 2.0.

What is HARP?

HARP stands for Home Affordability Refinance Program. The program allows for homeowners with no equity or negative equity to refinance their mortgages. In the past, refinancing was really only an option if you had equity in the property.

Who Qualifies for HARP?

First of all, the loan must be a Fannie Mae or Freddie Mac loan. Please see Marylou’s presentation for details on how to find out if your loan is a Fannie or Freddie loan.

The residence can be your primary residence, a second home, or even a rental property with four or less units. You must also not be in default on the mortgage payments.

What Does HARP Not Help With?

HARP will not help you with a second mortgage on your property. The second mortgage will continue to be on the property, even if you refinance the first mortgage through HARP.

Loans not backed by Fannie Mae or Freddie Mac do not qualify for the government program. However, it may be in your best interests to talk to your lender and see if they have a similar internal program that you qualify for refinancing or modification on your loan.

Marylou’s full presentation is available for you to review, along with her contact information if you have any questions or would like to inquire about refinancing your mortgage.

This is just a basic overview and is not legal advice specific to your situation. If you are considering bankruptcy or are feeling overwhelmed by debt, you should speak with an attorney in your area for legal advice. If you live in Alameda County, Contra Costa County, Santa Clara County, or San Joaquin County and would like to speak with me regarding your situation, please email me at [email protected] or call 925-586-6738.

I have recently been getting a number of questions about the new CA short sale law that took effect on July 15, 2011. The law is supposed to make it better for homeowners who are trying to do a short-sale on their houses by not allowing the second mortgage to come back and collect on the note after the sale is made. California had previously passed a bill that applied to first mortgages, but junior lienholders (like 2nd and 3rd mortgages) were not included in the original bill.

What’s the new law?
Before the junior lienholder is considered as having waived its right to seek a deficiency, both of the following must occur:

1. The junior lienholder must agree to the short sale; and
2. It must receive some payment amount against its loan as “proceeds from the sale” of the property.

What happens if both of the requirements do not occur?
The junior lienholder can still refuse to accept the terms of the short sale. In that case, the first lienholder may then choose to proceed with the non-judicial foreclosure. While the first lienholder will be prevented from seeking a deficiency (because of the one-action rule), the junior lienholder will retain the right to try and collect on the deficiency.

As another alternative, the junior lienholder could just release its lien without demanding a payment, allowing the short sale to proceed. Since the lienholder did not receive any payment from the proceeds of the sale, its right to seek a deficiency judgment would remain.

What’s the bottom line?
Be very careful in negotiating a short sale where there is a junior lienholder. If the 1st and 2nd mortgages are held by the same bank, it may be easier to negotiate a short sale that releases liability for both mortgages. If the 2nd mortgage will not agree in writing to the short sale, the bank retains its right to come after you for the difference after the foreclosure.

This is just a basic overview and is not legal advice specific to your situation. If you are considering bankruptcy or are feeling overwhelmed by debt, you should speak with an attorney in your area for legal advice. To speak with me regarding your situation, please email me at [email protected] or call 925-586-6738.

Many people, especially in California, are facing the difficult possibility of walking away from their houses. I talk to people every day who are trying to make huge mortgage payments that they can no longer afford. So, what goes in to deciding to give up the house?

First, it’s important to recognize that your house does not define you. There is a great article on Money Health Central today about the idea that your home and house are not the same thing. While the topic is usually emotional, looking at the situation from the standpoint that you can create a home wherever you live may help.

Second,developing a realistic budget to figure out whether you can afford to keep paying on the mortgage. Much has been said about loan modifications in the news, but what gets left unsaid is that those mortgages are now being extended to 40 years and/or requiring a balloon payment at the end. If you are 40 years old, do you envision yourself living in the house for the next 40 years and finally having a paid off home at the age of 80?

Third, many are concerned that they will not be able to buy another house ever again. It is possible that not buying a house is a great option. You’ll need to look at the cost of renting versus the cost of a mortgage, taxes, insurance, and home upkeep. In addition, it is possible to buy within a few years of a foreclosure and/or bankruptcy. Saving up a significant downpayment and living within your means are important steps to buying again.

What I hear frequently is that someone wants to keep the house because it is their home and they have sunk so much money into it. However, sometimes it is better to walk away from a bad investment than to continue paying interest-only on a house that is worth far less than you owe on it.

This is just a basic overview and is not legal advice specific to your situation. If you are considering bankruptcy or are facing foreclosure, you should speak with an attorney in your area for legal advice. To speak with me regarding your situation, please email me at [email protected] or call 925-586-6738