It isn’t impossible to refinance a home; improbable is more like it. Upside down homes are a scourge to banks and to the national economy.
In a regular mortgage modification like a refinance situation, the homeowner is expected to have 20% or more equity in his or her home. IN an underwater mortgage, it is likely they have -20% equity. This is a net loss for the homeowner that would be passed onto the bank if banks were shelling freebies. The only other way to recover this loss is for the economy and housing market to recover.
Home Affordable Refinancing Program
HARP is one refinancing option for homeowners in an upside down mortgage. HARP is a government program that allows qualified homeowners to refinance upside down mortgages that are worth up to 125% of the value of their homes. In order to qualify, you must meet the following criteria:
- You must not be in foreclosure or under serious threat of foreclosure in the future. Importantly, there cannot be a record of a delinquent payment in the last 12 months. Simply, you must be up to date with your mortgage payments and capable of making future payments.
- You must have a track sterling track record as a borrower. Besides not having a history of delinquency, you need to have a solid credit score. They will calculate a number of factors and create a picture of you as a borrower, before approving a HARP refinance.
Your loan must be secured through Fannie Mae or Freddie Mac. Check the official Making Home Affordable website to see if your bank secures loans through either of these institutions: http://www.makinghomeaffordable.gov.