Sunday 24th of January 2021

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NY Times Reports Underwater Mortgages

According to recent data released by a California-based mortgage analysis firm, more than one-third of the mortgages in the United States are “underwater.” Simply put, one in three of us owes more than our homes are actually worth. It’s a frightening reality, even as talk of the recession ending is permeating articles in newspapers and magazines and chatter on cable news and radio.The report, released by Santa Ana, Calif.-based CoreLogic and reported on by the New York Times over the weekend, makes it very clear that worries about foreclosures and home values nationwide aren’t going anywhere. The last two years have shown the biggest halt in the real estate market since 1959-1960, according to the Times. And according to the analysis, the situation could get worse.

Even homeowners who are paying their mortgages and are following the rules are likely to be affected. This is because foreclosed homes hurt neighborhoods, drive property values down, and thus delete hard-earned equity from people who were doing nothing wrong. This very issue is why the Obama administration has enacted several programs designed to halt the mortgage/foreclosure crisis by giving lenders and borrowers incentives to re-format their existing mortgages.

To avoid being underwater on your mortgage, now or in the future, be sure to consider these factors and strategies:

  • This is the very reason why so many lenders want home buyers to have 20 percent down when they buy a home. If you are in the market for a home, think seriously about how much money you can put down. Even 10 percent could shield and protect you from owing more than your home is worth. As a rule of thumb, homebuyers who have less than 20 percent equity in their homes are asked to pay “mortgage insurance” until they reach that 20 percent threshold. The insurance basically protects the lender in the event that you default.
  • Before buying a home, be sure to carefully review comparable sales in the area. This can help function as a guide for what the home is worth now, and what it could be worth when the market heals. It still is a buyer’s market, so make sure you get a reasonable price.
  • If you are concerned that you are underwater in your current mortgage, call and talk with your lender immediately. The federal government does have some strategies in place to help lenders and homeowners through these tough times. If you are currently able to make your monthly payments, it should help you through the process.
  • Interest rates remain near historic lows, and refinancing is still a great option for many current homeowners. But experts strongly recommend that you do not use your home as a piggy bank. Don’t “cash out” funds from your refinance or take money out of your equity. This is how thousands of people fell underwater on their loans. Let your equity work for you – don’t let your equity become your downfall.