Upside down is the description we hear too often. You most certainly are not alone in this situation.
In your research you are discovering there are alternatives available such as a 'wrap around' mortgage. As others have noted, if you are too far under, there simply will not be sufficient market space to make this a feasible options. Great care must be taken to avoid the 'Due on Sale' clause included in nearly every mortgage that a 'wrap around' may trigger. The outcome of your loan modification may change your options significantly. Make certain you lender is advising you of the new refinancing options that are available also.
You do have options. However, each and every one must take into consideration your situation and the outcome that will be most beneficial to you. Your CPA, attorney and real estate adviser (a truly multi-dimensional one) can develop a proper plan with multiple exit strategies that will minimize your risk.
The hardest decision you must make is 'Do I need to keep my home?" Reconciling this reality is the most difficult. The rest is simply execution of the right strategy.
Reach out and talk to a few professionals. If they can not describe to you at least three strategies, then please keep looking. After all, one is short sale, two is 'wrap around' and how hard would it be to come up with just one more? Find the right professional, and take whatever action is needed to get on with your life.
Best of success to you.
Best to see if your lender with qualify you for the: Home Affordable Foreclosure Alternatives (HAFA) Program. If you do they can give you up to $3,000 in moving expenses. Under a traditional short-sale you would receive $0. Always consult a reputable, and knowledgeable Attorney regarding your options.
Best of luck to you,
Rob Hughes: Long & Foster Real Estate Inc.
(Associate Broker) (AB065650)
(Hughes Associates) (Realtor since 1987)
Office: 610-225-7400 x7438
Cell# 484-410-9765 (Preferred)
Like, I "press" my clothes, but many people "iron" their clothes. I can it POtato, some call it poTATo....LOL! Or, CA will ask for a termite report on every loan; whereas asking for a termite in WA/OR will make any MLO roll their eyes (termites don't like the rain and are non-existent in the NW). But, hey, we can call it whatever we want, right? BTW, cross collaterization works too...though umbrellas in WA/OR are used for things other than loans. hehehehe
Dee, I think you are confusing wrap around financing with an umbrella mortgage or cross collateralization.
The only reason I know is because I was awake for that part of the state licensing class >>>>>Just kidding.
Interestingly, my initial thoughts about a wrap around mortgage are decidedly different that Don has laid out; however. It may be a geographical "thing", but a wrap (at least in my experience) is generally used more often for commercial lending. For example, a business owner is wanting to invest in a property for his/her business; however, the bank is not 100% comfortable with the business projections, the down payment and/or any other aspect of the file. However, the business person has substantial equity in a private residence and/or other real estate properties. The bank may agree to the purchase loan of the new business property, but will "wrap" around the entire real estate portfolio.
I am not sure this practice is that prevalent today; however, twenty years ago it was quite the rage with lenders. And, the result could be disasterous. At one time ('92) I had a client who had agreed with the bank to wrap his primary residence and vacation property with the business purchase. The business went sideways and the bank called the note. The borrower had SUBSTANTIAL equity in the other properties; however, no one would finance a cash out because of the wrap mortgage and the bank would not release the wrap because it was their only chance of getting repayment on a loan. At the time, I could not even convince hard money lenders to loan 50% loan to value...all because of the wrap encumberences (the wrap lien would always trump the new lien, so any new investor would have no recourse on repayment in the case of default).
In either explanation of a wrap mortgage, I fail to see how it would help you; however, it anyone is looking at entering into my "version" of the wrap around mortgage I would recommend extreme caution...and a real estate attorney. To my knowledge the client I was working with for months lost both homes to the bank. One was worth 575K with a mortgage balance of around 165K....it was an extremely disappointing scenario to know there was no financing solution for the client. Best to you!
A wrap or wrap around is when new financing is "wrapped" around the current loan. To give you a somewhat oversimplified example: Suppose you bought a house 5 years ago for $200,000. You started off with an 8% mortgage on $190,000. Your principle/interest payment would be $1,394.
Now you want to sell. The house is worth $230,000. (A wrap only works when the value's gone up, not down.) A buyer comes along and wants to buy but, for whatever reason, can't get a conventional loan. So the owner offers "wrap" financing. The owner says: "I'll handle the financing. You pay me 10% down, so you'll owe $207,000. We'll do a 25 year mortgage [so it's timed to end at the same point as the underly 30-year mortgage] at 7%. So you'll pay me $1,463 in principle and interest." So your new mortgage would wrap around the old mortgage. The owner would take $1,394 of your payment and send it to his bank and keep the rest. (A wrap mortgage can work better when interest rates are higher than the initial mortgage, too, which is not the case today.)
So, in short, I really don't see how a wrap could help you. You'd be wrapping your already too-high mortgage with another one, making your home even more overpriced than it is today.