Alan Jones

Jane,

Here's some great info...read it ENTIRELY, then go to web reference link below for more "clarity".

How To Walk Away From Your Home. This is akin to a self-help guide to walking away in California. Many people want to get out from their underwater homes, but are scared they will be liable for the unpaid mortgage debt. As previously explained ( http://www.sandiegopredatorylending.com/?p=33 ), California homeowners who used 80/20 loans to purchase their homes and have not refinanced the second mortgage

There are many folks who have refinanced that second mortgage, or who want to keep their homes, but can’t pay for the adjusted payment on their mortgage, or don’t want to pay on a house that worth substantially less than they owe on it. They have tried to get the bank to work with them, but are frustrated because the bank won’t talk unless they are two payments behind and the only thing the bank will do is freeze their payments or add their arrears to their loan balance. Banks will not reduce the principal amount on loans to fair market value to save a borrower from foreclosure. They just won’t do it.

Once again it’s the 80/20 loan to the rescue. This beautiful piece of financial engineering genius (you really need to click on that link, it’s hilarious!) has found yet another way to help distressed home owners. And not just in California, this trick works all over the United States.

The trick is called a “Chapter 13 Lien Strip” but I like to call it the “Back Door Cram Down.” You may have read about the proposed mortgage “Cram Down” legislation that would allow Chapter 13 judges to reduce or “Cram Down” mortgages balances to fair market value in a Chapter 13 case. This legislation has zero chance of passing until a new election and Congress are seated next January.

Instead, we are “Cramming Down” second mortgages using the old Bankruptcy code section 1322 which states:

“Contents of plan

(b) The plan may–

(2) modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims.”

What’s not obvious about this code section is a loan is not “secured” by your personal residence if there is no value or equity in your home that would go to the lender if the home was sold. That means the loan can be converted to unsecured or the lien “stripped” from the house by “modifying the rights of holders of secured claims.” This turns it into unsecured debt, like credit card debt, which can be discharged!!!! This is why I call it a “Back Door” cram down because we are cramming down the second mortgage to unsecured status.

Here is an example. You bought your home in 2006 for $500k with 100% financing using an 80/20 loan. So your first mortgage is 80% or $400k and your second mortgage is 20% or $100k. The market is down more than 20% from its peak and your house is now only worth $375k. This means if the house was sold, the first mortgage would take all $375k and the second mortgage would get nothing. In this case the second mortgage is “wholly unsecured” and the second clause of section 1322(b) does not apply, so we can modify the rights of the second mortgage holder and turn it into unsecured debt.

What happens to the now unsecured stripped off second mortgage? It gets paid in your Chapter 13 plan but only after your other secured debts are paid. Secured debts are the first mortgage, your property taxes, and your car payments. And because a Chapter 13 plan lasts only 3-5 years (usually 5) a whole lot of that unsecured debt does not get paid. At the end of 5 years, most unsecured debts (not student loans, back income taxes, or family support payments) are discharged so you don’t have to repay them.

So at the end of 5 years, you are left with just your just mortgage payment on your house. Your cars and your back property taxes are paid off, your student loans and back income taxes are paid down, but your second mortgage and your credit card debt is gone! Beautiful isn’t it? God bless the 80/20! It just keeps on giving. - Fri Jul 25 2008, 15:33

I am a Benefit Counselor and assist senior citizens to obtain financial freedom through FHA insured reverse mortgages to improve their quality of life in 30 states currently. It is quite possible to do exactly that, as you will have 250K equity...BUT you will most likely have to let the loan "season" for six months to the day in order to initiate the reverse mortgage.

I CAN HELP...Even if seniors have:

=> FORECLOSURE looming,
=> TAX LIENS
=> LATE PAYMENTS,

If you (or you and your spouse) are over the age of 62, you can receive a tax-free check each month (or lump sum) to spend on anything you wish.

A FHA Reverse Mortgage can literally transform your retirement. Features include:
• No mortgage payment for as long as you own and live in your home
• No income taxes are paid on the cash
• You retain title to your home
• You may sell your home at any time
• No credit, employment or income requirements
• You can never owe more than the home is worth

H.U.D. and A.A.R.P. endorsed. We are a mortgage banker and broker.
CALL ME TODAY at: (480) 621-4219 or e-mail me at ajones@thelendingco.com - Thu Jul 24 2008, 16:30

The link below is to an "amazing and insightful" article to help you with absoluteness of fact and decide for yourself. I believe you will agree it can provide "clarity". It's "Phoenix Economic Outlook - The GOOD the BAD, and the UGLY"

http://knowledge.wpcarey.asu.edu/article.cfm?articleid=1605 - Thu Jun 26 2008, 15:06

As "Jamie" said in the original response..."It's not only about prices, it's about financing as well."

How right he is! I don't have a crystal ball...but I do have horsepower and resources to finance the lovely new home you may choose!

We are a mortgage banker and broker, quickly closing loans due to our Unsupervised Direct Endorsement "FULL EAGLE" FHA liscensing status (only 5% FHA lenders are), home office in Scottsdale, AZ with average FHA underwritting in less than 48 hrs! We are offering our "Outer Limits" program...a "NO FICO SCORE" driven program that provides up to 102% financing on a home, NO MI, and even allows for "gifting" of the downpayment from family, employer, etc!!! (we're one of seven lenders in Maricopa County approved, at that time,to offer it) My bio, contact info is on my website http://jcaj.thelendingco.com Call for more info... - Thu Jun 26 2008, 14:57

I cacn get a 90% solid HELOC, I would need more info about your situation...but it seems "do-able" with good credit, refi or purchase, fully documented income, solid appraisal, need city info and solid job history for starters. I can go up to 1 Million so $600K is fine, I am an Unsupervised Direct Endorsement "FULL EAGLE" FHA lender (only 5% FHA lenders are), home office in Scottsdale, AZ (lending in CA) with average FHA underwritting in less than 48 hrs! We are a mortgage banker and broker. We have been approved to offer our "Outer Limits" program...a "NO FICO SCORE" driven program that provides up to 102% financing on a home, NO MI, and even allows for "gifting" of the downpayment from family, employer, etc!!! (we're one of seven lenders in Maricopa County approved at that time) My bio, contact info is on my website. http://jcaj.thelendingco.com Call for more info - Wed Jun 25 2008, 21:27

If you need financing for your potential new home, I am an Unsupervised Direct Endorsement "FULL EAGLE" FHA lender (only 5% FHA lenders are), home office in Scottsdale, AZ with average FHA underwritting in less than 48 hrs! We are a mortgage banker and broker. We have been approved to offer our "Outer Limits" program...a "NO FICO SCORE" driven program that provides up to 102% financing on a home, NO MI, and even allows for "gifting" of the downpayment from family, employer, etc!!! (we're one of seven lenders in Maricopa County approved at that time) My bio, contact info is on my website. http://jcaj.thelendingco.com Call for more info.. - Wed Jun 25 2008, 20:47