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Mortgage Loans

When consumers find themselves underwater in their mortgage loans it means they owe more than their house is worth. In some areas of the country, the real estate market has dropped by more than 20% in the last year and a half, and some specific homeowners are quoting up to a 50 percent decrease in the value of their home from 2006 to 2009. So what do you do when you realize that those monthly mortgage payments, along with the costs of property taxes, insurance, maintenance, and repairs, are not building any equity in your home? Many homeowners are facing the fact that not only are they underwater in their mortgage loan, they are sinking quickly and even on the verge of drowning.

With mortgage rates currently under 5 percent and the government promising to keep them there to give the economy a boost, many homeowners are looking at refinancing as a way to lower their monthly payments. Typically to refinance your home you have to have some equity in it, but many borrowers who purchased before 2007 when prices were high and credit was given easily, were able to purchase their homes with very little cash down.

The real estate market was exploding, and equity seemed to build as if by magic, and then it did not. Then came the recession and equity quickly plunged while unemployment rose, banks closed while major industries asked for government bailouts. In the meantime, many everyday Americans continue to pay each month on mortgage loans worth more than the value of their houses and are reluctant to throw more money into their real estate investment by refinancing.

Lenders are offering mortgage loan modification programs to reduce homeowners monthly payments but often this involves stretching out the length of the loan and additional closing costs that most people cannot afford. Loan modification by lenders is not debt forgiveness, its a way for lenders to avoid the costs of foreclosure and help keep people from losing their homes altogether. But for some people, loan modification just amounts to changing seats on the titanic. The government also has programs, like FHAs Hope for Homeownership which allows for people to refinance their mortgage loans but this program depends on the cooperation of lenders, and lenders have been reluctant to take the loss on the home loans they carry.

Some people are willing to wait out the economic downturn and truly believe that their property values will rise. These are typically people that can afford to stay where they are, or those who simply cannot bear the thought that renting may in fact be the cheaper alternative. If you find yourself underwater you can choose to sink, or to swim, or to get out of the water altogether.