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There's Some Relief For Upside Down Homeowners

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May 20, 2009 10:12 pm US/Mountain

There's Some Relief For Upside Down Homeowners

Good Question: What can you do if you're upside down?

Written by Alan Gionet

Reporting
Alan Gionet
DENVER (CBS4) ― Michelle Clopton is like a lot of homeowners. She's under water. Her home in Aurora has declined in value to the point where she owes more than it's worth. Recently her adjustable rate mortgage adjusted and even with today's low rates, her mortgage interest rate went up. So she called her mortgage holder to try to get them to give her a better deal, but it hasn't done much for her.

"They're refusing and they're sending me to modification departments and other departments within each mortgage company to see what they can do. But the answer has been 'no' for about two months now," Clopton said.

But there may be a glimmer of hope. There are loans now making their way to the market which can help some people who are under water, according to mortgage banker Barbara Funke of Megastar Financial.

"If you didn't have luck six months ago, you may have luck today," Funke said.

The re-fis are more widely available under three programs. Loans held by Fannie Mae are called "Desktop Underwriter Re-fi Plus." Under Freddie Mac they're called "Relief Re-fi." FHA loans are called "Streamline."

What they are is a re-do on current loans with those mortgage holders. The Fannie and Freddie loans can cover amounts up to 105 percent of the loan to value on a home. If you're deeper in the hole than that, there's not much for you yet -- unless you're not paying, then requesting modification may be easier.

Homeowners who pay on time like Michelle can also seek a modification.

"I think if you're persistent and you contact your lender in writing and by phone, I think you could have some success," Funke said.

But as with Michelle, it doesn't always work. In addition many loans are not held by Fannie, Freddie or FHA. That's especially true with loans for larger amounts. Often those loans were sold into mortgage-backed securities or to a hodgepodge of investors -- entities like pension funds.

"Perhaps they want to work with the customer but a lot of these loans have been sold to various investors and those investors will not cooperate," Funke said. "Or they're sold in securities and it's very difficult to take those loans out of a security except through foreclosure action."
How do you find out? Call your mortgage lender. It shouldn't cost to ask whether your loan is Fannie, Freddie or FHA. And don't forget to check on your mortgage broker with the state's free database -- click the link below.



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