Ask Money

Modifying mortgage

Chris Farrell Mar 5, 2010

Question: I have two dilemmas to ask you about. The first is about my own mortgage. I have a mortgage for my condo in Los Angeles on which I owe $513,000. The interest rate I’m paying to CitiMortgage is 6.75% and right now am only paying interest only of $2,900 per month. The value of my home according to Zillow and some mortgage brokers is $560,000 to $600,000. Since I the loan to value isn’t there no one will refinance me without mortgage having me pay mortgage insurance. When the brokers look at my situation the deal they offer is no better than what I’m paying now. My loan is not owned by Fannie Mae or Freddie Mac.

My second question involves a friend of mine who’s husband just left her and she owns a home with a mortgage of $189,000 and a second for $100,000. She cannot afford to make the payments alone. She consulted her lender Wells Fargo and they told her they couldn’t modify her loan or help in any way. She consulted a broker who told her to file bankruptcy. She says her loan is owned by Fannie Mae or Freddie Mac. She asked me for help and I want to help her but don’t know what to tell her. Thank you, Renee, Los Angeles, CA

Answer: Sad to say, you have a lot of company. The drop in home prices have left millions of homeowners without enough equity to refinance at today’s lower interest rates, about 5%. The various loan modification programs announced by the Obama Administration haven’t done much good. For example, the Administration predicted a program designed to help folks with underwater mortgages would benefit millions but “so far just 188,000 borrowers who owe between 80% and 105% of the value of their homes had refinanced through December,” according to the Wall Street Journal “Last September, it was expanded to include borrowers who owe up to 125% of their home value, but fewer than 2,000 borrowers have used that program through December.” (The Wall Street Journal online is gated, but if you have a subscription you can read the article here.)

I wish I could be more optimistic. California has a program which hasn’t done much good, either. The Administration is trying once again to boost modifications. Frustration is everywhere. The only thing I can recommend is to stay persistent and keep hounding your bank on being able to refinance.

As for your friend, she needs to consult with a lawyer ASAP. She needs the advice of a professional advocate.

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