For homeowners struggling with high mortgage payments, there are alternatives to filing New York bankruptcy. One of them, refinancing, is underused by homeowners, according to a report that was recently published by National Bureau of Economic Research (NBER). (The NBER is best known for setting the official start and end dates of U.S. recessions.) The authors of the report estimate that by choosing not to refinance around 2010 homeowners lost billions of dollars in forgone savings.
By sampling data on roughly one million mortgages on single-family residences in December 2010, the authors were able to measure the predicted effects of refinancing based on the low prevailing interest rates. They found that despite factors that might have cautioned against refinancing (likelihood of moving, tax implications, loan-to-value ratios, etc.) as many as 20 percent of households could have refinanced their houses and saved a cumulative $5.4 billion in the long term.
The median household would have saved $11,500 total, and its monthly payment would have been reduced by $160. Nearly 10 percent of households would have saved between $8,000 and $9,000. However, despite government support to homeowners for mortgage refinancing, especially the Home Affordable Refinancing Program (HARP), by September 2011 only about one million households joined the program, but changes to HARP have increased participation. Up to five million households may have been eligible.
The report’s authors spend a good deal of effort searching for explanation as to why so few households refinanced their mortgages even though interest rates had fallen. They suspect that homeowners didn’t know about the potential benefits, or they fell prey to psychological factors, e.g. procrastination, mistrust of the banking system, and what they called “an inability to understand complex decisions.”
Access to the NBER paper can be found here.
If you are having trouble with your mortgage payments, refinancing your loan can reduce your monthly payments. It might also help to discuss your situation with a New York bankruptcy lawyer as bankruptcy can also ease mortgage burdens.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced landlords rights in bankruptcy Bruce Weiner for a free initial consultation.
