Lenders May Be Quicker to Agree to Refinancing in New York Than You Might Think
Most bankruptcy attorneys discuss short sales, loan modifications, deeds in lieu of foreclosure agreements as options for addressing the underwater mortgage. There is another option that homeowners do not consider:Refinancing.
To explain, a homeowner refinances a house by borrowing a new loan on more favorable terms to pay off the previous mortgage that had less favorable terms. The new mortgage is secured by the house, just as the previous one was. New York homeowners may wonder why banks would agree to give homeowners a break in this regard. There are two reasons.
First, banks just want to get paid, and if you stop paying on a mortgage, then it has to move to the foreclosure process and worry about you filing bankruptcy to stop it. Homeowners are less likely to default on a refinanced loan than on the original one, so the bank gets paid. It’s important to note that some banks are not quick to agree to refinancing, especially if you’re current on your payments. It may not see any reason to agree, and some people have found that threatening to default may push their lenders to appear at the negotiating table. The other options for dealing with an underwater mortgage, other than a short sale (foreclosure, strategic defaults, and deed in lieu agreements), result in the bank owning a home. Houses are not fungible, and banks cannot pay their depositors interest in houses. Thus, refinancing may be a good idea for homeowners with secure incomes.
Second, banks may be willing to cooperate with homeowners whose mortgages are eligible for the Home Affordable Refinancing Program (HARP), which Congress extended into 2012 and should not be confused with the Home Affordable Modification Program (HAMP). If the government owns your mortgage (mostly via Fannie Mae or Freddie Mac) or guarantees it, then it’s probably eligible for government-assisted refinancing. Unlike other mortgages, HARP loans are fixed-rate instead of adjustable and don’t require mortgage insurance when the equity is below 20 percent. Consequently, it’s good for underwater mortgages. HARP does not require homeowners to use their current lenders.
Refinancing is one of many options open to homeowners, and not just those whose equity is gone. Bankruptcy can help too, so it’s important to consult with an experienced New York bankruptcy attorney before taking a course of action.
For more questions about refinancing an underwater home, bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy lawyer near me Bruce Weiner for a free initial consultation
