I'm not afraid to admit that I was one of the millions, caught up in the frenzy of the "easy refinance." Some of us bought cars, some of us went on luxury vacations. I bought some investment houses. Either way, were all in the same boat: Stuck in bad loans with increasing payments, and not able to refinance due to the sagging housing prices. Let's face it, most of us aren't going to qualify for loans if the house is worth less than we owe. So what are our options? Keep juggling and hang on? Dump the house and take the loss? Who can we trust to help us?



I haven't missed any payments, but I'm getting tired and my savings is circling the drain. I'm not going to be able to do this balancing act for much longer. I've stuck with my commitments until now, but I need help. I've got to find a way to fix this mess, and look at all of my options, and cut a deal with the banks. I've never been in this position before, and sometimes I think the banks would be more willing to deal, if I HAD missed a few payments!

The "end of the line" for me was when a rental home value dropped by $100000 in just a few months. I calculated the time it would take to regain my loss in a healthy market assuming 8% appreciation a year, and it would indeed by over 10 years. So that means no matter what, I'll be scraping to make ends meet for a long long time. No appreciation, no gains. Just damage control. It just doesn't make sense anymore and perhaps it would be better to take a hit now, and start the recovery process, earlier. So where do I go from here?

That was the dilemma. My mortgage was upside down, and I was stuck in the loan. Perhaps you are in the same position, and owe way more on your house than its currently worth. I sought out and talked to several real estate attorneys, CPAs and realtors for some professional opinions and to get a handle on my options. Here is what they told me, and I hope this information can help you analyze your personal situation.

1. Maintain that balancing act! (Those of us that can!) For some of us, this will be a personal choice, and for the rest, it won't be an option. All of us that are caught in upside down mortgages and can afford to keep up the payments need to ask yourselves if your willing to gut it out for the next (x) number of years with little to no equity gain. Who knows, the market may recover soon, but it's not likely. You can't time the market, not even the banks can.

2. Try to renegotiate your loan with the bank: I've done this successfully. It's a good step if your home hasn't depreciated over $100,000. You just call up the bank, and as for the "loss mitigation department." You tell them your having a hard time, and they will send you a hardship package to fill out. You fill it out, looking as financially desperate as possible, and they will come back to you with a modified loan.

3. Short Sale: This is a pre-foreclosure sale. Your late on a few payments, and the bank takes a serious look at you and begins the foreclosure proceedings. You find a realtor to represent you and present the hardship package. The realtor prices the home with an aggressive discount and finds a buyer. She presents the offer to the bank, and the bank usually accepts the deal, which is a win-win for everyone. The bank is always interested in short sale instead of foreclosure as it saves them tens of thousands of dollars in hassle and legal fees, and allow both parties to move on to new business. You should remember that there are still negative ramifications for short sales, even if less damaging than those associated with foreclosures or bankruptcy. However, short sales do carry less negative effects than foreclosures. Short sale sellers are widely seen as less risky than foreclosed sellers. 3. Short Sale: You could call this a pre-foreclosure sale. Your late on a few payments, and the bank takes a serious look at you and threatens foreclosure. You find a realtor to represent you and present the hardship package. The realtor prices the home at a substantial discount and finds a buyer. she presents the offer to the bank, and the bank usually accepts the deal, which is a win-win foreveryone. The bank is always interested in short sale instead of foreclosure as it saves them 10s of thousands of dollars in hassle and legal fees, and allow both parties to move on to new business. You should remember that there are still negative ramifications for short sales, even if less damaging than those associated with foreclosures and/or bankruptcy. However, short sales do carry less negative effects than foreclosures. Credit to short sale sellers are widely preferred over foreclosed sellers. Case in point, Fannie Mae recently adjusted their guidelines to dictate only a two year waiting period for a short sale seller to buy another primary residence, while they extended the waiting period for foreclosures to five years.

4. A Deed in Lieu of Foreclosure is one of the banks least favorite options. This is where you just hand over the deed, and say goodbye to the bank. The lender has to then sell the house to recover it's losses. The bank will subsequently provide the borrower with 2 documents. One document will cancel the debt and relieve the borrower any further debt, and the other one assures they can never come back to you for the money.

5. Foreclosure: This is the final option and if you like to go to court, then this is the option for you. In foreclosure, the lender first sends you a summons to appear or foreclosure complaint. The borrower responds to prevent foreclosure and explains the problems at a hearing. The borrower can this point you can still pay the full amount and get the house back during this redemption period. After the redemption period is over, the lender sells the property a public sale or auction and getting as much as they can (or settle for). Any excess goes to you, the original owner/borrower. If the sale amount is less than the loan amount, and in your case it probably will be, you will still owe the balance to the lender. This amount is determined as a result of deficiency proceedings.So as you can see, as we go down the line, the options get worse and worse! As far as my situation, I have to walk away from at least 3 houses. I'm losing a hell of a lot of money, but I'm getting my life back.