{"id":17079,"date":"2011-09-19T10:14:59","date_gmt":"2011-09-19T17:14:59","guid":{"rendered":"http:\/\/seattlebubble.com\/blog\/?p=17079"},"modified":"2011-09-19T10:14:59","modified_gmt":"2011-09-19T17:14:59","slug":"reader-question-refinancing-an-underwater-mortgage","status":"publish","type":"post","link":"https:\/\/seattlebubble.com\/blog\/2011\/09\/19\/reader-question-refinancing-an-underwater-mortgage\/","title":{"rendered":"Reader Question: Refinancing an Underwater Mortgage?"},"content":{"rendered":"

A reader emailed me with an interesting question about refinancing an underwater mortgage:<\/p>\n

Do you think I can convince my lender to refinance my underwater 30-year mortgage to an underwater 15-year mortgage? Obviously another lender would have no motivation to take over a bad investment. But arguably it could be advantageous to my lender. They’re already on the hook for this bad investment and this way it would (probably) become a good investment much sooner. I of course would benefit from the cheaper interest rate and shorter term.<\/p>\n

My specifics are below if you’re curious (though I think it’s an interesting question in general).
\nRemaining term: 25 years
\nRemaining debt: $490,000 ($410,000 6.0% fixed + $80,000 variable heloc)
\nZestimate: $435,000
\nLender: Bank of America (via Countrywide)<\/p><\/blockquote>\n

I haven’t heard of any banks that are willing to do refinances on underwater mortgages like that, although there are some programs out there that are intended to encourage banks to do so. The HAMP program<\/a> in particular comes to mind, but that’s considered a loan modification rather than a refinance, and from what I’ve heard most banks are not exactly jumping at the opportunity to participate.<\/p>\n

You would think that banks would be capable of making logical decisions that work in their own best interests, but their actions over the last few years have proven that not to be the case.<\/p>\n

It would be advantageous to lenders to work with underwater borrowers trying to short sale their house, especially when they have a buyer lined up at market price, but instead most banks have been dragging their feet on short sales, repossessing the homes, and selling them for far less months (or even years) later as REO.<\/p>\n

Perhaps we have some readers in the lending industry that can give us some additional insight here, but unfortunately I’m thinking that this emailer might be stuck with two choices: Keep paying on the underwater loan, chipping away at the principal until you owe less than the value of the home or throw in the towel and walk away.<\/p>\n","protected":false},"excerpt":{"rendered":"

A reader emailed me with an interesting question about refinancing an underwater mortgage: Do you think I can convince my lender to refinance my underwater 30-year mortgage to an underwater 15-year mortgage? Obviously another lender would have no motivation to take over a bad investment. But arguably it could be advantageous to my lender. They’re…<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[206],"tags":[305,9,220,667],"coauthors":[],"class_list":["post-17079","post","type-post","status-publish","format-standard","hentry","category-features","tag-banks","tag-reader_question","tag-refinancing","tag-underwater"],"yoast_head":"\nReader Question: Refinancing an Underwater Mortgage? \u2022 Seattle Bubble<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/seattlebubble.com\/blog\/2011\/09\/19\/reader-question-refinancing-an-underwater-mortgage\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Reader Question: Refinancing an Underwater Mortgage? \u2022 Seattle Bubble\" \/>\n<meta name=\"twitter:description\" content=\"A reader emailed me with an interesting question about refinancing an underwater mortgage: Do you think I can convince my lender to refinance my underwater 30-year mortgage to an underwater 15-year mortgage? 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