What is the meaning of an upside down home?
As a result of the financial crisis, homeowners who put little down or bought homes in areas worst affected by the crisis found themselves in an upside-down mortgage.
As a result of the financial crisis, homeowners who put little down or bought homes in areas worst affected by the crisis found themselves in an upside-down mortgage.
When a homeowner needs to sell but doesn't have the cash to make up for the deficit in equity, an upside-down mortgage can be dangerous.Some borrowers can approach their lender for a short sale in which the lender agrees to take a lower amount in order to market the home for sale with a real estate agent.When a lender refuses a short sale, or if a struggling homeowner is unsuccessful in one, foreclosures are often a result.Many homeowners who lose their home in a foreclosure suffer federal tax consequences with the Internal Revenue Service, and all have credit report damage.
30 percent of the mortgage holders surveyed were upside down in their mortgage, according to the February 2009 survey by the Pew Research Center for the People & the Press.The factors were age, income and race.Almost 25 percent of respondents who were upside down in their mortgages were under 30 years old, and 64 percent had children under 18 living at home.Forty-one percent of upside-down respondents were mortgage holders with an annual household income under $50,000.Only 6 percent of black and Hispanic respondents were upside down in their mortgages when they said they could recover their home's value in a sale.
An additional 600,000 homes became upside down by the third quarter of 2009, according to a study published by First American Core Logic at the end of 2009.
HAMP offers homeowners who have difficulty paying their mortgage an opportunity to modify their loan.The lender may forgive a portion of the principal loan balance in order to create a positive equity situation and lower monthly payments.To be eligible, the homeowner must be paying more than 31 percent of his gross income in mortgage payments for his primary residence; the residence can have from one to four units.As of September 2010, the borrower owes less than $729,750.The first mortgage must have been originated before 2009.The lender permanently modifies the mortgage after a three- or four-month trial period at the beginning of the program.