Response to Cat: Why Hold Onto an Upside Down Investment?

Mortgage Meltdown: Cat Writes:

cat

All good but why would I want to keep paying on a house that I owe $450,000 that is only worth $325,000 at best.

From HUD RELEASES TIPS FOR AVOIDING FORECLOSURE, 2008/04/22 at 9:42 PM

EDITOR’S RESPONSE:

THERE ARE ONLY TWO REASONS YOU WOULD WANT TO HOLD ONTO THE HOUSE — MONEY AND STRESS. Using the procedures and substantive claims addressed here it is POSSIBLE to get the mortgage note down to something considerably less than the value of the house.

The violations of TILA and other claims (including fraud) gives you a leg up on a complete refund of all the interest and points you paid, plus the down payment and improvements you made to the house, and a refund of the difference between what the house was really worth in fair market value and what it was stated to be worth.

Put all that together in a settlement (rather than a trial) and you can end up with a mortgage that is perhaps 50% of true fair market value, with your payments down by as much as 75%+ per month. 

Whether you offer an olive branch to the lender/investor of participating in the upside (an honest increase in the fair market value of the home) so that they recover some of their investment when you sell or refinance, is up to you. We would suggest that you offer that inasmuch as it is more likely to lead to settlement.

 

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