Across California, people are currently living in a home that they owe more than it is worth. Are you currently living in a home that is worth less than what you owe?
There are two “magic” numbers that you need to be aware of: 105% and 125%.
If you currently do not owe more than 105% of your property value, then you can refinance right now under the Making Home Affordable plan – also known as the “Obama Refinance”.
If you currently owe more than 105% but less than 125% on your property, then soon you will be able to refinance under the expanded “Obama Refinance” plan. The plan has been announced and lenders are figuring out how to implement it now. Expect sometime this fall for lenders to roll the plan out.
If you currently owe more than 125% of what your property is worth, there is no “Obama Refinance” program that will help you — so these are your options:
- Continue making your payments
- Short sell your house
- Attempt to get a loan modification that will most likely still leave you with 50% (or more) negative equity
- Foreclosure
What Should You Do If You Have 50% Negative Equity And A Reduction In Your Income?
The short answer: If you can’t continue to do #1 (make your payments) and you want to live in the home, try #3 (loan modification) with your lender but be ready to do #2 (short sell your house) to hopefully avoid #4 (foreclosure).
