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Our Mortgage Crisis

The following is a guest post by my sister Kirsten.  She and her husband have been dealing with a unique aspect of the housing market crash from an Air Force family perspective. 

Crisis? I’m not quite sure that’s the right word; maybe catastrophe is more like it. 

CRISIS

My husband and I think that we have taken good care of our finances and have a very good long-term plan. We have no credit card debt, no college loans, and have just recently paid off our second car. We put away money monthly for our retirements and our three, soon to be four, children’s college funds. We even have a sizable emergency fund in case of the unthinkable happening.

In May of 2007 we were moved to the very shiny, VERY hot city of Las  Vegas, NV on military orders.  We thought about taking out a loan with Omni Financial to help us pay for moving expenses. Upon our move there we purchased a home in the growing northern part of the city. Military orders as a general rule will keep you in a certain area for an average of 3 years, so buying a home is not uncommon for the military family, as transient as we might be. We purchased our home there for a modest $259,000. Believe me when I say modest, 1869 sq. ft., decent-size backyard and nice neighborhood within 10 minutes from Nellis AFB. Many of our friends purchased or rented homes that you’d think you’d see on MTV Cribs, but we try our best to live within our means.

In early 2008 the unthinkable happened, well, two things actually. There is something called BRAC – Base Realignment and Closure. For the layperson, ‘realignment’ can mean several things, (For further info:
http://en.wikipedia.org/wiki/Base_Realignment_and_Closure) for us it meant that after only a year of living in Las Vegas we had to move to Cannon AFB, NM.  Oh, crap (in much more kid-friendly terms than we used at the time).  We were excited about the move to a much greener place, but were concerned about meeting our obligations on the mortgage in Vegas as the market had already been headed downward. A year or so later, the market crashed completely.  We were able to get renters in the house in fall of 2008. A complete blessing, but the rent we were able to ask and the mortgage had a difference of $500 per month.  Boo.

A couple of months ago I saw the Bank of America had made a public proclamation to assist military affected by the housing crash and my ears immediately perked up! Help? Yes please. I bravely went online to look at the current value of our originally $259,000 home. It is now sitting at a bleak $111,000, according to Bank of America’s home value records; even worse than the $120,000 I had been hoping for. Our home is worth less than half of what we bought it for. We are in the hole over $140,000.

For us, this seems surreal, dream-like, nightmarish. After we moved to NM, we bought a home here as well, and we’ve made every payment of BOTH of our mortgages on time! So, wouldn’t you think as very good customers of Bank of America and as Airmen in the world’s finest Air Force that they would be bending over backwards to help us out of this disaster? Not as of yet, but we’re hopin’. 

Our Options:

1. Refinance

Our mortgage balance stands around a daunting $225,000 (actually, a combination of two loans), financed at 6.375% and 7.500%; this compared to the current rates of roughly 4.750% to 5.000%. If they combined the two loans and refinanced it at 4.750%, it would decrease our payments by $600! That would allow income from our renters to cover the mortgage payment!

But alas, in order to do the above suggestion we would have to bring $84,000 to the table, plus closing costs. Understandable, because the bank can’t risk financing a house that doesn’t have the collateral to back up the loan.  Since we don’t have that kind of cash lying around, closed is Option 1.

2. Loan Modification

I am rapidly learning about the complicated world of finance as I go through this. Option 2 is a loan modification. This option would lower our payments only slightly, and it would negatively affect our credit for 4-6 months. Since, we are able to make our payments currently (even though our house is worth peanuts), we’ll forego Option 2.

3. Housing Assistance Program

I had heard of the Housing Assistance Program before, but I had disregarded it as not for us. Upon finding out about the peanut house, I decided to give it another look. According to their website: “The program is authorized by law, and administered by the US Army Corps of Engineers (USACE) to assist eligible homeowners who face financial loss when selling their primary residence homes in areas where real estate values have declined because of a base closure or realignment announcement.”

There are several options when it comes to applying.  We are asking the government to do one of two things; they could buy the home outright from us for the remainder of our loan, or we can sell the home on the private market and the government will give us 90-95% of the difference between the selling price and our original purchase price.  Personally, I would love the latter option, as it gives us the smallest chance to get some of our down payment back.

Now, here’s the tricky part and the part that leaves us holding our breath (again). There are deadlines in place for the original purchase date of the real estate, which we fall short of by about 1 year. According to the HAP, in order to be eligible you must have purchased the property or been under contract by 1 July 2006, while we purchased in May 2007.

Currently, there are several members of Congress that are trying to make an amendment to the HAP program. The general principle is this, the housing markets across the US did not all crash on the exact same date. They are trying to make the eligibility dates flexible based on your region market. Congresswoman Dina Titus of Nevada is trying to make this happen with over 20 co-signers on the amendment.

No application, no glory. Even in lieu of the date requirements, we are submitting our application for the Housing Assistance Program and remaining hopeful that they will take pity on our case in particular, even though I know that we share the same situation of countless military members. The Good Lord has a plan, He just hasn’t let me in on it yet. So, here goes nothing!  We’ll be submitting the application this week, with a 3 to 4 week processing time – updates to follow!

Update 9/20/2010:

After much ado (although, not over nothing) we have finally received our much anticipated letter of rejection from the Housing Assistance Program… but wait… there is a silver lining.

We have recently conversed with our long-time realtor in Las Vegas about our property and how the market is recovering out there. Long story short, there really is no recovery happening, at least that we can tell.  The market is going to be in a slump into the foreseeable future.

Silver lining:  She told us that once we received our HAP rejection letter to appeal it immediately.  Then, she said, expect to receive a second letter of denial.  Once the second letter arrives appeal even more immediately.

Due to the fact that once you are in your second appeal, it no longer goes to the regional office, it goes straight to the National HQ of HAP.  Why is this good?  Well, apparently there are monies that sit unused that are in the process of being delegated to help families such as ourselves. Yippee!!!

So, per her instructions, and hope against hope, our first of the two appeals was mailed out last week.

Yet again, here we wait.  Hopeful and praying.

 

Anyone have any suggestions for Kirsten?  Have you gone through a similar experience yourself?

Well, tell us about it.  We aren’t going to beg you.


Article publié pour la première fois le 10/06/2010

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