Repost: Help, I Need $153,000!

This is a repost from my main blog M is for Money, where I deal with finance in general not just the perils of being underwater. This is related to my earlier post, Called My Lender.

How do you come up with $153,000 in a hurry? Really I have no idea, but that is the amount I would need to refinance my mortgage. I bought a small starter home in 2005, we planned to move up after ~5 years. I took out an adjustable rate loan, which now seems like a ticking time bomb in my lap. Mortgage rates have never been better but like all the other underwater homeowners, I can’t take advantage of them. I tried calling my lender to see what they could do. The news wasn’t good.

They are holding my mortgage, it was not sold off to investors. But any modification or refinance would have to conform to traditional standards and the loan could not exceed 80% of the appraised value. The not so helpful loan officer asked how much I was upside down - I told him I didn’t know but it was significant. Afterwards, I used their online home valuation estimator. Based on my current loan balance, their value estimation and the 80% limit, the difference was $153,000. Yeah, I’ll just write you a check.

Their valuation model had some quirks, my home value was placed 50% below the comps! Only 1 of the 8 was actually in my neighborhood. None of the comps have a view like I do, most are in poor condition and all have smaller lots. Still, even an optimistic appraisal would leave me owing a hundred thousand to refinance. Money I don’t have.

The call left me rattled. I had held on to the hope that my lender, a credit union, would be more flexible. The money has already been loaned out, why not reduce the risk of default. It’s extremely painful knowing I could pay half as much for the same house. I’ve made a lot of financial mistakes in my day, but I’ve been able to recover. I don’t know what to do this time. It will take me 10 years to save up that much. If the rate adjusts to the maximum, my payments would increase by 60%. The $3500 monthly house payment would eat up most of my salary, say goodbye to saving. I feel helpless.