Do Upside Down Mortgage Holders Have Another Option Besides Short Sales?

Do Upside Down Mortgage Holders Have Another Option Besides Short Sales?

Are there any other options for upside down mortgage holders besides short sales? There answer is now yes. A new program known as a Principal Balance Reduction is being offered to homeowners upside down a few that meet basic qualifications. As long as the mortgage (s) is worth at least 25% more than the value of the property and the applicant can document a debt-to-income ratio of 50% or less (based on the new, lower monthly mortgage payment) the negative equity can be completely eliminated through a Principal Balance Reduction program.

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A Principal Balance Reduction program is essentially a large scale Note purchase program consisting of heavily upside down homeowners, some current on their payments and others that have already stopped making their mortgage payments. Due tothe fact that property owners who owe more than their property is worth are very likely to default in the not so distant future, the Notes are sold to the new buyer (in this case a $ 5 Billion dollar hedge-fund) at a steep discount to current market value. The new owner of the Notes, the hedge-fund, then turns around and changes a couple of terms of the existing Note they just acquired. The outstanding mortgage balance is reduced to 95% of current market value and the interest rate is changed, to either 6.25% 7.25% or depending on the homeowners credit score. The once upside down homeowner now has a permanent principal reduction often amounting to hundreds of thousands of dollars in savings and the hedge-fund makes a quick profit and turns around and repeats the process with newclients.

Short sales Are a thing of the past? Possibly. If a homeowner qualifies for the program, why just walk away from the property and let someone else get a great deal. Also, short sales have negative tax implications and don't do your credit any good. A Principal Balance Reduction program allows the homeowner to essentially short sell the property to themselves without the negative tax implications or ruining their credit rating.

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