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SMART MONEY: Patience may pay off for upside-down homeowners

on July 07, 2013 2:50 AM

DEAR BRUCE: I have a house that has a second mortgage. We owe more than the house is worth. Is there anyone who can help get refinancing? — W.W., via email

DEAR W.W.: There are some government programs being advertised extensively on the radio. You might wish to respond and see what they have to offer. The ads say that in some cases, even though a home is upside-down (meaning more is owed on it than it’s worth), you can still get some refinancing on these special programs. I wouldn’t get my hopes up too high on that.

One thing that is certain, though: In most parts of the country, real estate is starting to recapture its value. I don’t expect to see the sky-high values of five or six years ago, but if you can afford the payments, you might consider keeping them up. The likelihood is that the majority of your deficit will be wiped out. In the absence of that, you might wish to investigate a short sale. In other words, you would go to the lender and say, “The house is worth $100,000, but the most I can get for it is $90,000. If you will accept $90,000, I will sell it to get out from under it.”

DEAR BRUCE: I have a repossessed vehicle loan from back in 2009. It is in collections, and I have creditors circling. I am sure they have sold the vehicle, but I do not know how to get that information.

The last creditor I talked with said I owed $8,000, due immediately, which is what I owed when I lost it.

But being in contact with friends and a family lawyer, I’m told that they can only collect fair market value and/or whatever is left on the loan from the resale. I was advised, from this lawyer, just to ride it out, not to talk to any collectors and wait for it to disappear.

I hate having this over my head and would love some resolution, one way or another. Any information, advice, help or suggestions you can give me would be appreciated more than you could know. — Ryan, via email

DEAR RYAN: I am not sure that what your friends and family lawyer are telling you is the way you should consider going. Since it’s been a number of years, that loan has been sold once or twice already and will be sold again by the company that owns it now but isn’t collecting. That new company will get aggressive in collecting what is owed.

You have every right to insist that the company provide the amount that was due on the loan when the repossession took place, how much it was sold for, and the interest that has been accruing over the last three or four years. You can probably settle it for 15 cents or 20 cents on a dollar. That might be the way to go.

If you hang in there for a couple of years, it probably will go away, but it will stay on your credit report certainly for five to 10 years. If that’s important to you, you might wish to negotiate a settlement.



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