There May Be Hope for Underwater Mortgages in Arizona

New Rules for Underwater Mortgages in Arizona

Some homeowners in Arizona who are trying to escape an underwater mortgage may have some hope. What is an “underwater mortgage” and why are those affected by this financial crisis desperate to find a way “above water”?

The term underwater mortgage is a term referring to a situation in which a homeowner is left with more debt on their home than what it is actually worth on the current market value. So the homeowner actually owes more on the mortgage that the house is worth. They could sell the house, but it wouldn’t cover the current mortgage that is owed. Due to the recent economy, the value of the housing market has greatly depreciated leaving many homeowners stuck with an underwater mortgage and desperately wanting help to bail out. Without a bailout on their mortgage, many people are forced to file for chapter 7 or chapter 13 bankruptcy in order to get out of the mess that has been created by their mortgage issues.

There may be help for those homeowners stuck in a house and mortgage who are unable to move or sell their homes due to the fact that they owe more on their property than it is worth. To help the economic recovery and to benefit people who need to move due to job relocation, the death of a spouse, illness which requires a shift in location, and for military personnel relocation, new rules for deed-in-lieu transactions may apply. On March 1, 2013, Fannie Mae and Freddie Mac will begin to allow some homeowners who need to move but are stuck in their “underwater homes” to give up their houses and cancel their debt. These moves may lead to a new financial start for many people in Arizona and throughout the United States who are “underwater” with their mortgages.

There are restrictions to this new relief program. To be eligible, homeowners must be able to prove that their need to move is considered to be a hardship; a move that is deemed necessary such as the death of a spouse. The rules of the program do not allow just anyone who is underwater who wants to move do so just in order to escape their financial situation.

The new rules apply to those who are current or less than 90 days late of their monthly mortgage payment (first mortgage, the program does not affect a second mortgage). Homeowners , depending on their financial situation, may also need to give up a percentage of their personal assets in order to meet some of the balance owed. So, don’t stop paying your mortgage now because you think that after March 1st you won’t have a mortgage any longer.

The newly announced relief program has created several questions, such as: How many homeowners facing an underwater mortgage will these new rules affect? Who will actually benefit? It appears that the number of borrowers who may be eligible for a deed-in-lieu release is projected to be small. Although it is a program created to help homeowners, it is somewhat restricted. (However, every little bit helps.) Short sales (a sale that allows lenders to sell the home for less than they are owed) have been far more popular than the deed-in–lieu transactions. Nevertheless, the program, as restricted as it may be, is intended to help borrowers affected by the housing market collapse.

Check out the restrictions and see if the debt relief is applicable to you. If it is not, it wouldn’t be a bad idea to seek the assistance of an experienced short sale lawyer or bankruptcy attorney to find out what other options may be available to you.

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