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It is estimated that 20% of homeowners are now underwater on their mortgages. This will surely restrict job mobility, making it harder for job seekers to take jobs that would require them to relocate. Up until now, the U.S. has one of the most "mobile" work forces in this regard. ....
3. With the high number of homeowners underwater it seems like there needs to be new mortgage products to account for the current times.
maybe a few rules could be tweaked to allow this to happen
I'm trying to understand. (I don't have a background in finance, but I find it interesting.) The bank would have an identical mortgage on an indentically valued house. There wasn't any money created. (They get their original loan repaid on the same day they make the new loan, let's say.)
Yes, perhaps there is a some rule against it (I'm supposing, I don't know), but that doesn't mean it isn't a good idea that might stimulate our economy without costing anything.
It wouldn't be an identical value though. When you buy the second house for $200,000 that becomes the "value" of that house. It is highly unlikely that the house would appraise for $60,000 more than what the buyer is offering. And if it did then that means the loan is 100% financing. Fannie and Freddie aren't buying those which means that the bank that loaned the money would have to hold that mortgage.
The piece you are missing is that the buyers original loan on their current home is probably held by Fannie Mae or Freddie Mac. The "bank" that you send payments to, really doesn't have the note, they just service the loan of behalf of the loan giants. Since they don't "have" the loan, they can't just transfer the loan to a new house. The loan is held by someone else. So the other loan has to be cleared and a new loan originated because Fannie and Freddie don't originate loans.
It wouldn't be an identical value though. When you buy the second house for $200,000 that becomes the "value" of that house. It is highly unlikely that the house would appraise for $60,000 more than what the buyer is offering. And if it did then that means the loan is 100% financing. Fannie and Freddie aren't buying those which means that the bank that loaned the money would have to hold that mortgage.
The piece you are missing is that the buyers original loan on their current home is probably held by Fannie Mae or Freddie Mac. The "bank" that you send payments to, really doesn't have the note, they just service the loan of behalf of the loan giants. Since they don't "have" the loan, they can't just transfer the loan to a new house. The loan is held by someone else. So the other loan has to be cleared and a new loan originated because Fannie and Freddie don't originate loans.
Wow. It's too complicated. Isn't there any way to make this work?
Wow. It's too complicated. Isn't there any way to make this work?
What options the OP has depends on who holds the note. The OP can lookup on the Freddie and Fannie sites if they own the loans. If they don't own the loans and the actual bank does, then they might be able to work out a prom note with a new loan. I haven't heard of it being done, but it would be worth talking to the lender about. Debt to income ratios will come into play on that though.
What options the OP has depends on who holds the note. The OP can lookup on the Freddie and Fannie sites if they own the loans. If they don't own the loans and the actual bank does, then they might be able to work out a prom note with a new loan. I haven't heard of it being done, but it would be worth talking to the lender about. Debt to income ratios will come into play on that though.
Unfortunately, Freddie Mac is the owner of my mortgage.
What options the OP has depends on who holds the note. The OP can lookup on the Freddie and Fannie sites if they own the loans. If they don't own the loans and the actual bank does, then they might be able to work out a prom note with a new loan. I haven't heard of it being done, but it would be worth talking to the lender about. Debt to income ratios will come into play on that though.
Unfortunately, Freddie Mac is the owner of my mortgage.
My sympathies. They are one of my least favorite entities to deal with, at least the West Coast office stinks. MAM has had better luck in the Midwest with them. Not sure about FL.
I disagree. With the presumption that anything that gets people moving, accepting new jobs, pursuing entrepreneurial ventures, freeing their old job for a new person to take, etc, helps our economy recover as quickly as it can...
Person A buys a house five years ago for 300,000. House is now worth 200,000; he owes 260,000 and, not having 60,000, cannot sell it.
He gets good job opportunity in another state. If he moves, he could buy a house in state two for 200,000 (home values have fallen there as well.)
His bank allows him to use his second house as collateral for 260,000 dollar loan. He pays off house one, and owes 260,000 on house two (which is only worth 200,000). For bank, it is neutral, except person A is more likely to pay back the mortgage because he has a good job.
This is a good idea for everyone.
Edit: It has to be the same bank handling both loans, off course. As OP states--bank gets second advantage, closing costs.
Huh??? x2
Good job opportunity in another state - Check.
Owes $460K on something maybe worth $400K - Check.
Doesn't have enough money to settle debts but a bank would be willing to loan $200K w/o a downpayment - Check.
Pays off house (time period unknown) - Check.
Still owes $260K - Check.
Your premise is flawed and your assumptions lack validity.
Good job opportunity in another state - Check.
Owes $460K on something maybe worth $400K - Check.
Doesn't have enough money to settle debts but a bank would be willing to loan $200K w/o a downpayment - Check.
Pays off house (time period unknown) - Check.
Still owes $260K - Check.
Your premise is flawed and your assumptions lack validity.
Bottom line...it's a terrible idea - period.
what are you talking about?
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