We are in a very unique moment; prior to this, it would be hard to find a point in history where home prices rose only to retract below original values. The rapid rise in home values, fueled by cheap money and flexible lending criteria, was met with an equally devastating crash that has left some 11 million homeowners upside down on their mortgages. The Economist reports that perhaps 25% or more of these upside down houses are worth as little as half your mortgage. While this is all old news, there are companies offering new solutions and services for struggling homeowners.

First of all, homeowners are not alone. While navigating one’s options for what to do with their negative equity is daunting, since state, federal, and IRS rules factor in, there are services that provide homeowners with guidance on what to do. A company that te alejas.com helps homeowners determine their deficiencies/obligations regarding “abandoning” their mortgage.

Most importantly, you should always seek the advice of an attorney. Especially when you are at risk of receiving a deficiency judgment on your mortgage. An attorney will help the owner determine if his or her mortgage is classified as “with recourse” or “non-recourse” and if a foreclosure proceeding would be conducted as a “judicial” or “non-judicial” foreclosure.

Strategic default has entered our lexicon with this recession. While there are lawyers and services to help homeowners. There are also government programs available for those in financial difficulty. If a homeowner lost their job or experienced a significant drop in their income, FHA and other agencies have funds available. Banks are also open to short sales for individuals, however based on the most recent statistics and anecdotal evidence it is a fair estimate to say that only 10% of short sales close.

For homeowners with a reverse mortgage who can afford their housing costs, have a good income and stable employment, there are no negative equity programs available to them, and never will be. Even if one has no background in the financial industry, common sense dictates that bondholders of mortgage assets will not offer to take a loss when their investment is performing. Furthermore, no government can legislate an investor to take a loss on an investment without offering compensation. If the government were to legislate, write down some estimate that puts the loss at $761 billion. An amount that the federal government would have to borrow.

However, there is a program for good credit, good income homeowners offered by Clean Slate Funding Inc. Their program is designed specifically for homeowners entering strategic default who love their home, would love to keep it, but can’t imagine paying negative principal for the next 25 years. His program is a lease-to-own strategy in which the company buys the house from the bank, during foreclosure, while the owner still resides on the property. The home is then leased back to the owner for a five-year term, the rent is set for the 5-year term, and most importantly, the purchase price is set at the value of the foreclosed home. . They use a standard lease-purchase agreement applicable to the state in which the owner resides (offered in California, Florida, Nevada, and Arizona). Quantities are fixed and prices guaranteed.

Previous housing market declines in other countries are a good indicator of how long the United States can stay in this mess. Alberta, Canada, was home to a major housing crash between 1979 and 1981. The increases in home values ​​were sustained by the oil industry and cheap rates. While the collapse was triggered by the NEP and the prime rate rose to double digits. If that past drop is any indication, it may take 20 years for home values ​​added to recover to their original levels. Very interesting moments.