Got a second mortgage? Guess what…”the man” could possibly torch that sucker.
Let’s start this discussion, in the interest of transparency, by saying that this DID NOT happen to me. But it is happening to other Americans, and quite a bit.
Welcome to the world of “HAMP,” “HARP,” “Dodd-Frank,” “Underwater,” and “Loan Extinguishment.”
Is “Extinguishment” even a word? “Extinguishing” might be better. Or, even better still, “torch that sucker.”
Background…and if you’re not a homeowner, well, I’d encourage you to give this a read nonetheless: you may learn something you can put to use down the road.
Some crazy wacky number of Americans are “underwater” in their homes. Here’s a story from the Washington Post from September that says 10.8 million Americans owe more in their mortgage(s) than their house is worth.
Contributing to this phenomenon: second mortgages, which seemed like they were being dispensed from vending machines right before the Great Recession started.
Hypothetical example (“ripped from the headlines,” or, in this case, taken from a website called LoanSafe.org:
- Borrower’s first mortgage: $310,000
- Borrower’s second mortgage: $210,000
- Value of home: $295,000
- UNDERWATER: $325,000
That’s a big, red figure, no?
How does this work?
We’ll admit that, in our research of this phenomenon, there’s quite a bit of cat-and-mouse going on, and even a little bit of luck. Our best understanding of this convoluted process involves some of the terms we discuss above…such as…
Home Affordable Modification Program. This is a program from the government, and you need to qualify. In order to qualify, you have to fall behind on your mortgage and ask for some help from the government. And then you have to jump through a few (hundred) hoops, send in lots of paperwork, send that paperwork again, get things signed, double-checked, signed again, notarized…
Don’t believe me? Go check out the LoanSafe.org Forum. There are hoops. Lots of hoops.
Home Affordable Refinance Program. Like HAMP, but different. We won’t harp on the differences (see what I did there?) but, as far as we can tell, if you jump through the HAMP hoops and don’t qualify, you might qualify under HARP. If you don’t qualify under HARP, you might be able to find a different program.
We can’t stress this enough: make phone calls, do research, talk to attorneys, ask experts for advice. See our Disclosures page once again – we are not the experts on this subject. AND, given the volume of everything you can find on the subject, we’re not going to put an ad up in this post telling you to hit up this lawyer or use that debt relief program.
Dodd-Frank is a form that is required when you go through any of these processes. It references a law that two guys were involved in the making of. (You can guess their names.)
Don’t be surprised if you need to fill out this form a few times – I’ve seen quite a few stories on LoanSafe that reference this form expiring often, needing to be filled out again, changing, etc.
As for the act of “Extinguishment”…
It appears that, well, it just, sorta, kinda…happens. Poof.
In fact, in some cases, you don’t have to do any actual work to get on the “Extinguishment List.” See this article from a website called AGBeat for more.
You’ll have a loan that’s with a bank that’s on the list, the bank’s settlement with the Government means that they have to get rid of some of these loans and…
The ethics involved
I don’t know anyone personally who has had a second mortgage extinguished. Yet.
But it happens, and…well, given the amount of noise around bailouts, bailout money, toxic mortgages, lawsuits and the like…
My advice – if you qualify and can make it happen – is to go for it.