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1st, HELOC and Underwater

We own a very nice 3500 sq ft home, on two Redwood treed acres, with a 10 car shop w/apartment, for $280,000 in 2001.  They were asking $420,000 (Divorce).  The market was flat and this was one of the most expensive homes in the area.  The problem was the unfinished gravel road, dirt back yard, etc.  In about 2006, I went to BofA and obtained a HELOC to fix these areas.  They had it appraised by their people for $747,000.  I fixed everything up, paved the entire 1/4 mile lane, 11,000 sq ft entry drive, flagstoned the back yard, built a fire pit, installed a jucuzzi, replaced the rear deck, upgraded two 5' x 5' windows, replaced the rear french doors, had the hardwood floors refinished, installed granite counter tops and backsplash, ... My problem now is the value of my home dropped from $747,000 TO $330,000 in three (3) years after putting my HELOC money into my home.  I currently owe a total of $495,000 ($165,000 UNDERWATER.  I have lost $25,000 per year as of 2 years ago and I am living paycheck to paycheck.  I called the banks to see if there was anything I could work out with them and they said no because I am making my payments on time. What should I do.  Who do I call first, Wells Fargo.  BofA said they cant do anything with a HELOC.
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April 20 2013 - Crescent City
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    Answers (2)

    Recently, in California, the Attorney General, along with many other states, filed a lawsuit against many of the major lenders (banks) for their mishandling of loan modifications, foreclosure methods, and other loan violations.  As a result, billions of dollars have been set aside in a judgement and must be dispersed to homeowners who have similar situations.

    One of the most frustrating elements of loan modification requests were that the banks would not even discuss a modification if the homeowner was not at leat 90 day in arrears, and were in a notice of default phase. Now, this is not the case.  Some loan modifications even include principal reductions to bring the loan to value more in line with the appraised value.  If you can show that your HELOC was used to improve the property and not other consumer spending, this may suffice.

    Contact your Attorney's General in your respective states, and inquire if the above mentioned settlement will require lenders in your state to grant loan modifications, including principal reductions, and have them direct you to the proper venue to file your application.
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    April 20 2013
    your best bet would be to check to see if your home is fannie mae or freddie mac owned. if so you can refinance your first mortgage at a lower rate and payment. you wont be able to do anything with the second mortgage.

    https://ww3.freddiemac.com/corporate/
    http://www.fanniemae.com/loanlookup//

    let me know if you have anymore questions
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    April 20 2013
     
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    1st, HELOC and Underwater
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    Latest answer by Randall Rafoth
    April 20 2013 | 2 answers
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