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Can Harp help? Refi of very underwater income property in Tempe Az.

House bought in 2006 for $300K, first of $240K and second of 30K. current unpaid principal of the two combined is about $264K. The value of the home is well under 200K.  5 year ARM on the first adjusted to low 3% from 6.75 but the 2nd is still 7.75%.  I don't want the property, keeping it afloat with about $500 negative/mo.
but I hesitate to short sell because of the 1099 debt forgiveness, (it's not a primary residence) and the credit ding. 
 Here is the kicker,  Ex-wife is on the loan and divorce decree says she she has no responsibility for the house and I was to have gotten her off the loan by refinancing two years ago.
Thanks, Kim
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July 05 2012 - US
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Thank you Brian, 


Kim
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July 05 2012

Have you looked up the address on Fannie Mae or Freddie Mac's website to determine if you are eligible for a HARP refi?   If you are eligible, the HARP program will work to get the 1st loan in your name only.   You won't be able to do anything with the 2nd mortgage at 7.75%. HARP does not allow you to consolidate the 1st and 2nd loans together. The only thing you would be able to do is refi the 1st mortgage.  

Personally, I would keep the loan you have right now. You are not going to get a better rate than the 3% rate you have right now.   I would expect the rate to stay that low for at least a year.   My adjustable has been bouncing between 2.75% - 3.5% for the past several years.   At some point it should go up, but as long as the economy continues to struggle like it has, the chances of the rate going up anytime soon are minimal.

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July 05 2012
 
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