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Upside down on HELOC only

I have a $300,000 HELOC only loan (no other 1st or 2nd mortgage).  I am upside down about $120,000.  Bank of America insists that it is not considered a 1st place mortgage, although other banks I have spoken with tell me differently. BOA told me they are not obligated to follow the Obama HAMP/HARP rulings.  I am not having difficulty making the interest only payment at this time, but in 2 more years, when the principle is added on, I will not be able to make the payment.  I called BOA to come up with a game plan because I do not want to ruin my 807 credit score.  They will not give me any information or help me in any way.  The only thing they kept reiterating during our conversation is that I am not having a hard time making my payment.  I am currently paying 2.24% on $300,000, which is about $570.00 per month in interest only payment.  When the principle is tacked on, I am guessing that my monthly payment will be around $2000-$2400. per month, which will be impossible for me to make.  Do I need to get an attorney, because it appears that they are going to be very uncooperative.  If I can't get a modification, can I get it discharged through bankruptcy?
  • June 30 2012 - West Palm Beach
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Answers (2)

Profile picture for Alyse Sands
HAMP is a program that was started to assist home owners who are under hardship and can't pay their mortgages now. The government and the banks aren't required to modify loans, even on a first mortgage. You'd still have to provide documentation of income to prove that you're needy.

Did a professional suggest to you 8 years ago that it wasn't a good idea to only pay the interest on the loan?  Have you considered adding $ towards your principle now since you haven't paid down any of your equity? 
If you double or triple the payments (less than your projected payment later), in two years you will have paid the loan down about $25,000. Since HELOCs are amortized monthly on the balance, your payments will be less than you're figuring later.

Have you considered getting a roommate or renting out a room if you can't do this with your job, alone?
I think you SHOULD consult a FL Real Estate attorney.  I'd like to know how things turn out.
  • July 01 2012
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If you are not having trouble making your payment, there really is not much that you can do. Most lenders won't do anything until you demonstrate some financial hardship. Interest only, which is what you have, is not considered for HAMP or HARP. I have been down that road with sellers a few times. If you like your home and plan to stay in it. I would advise you to wait and see what happens when it adjusts to P&I. If you have other debt that you can pay down to allow more to go toward your mortgage, perhaps you should work on that.
The only other suggestion would be to speak with an attorney and see what other options you might have. Bankruptcy should always be the last resort. Good luck.
  • July 01 2012
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