Refinancing when underwater

I have a question about any help out there in refinancing our home mortgage.

We have a mortgage and HELOC with Chase Bank. We put 10% down on a $480,000 house and Chase told us to take out a 10% HELOC to make a total down payment of 20% to avoid Mortgage insurance.

We have a 7/1 ARM that will reset in 2012. Currently we have $360,000 balance on our first mortgage and a $44,000 on the HELOC. For a total balance of around $404,000. At an estimate due to falling house prices in our area our property is worth around $330,000. We have always paid on time and paid principle and interest on both loans.

We wanted to refinance into a 30 year fixed rate just to have the payments set, because we are concerned that when our mortgage does set we still won't have any equity and won't be able to refinance or afford the new payments. Chase won't refinance us because they require at least 20% equity.

What are our options? I have spent hours on the phone and sent multiple letters to Chase just asking them that we DON"T want to adjust our payments or reduce our principle, but just to let us refinance into a more stable fixed rate. They say they want to help customers before payments are missed and to avoid foreclosure.

We have had no response from them and because we are not behind in our payments they won't discuss anything over the phone, and we get passed from department to department.

The new government housing program addresses our exact problem but unfortunately is only available to Fannie and Freddie owned or service loans. I have heard that the government are trying to get other lenders apart from Fannie and Freddie to allow underwater homeowners to refinance as well?

Do we have to refinance both the first mortgage and HELOC together. Or can we just refinance the first mortgage. Chase will only be helping themselves and us by allowing us to refinance into a 30 year fixed, so in the future our rate will not climb. They are not taking on anymore risk or loan amount because they already hold the loan.

Where can we go from here? Our house price will not regain equity in the next few years before our ARM resets. We will have less income due to a new born on
the way as well.

First of all, I am sympathetic to your plight and the millions of homeowners who are in a similar position. Unfortunately, the latest elements of the stimulus package address only those borrowrs whose loans are less than 105% of the value of the home. Therefore I think you are going to have to rely upon Chase. They recently announced that they had hired 2,500 people who are ready to deal with people like you. Frankly, as long as you are only asking for potential relief such as continuing the current rate for another five years, one would think that they would agree. You are just going to have to stay in contact with them. Luckily, 2012 is still a ways off and that gives you and our market an opportunity to come to grips with these problems in a rational way. I hope it works out for you and that you will report back in when you are successful.

great posting
I am in a similar situation due to the Hantz Fiancial group repeatedly encouraging, insisting, persisting in getting us to give up our 5.25% fixed mortgage 3 years ago and to refinance our mortgage at 3 months low rate and 3 months higher- every 6 months for these low rates, dismissing our concerns about not having principle build up ( each refinane once we gave up our original mortgage had increasing demands to roll over any temporary debts we had) and what if we get stuck and cannot keep refinancing at these low rates and we get stuck having to have a higher rate mortgage?...

so now our mortgage is a 6.25% RATE and our home value is down to 310k from a 500k assessment 2.5 years ago, this is less then we paid for it 14 years ago before putting in a dock, new granite kitchen and bath, landscaping, and our bank is Chase.
Chase even took an application for refinance fee from us, reassuring us that the assessments were "coming in higher," offering 5% rate potentially and you guessed it- they wanted 20% of the 310 down, plus the 50k we are underwater with ... any suggestions... since we already are paying them automatically every month, were paying more each month, and have a 30 year mortgage with them. We a have high credit rating... we lost most of our retirement in the stock market and are both 61 so at this rate we will have to walk away from the house in a few years... I have become partially disabled and work part time now and my husband is very concerned about his job security here in MI.
Suggestions for how to talk with Chase or find another mortage company? The payments are too high for us.
yeah Chase
thank for any help

This message was edited 3 times. Last update was at 04/02/2009

The mortgage industry is simply not coming to grips with the plight of people like you. I would agree that they ought to be concentrating first on those who are about to lose their homes so as to halt the number of foreclosures when and where it is possible.

But at some point in time it's going to be your turn. The funny thing is that your loan may be on their books for $275,000 and you wonder why they wouldn't be willing to offer that deal to you and make some modification like "PAY US LATER IF YOUR HOUSE EVER GROWS IN VALUE" on the 2nd kind of deal.

That just doesn't seem to be happening and I wonder who those 2,500 loan modifers spend their days talking with.

We just need to see how this whole economic stimulus package sorts itself out. Perhaps they will get around to you later this year. I wrote a piece for CREDIT.COM called The Principle of Principal that talks about this issue. It isn't going to help but if it makes you feel better, I'd be happy to send it to you. Send an e-mail to randyj@loan-wolf.com and I'll reply.

This message was edited 2 times. Last update was at 06/02/2009

AC1974,
There is a method you can follow, where you can use your Home Equity Line of Credit as your main account to pay your bills. Let me try to explain. Essentially, you take your paycheck each pay period, and deposit the full amount into your HELOC. You pay all your monthly bills and expenses through your HELOC. The HELOC allows you to have a checking account and a charge card attached to it. What's left over from your paycheck has been applied to the balance on your HELOC, rather than sitting in a checking/savings account. It takes some discipline, but often times what you will find is that after 3 years, you will have paid down the majority of the HELOC, so that you can pay down the principle of your home mortgage at a much more aggressive pace. This process is known as "mortgage acceleration." Hopefully, by 2012 you would not be upside down anymore. Good Luck!

Joe