Jumbo Underwater...help!

[sw615]

Hi everyone. I am so glad I found this site, if for nothing else, to ease my worries. Here is my situation: We bought a home in 2006 for a little over 1M. We put 10% down and financed about 973K.

We have our first mortgage at Wells Fargo 5/1 IO ARM 6.25% for 865K, set to reset in 2011. Our HELOC is with Natl City for 108K 7yr IO at 4.67%. I

am so stressed out right now, because our mortgage is totally underwater and there is no way we will be able to refinance it when the ARM resets. My husband has a great job and we can afford our payments, but if we can't refi and they go up to astronomical rates it will be very hard. We did this kind of loan to free up some of our cash while he started his business and planned to refi, but the market crashed before we had time to do it. Jumbo loans are impossible to come by right now and I am not sure what we should do. Should we work over the next 5 years to pay off our HELOC so that we only have 1 mortgage? Can anyone give me some peace of mind. I know there is not alot I can do right now, since our ARM is set for almost 3 more years. But I am a planner and I need some peace of mind for my sanity! I haven't slept since this whole disaster has happened.

Thank you for your help.

[LHarveyMadman]

Your story is similar to mine - 5/1 interest-only jumbo at 6.25%, originated in 2006, originally due to reset in 2011, plus a HELOC of nearly $100k with a good interest rate. The lender of my first is Bank of America.

I, too, was not behind in my payments, and wasn't facing any immediate hardship, but I was concerned about what would happen when my rate reset. I explored refinancing, but didn't have enough equity to do so (and now I have none!).

Long story short, I was able to get a modification without being late or having a current hardship. I definitely was facing a hardship when the rate reset and I had to start paying the principal. So it is not impossible to get a modification while current; however, I do not know how much this is occurring with WF.

It doesn't hurt to try to get a modification from WF. Calling their loss mitigation number might not get you anywhere; I'm betting that the agent who answer the phone will turn you away since you're current on your loan. Writing a well-thought-out letter is what worked for me. You can probably find the names and email addresses of several WF executives that could be appropriate recipients of your letter.

With regard to whether you should pay off your HELOC, it won't make much of a difference if you are too far underwater. Having one loan that is still underwater won't help you when it comes to refinancing. If you want to pay down your debt, then at present it would make the most sense to pay down your first loan, since it currently has the higher interest rate. But as you know, the HELOC interest rate will eventually go up, though I do not expect this to occur anytime in the near future.

[HopingtoFind]

sw615....welcome,

Here is an WF executive office number that *** posts to help everyone: 800-853-8516. LHarvey is right.... regular Loss Mitigation department would probably not do much if you're current.

Wells Fargo is also not the easiest to work with unfortunately.

[sw615]

I contacted Wells Fargo the other day and they said that I should "sit tight" and enjoy the low interest rate/payments and not worry about it for another 2 1/2 years. And that the jumbo market is all but closed to lending with interest rates around 7-8%. I am just not sure I can "wait" this out. It is causing me so much stress. WF said that unfortunately banks won't modify mortgages because the consumer is stressed out. Do you think I would benefit or even be able to redo the loan to a 5/1 ARM instead of an IO 5/1 ARM. I am just not sure what to do. I swear it feels like I am the only one in this stupid situtation. Is there anyone else out there with my problem? We did this type of loan with the knowlege that our income will grow with the mortgage, and it will, however, I hate feeling trapped in a bad loan with the possiblility of a higher rate in the future. HELP!

[LHarveyMadman]

We warned you that calling would get you nowhere....

It's not true that jumbo loans are no longer available. It's just that for you, with insufficient equity, refinancing is not an option. It is true, however, that the nonconforming interest rates are considerably higher than for conforming loans.

There's nothing stopping you from paying down your principal on your current loan. But it's going to be hard to make a big dent before your loan resets unless you drastically increase your payments.

Work on a letter. Send it to the WF executives. It doesn't hurt to try.