Underwater HSBC Interest Only ARM, opinions saught on options

[ShelseyWalsh]

Hi

This is a story much like many others. We took out a $550,000, 100% interest only ARM on the (verbal) advice of our Mortgage Broker to allow us to pay off debt and undertake some upgrades on the house, master suite and basement. With a pre payment penalty period of 24 months we were assured we could refinance out of the ARM in month 25 and return to a 30 year fixed product using the increased value in the property to give us an equity stake for a more traditional product.

Well of course, despite both my wife and earning good wages at month 24 I was laid off and in getting new employment refinancing got put to one side. When we did get back to it we had an appraisal at $630,000 and we were all set ready to sign the paperwork in Feb 2008 when our Mortgage Brokers 'disappeared' despite numerous calls no response and again our busy lives took over.

Fast forward to Dec 2008 when I am laid off again, my wife is still working and I am still looking for a new job. House has now appraised at $430,000 and despite all the work we have put in it over the last 9 years it is now worth only 90% of what we originally purchased it for. Cutrrent rate for the ARM is 10.375%, basically the most expensive rental property possible which with out a loan modification and principal reduction to allow refinancing on a fixed 30 principal and interest loan we have no hope of ever owning.

Despite numerous calls to HSBC and requests for help, it has not been forth coming, 4 requests for modifications havwe been denied. We also have unsecured debt of $110,000 to take care of.

We are just about to go 4 months behind and have received a letter saying unless payments are made by 5/21/09 the loan will be considered past due.

These appear to be the options;

1. I have applied for help under the NACA home save program
2. HSBC have talked of processing a loan modification initially for 6 months at about 5% after we make a monthly payment by 5/16.
3. Talking to an HSBC representative at a Foreclosure Forum yesterday he is prepared to set the wheels in motion for a Deed in Lieu and we give back the house and HSBC will not persue the delinquency. I have also been told that for 2009 such debt foregiveness should be entered on your Tax return but no tax will be due.
4. Tough things out to gain some time by allowing the foreclosure process to run its course whixch in MI would get us at least 6 months post auction in the house. Ditto re HSBC chasing us for the delinquency or tax being due.

I think we are reconciled, sort of, to losing the house. Tensions have built in our family we have 3 daughters under 10 and both my wife and I are tired of the arguments and stress. We do not want to spend the rest of our lives trying to keep afloat with what seems to be a millstone hanging round our necks. Moving out of state with a clean break and a fresh start might be best for each of us, our marriage and our family.

I would be grateful for any thoughts, advice or feedback.

[Opus09]

Having a mortgage with Beneficial/HSBC myself, I know how difficult they can be to deal with.

The only option offered to us at the time (February 2009, 2 months behind) was a 6 month loan modification, our principal and HELOC at 5.25% until August and we are currently in our 3rd month. They seemed to indicate to us the possibility of a permanent modification but if you read other posts from folks dealing with HSBC, nothing permanent ever happens.

Hopefully, someone else with more experience with HSBC will give you more feedback.

[ShelseyWalsh]

Thanks Opus

Yes it seems to be a slow painful process. In our position, the same as many others, a short term rate modification provides no real benefit. It just puts things off. To make things work and motivate me to stay I need to see a principal reduction and a modification to a fixed 30 year principal and interest loan. To make that happen we need to see some sense of reality from lenders, better to keep a current loan at 60-70 cents on the dollar of the original rather than go by the (outdated book) and cut off your nose to spite you face and lose a great deal more with a deed in lieu or foreclosure. Both the principal and 30 years of interest payments....

I can't mortgage (aka bet) my families future on a possible modification, principal reduction and the housing market bouncing back to earlier levels. Am I completely crazy and missing something, why do the banks not see this?

[wolfie]

I have been lurking for awhile myself and reading everyone's advice. I have an interest only loan with HSBC. We are not behind on our mortgage but it was set to go up next month. I tried to do a modification through them and was told we make too much money even though we made less this year than last. So, I decided I would just go through NACA instead of dealing with them myself. I submitted all of my necessary papers to NACA and was told to call HSBC in two weeks and make sure they got the paper work and if there was anything we could do to speed things along. Well, to my surprise they said they had just approved a modification for 5.25% for 2 years. But it is still interest only. I need to fax the papers to NACA to have them look at it. I am surprised on how quickly they made us an offer. But to me thats not a great offer. I want it for the life of my loan and not interest only. I am thinking it was an offer to get us to not go with NACA. I guess I will wait and see what they say on the offer. It is better than the 6 months they have been offering and it will give us more time.

[Moe Bedard]

Hi wolfie,


Welcome to the forum and thank you for joining.........

Your assessment of the HSBC offer is most likely correct............any proposal that NACA would be trying to get an approval on from your investor on your loan would be a low rate fixed for the life of the loan.


Keep us posted on how it goes......