My 80% fixed becomes an ARM in 1 more year

[networks4ever]

Hi, glad to see a forum like this out there. I wanted to get some opinions on my mortgage situation.

I have an 80/15 setup on my 1br/1ba condo, sale price of $250k in May of 2006, financed $237.5k. I owe $234k as of now. I believe it is currently worth about $200k, but expect it could drop as low as $160k by the time we hit bottom. My 80% is a 40yr fixed 8.65% for 3yrs with Citi, then ARM thereafter (6% added onto the 6 month Libor index when it adjusts), re-amortizing to a 30 year at the 10 yr mark. It also has a prepayment penalty for the first 3 years. My 15% is a conv. 30 yr fixed (11.8%) with Specialized Loan Servicing with no prepay penalty. Both loans were originated by Argent Loans, aka Ameriquest/AMC Mortgage Services.

After living there for awhile I was doing too much driving and was too far from work. I rented the unit out to a relative nearby for $800/mo who was unhappy where they were staying before and I moved into an apartment close to work ($1200/mo).

I ended up needing a new car so I did extra hours at work to pay for that. I bought the new car but got a 0% apr loan from GMAC so I ended up keeping the money.

I have the opportunity to pay off my 15% loan by using a combination of my funds and my relative's (renter) funds in exchange for giving them free rent for about 10 months, at which point the $380/mo I am paying for the mortgage will then start being fed back into my savings or elsewhere if required.

I have not done anything yet because I wanted to get other opinions on it and I also wanted to see what happened with the economy a bit more. So far nothing seems to have changed at my job. The company is still growing and we don't have difficulty getting pay checks. I have also received another job offer that I have turned down but they are still hoping I join.

I would like to turn this loan right side up as quickly as I can and I see this as one step in that direction. The only other realistic step I can see taking is doing a short sale and paying the bank monthly for the difference. I don't know if anyone would buy the place in this market, and I don't know if the lender would want to do that type of arrangement. Does anyone know if banks will allow you to pay an interest free unsecured loan in the hopes of getting their money back as quickly as possible?

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

This really is dependent on whether or not you intend to hold the property as an investment long term, real estate does move in cycles, this one is rather violent, but values do return....

So if you pay the second off and hold the property there is a chance that you will see value return. They will not presently reduce principle amounts so that is not on the table.

Now the alternative requires that you submit financial packages and prove the financial hardship that warrants a short sale with forgiveness...you post that the income issues are not the concern, it is a matter of value and loan amount. This may not be real compelling to the lender/servicer....

I am sure that they would allow you to short sale it, and pay the difference, but interest free, don't know, doubt it. They may not even allow short sale without the financial hardship. They need to take some serious financial hardship situation in to consideration for that option, and again you have not indicated any hardship. Even with hardship they are still in some cases requiring repayment of the short amount with interest. They did anticipate it at the onset of lending the money.

The lender that originated this loan is a winner...Argent/Ameriquest, they are shuttered and shut down at this point.

Foreclosure would result in issues with credit, the interest free car loan that you got would not be offered to you after a foreclosure. In addition to the financial down side of foreclosure it also affects/effects employment as some firms pull credit reports as a function of the hiring process.