1 year until my rate adjusts..cant refi

[Dublinman]

What a fantastic service! I was on google looking for advice or stories like mine and WOW..what a forum I got. Thank you for this site!
Anyway, I am looking for advice based on my situation. All the facts are below. Hopefully this thread will be useful for someone else out there going thru the same issue.
So I am 100% up to date on all my payments. I have excellent credit a great job with good pay and am taking action now before my 5/1 interest only ARM adjust to an adjustable rate in Jan/Feb 2010. I am very nervous about this and want to take action now if that’s the best course of action. Here are the facts.
Purchased property in Q1 2005 for $555,000
Current Value (estimate): $450-475k
Owe: $540k
Down payment was $27,500 of which 10 was borrowed from a friend and already paid pack so I have (excluding my payments) $17,500 into the house.

First Loan (Citi) ($444k)
• First Loan = Citi Mortgage
• Amount: $444,000 5/1 interest only at 5.125%.
• Fixed for first 5 years adjustable yearly after that.
• Current payment - $1896/month
• Margin = 2.250% (Rate = LIBOR + 2.250%)
• First rate change is 2/1/2010. The rate is calculated by LIBOR + 2.25% and will also include principle. The principle is calculated based on note maturity date on 2/1/2035.
• First adjustment cap = 10.125% max or no less than 2.25% (e.g 5% increase max and 2.875% decrease from original interest rate of 5.125%). So 10.125% is the maximum it can adjust to on 2/1/2010. Current Libor is around 2.70% first payment could be calculated on
o Low estimate:
? 2.70% + 2.25% = 4.95%
? $444,000 x 4.95% amortized over 25 yrs = $2582/month (p+i)
o Maximum estimate
? 10.125%
? $444,000 x 10.125% amortized over 25 yrs = $4075/month (P+1)
• Periodic cap = After 1st adjustment date, the rate cannot increase or decrease by more than 2%. e.g. On second change date, rate cannot increase or decrease more than 2%
• Rate can change once every 12 months after 2/1/2010 so 2/1 of every year
• Rate can never exceed 10.125%
• Termination fee = 0
• I start to pay principle after the 5 years are up.

Second Loan (HELOC) ($95,900)

• Second Loan: Wells Fargo HELOC (Home equity line of credit)
• Rate was originally fixed at 7% but I changed to an adjustable interest only about 8 months ago.
• Draw period = 10 years
• Adjustable rate is based on the Wall Street Prime which is currently at 4.5%
• Payment is approx $400/month
• APR will never be more than 18%
• APR will never be less than 4.24%
• Amount: 100,000 original, currently owe approx. $95,900
• 500 prepayment fee if closed within 3 yrs (10/21/2008) - No big deal here
• 8.25% line of credit - e.g. I paid off $2,000 and if I draw that back, the rate on that money is 8.125%


My options as I see them:
• Do nothing until the end of 2009 just before my rate is about to jump and try and refinance then hoping the value goes up. In the meantime, pay as much of my HELOC off now.
• Request a loan modification to extend my interest only period for another 2-3 years until home values start to go back up (guessing here)
• Refinance now to a fixed rate. I am not sure if I can get a loan based on the comps at this point but it’s possible since my credit is outstanding. The conforming loan limits jumped from 417k to 725k so in theory I should be able to get a loan at the confirming rate of ~6%. In which case I would refinance the k44k at ~6% and pay $3,200/month + the HELOC payment. Or I just refinance both into 1 loan (544k)if I can.
• Rent it for about $1900/month but there are rental restrictions and I have to get on the waiting list from the homeowners association which I am on but I don’t expect I can legally rent for another 5 years.
• List it as "Pay what I owe and I will rent back for 2 years for $2800/month) but I don't like this idea.
• Call a realtor and sell it but would probably only get 475k at best and have to pay 30k in fees leaving me with 95k needed to cover the difference...not cool.

Any advice would be appreciated. Oh and property taxes are about $6,700 year

[Dublinman]

Fixing some formatting issues

What a fantastic service! I was on google looking for advice or stories like mine and WOW..what a forum I got. Thank you for this site!
Anyway, I am looking for advice based on my situation. All the facts are below. Hopefully this thread will be useful for someone else out there going thru the same issue.
So I am 100% up to date on all my payments. I have excellent credit a great job with good pay and am taking action now before my 5/1 interest only ARM adjust to an adjustable rate in Jan/Feb 2010. I am very nervous about this and want to take action now if that’s the best course of action. Here are the facts.
Purchased property in Q1 2005 for $555,000
Current Value (estimate): $450-475k
Owe: $540k
Down payment was $27,500 of which 10 was borrowed from a friend and already paid pack so I have (excluding my payments) $17,500 into the house.

First Loan (Citi) ($444k)
• First Loan = Citi Mortgage
• Amount: $444,000 5/1 interest only at 5.125%.
• Fixed for first 5 years adjustable yearly after that.
• Current payment - $1896/month
• Margin = 2.250% (Rate = LIBOR + 2.250%)
• First rate change is 2/1/2010. The rate is calculated by LIBOR + 2.25% and will also include principle. The principle is calculated based on note maturity date on 2/1/2035.
• First adjustment cap = 10.125% max or no less than 2.25% (e.g 5% increase max and 2.875% decrease from original interest rate of 5.125%). So 10.125% is the maximum it can adjust to on 2/1/2010. Current Libor is around 2.70% first payment could be calculated on:
Low estimate: 2.70% + 2.25% = 4.95%
$444,000 x 4.95% amortized over 25 yrs = $2582/month (p+i)

Maximum estimate: 10.125%
$444,000 x 10.125% amortized over 25 yrs = $4075/month (P+1)

• Periodic cap = After 1st adjustment date, the rate cannot increase or decrease by more than 2%. e.g. On second change date, rate cannot increase or decrease more than 2%
• Rate can change once every 12 months after 2/1/2010 so 2/1 of every year
• Rate can never exceed 10.125%
• Termination fee = 0
• I start to pay principle after the 5 years are up.

Second Loan (HELOC) ($95,900)

• Second Loan: Wells Fargo HELOC (Home equity line of credit)
• Rate was originally fixed at 7% but I changed to an adjustable interest only about 8 months ago.
• Draw period = 10 years
• Adjustable rate is based on the Wall Street Prime which is currently at 4.5%
• Payment is approx $400/month
• APR will never be more than 18%
• APR will never be less than 4.24%
• Amount: 100,000 original, currently owe approx. $95,900
• 500 prepayment fee if closed within 3 yrs (10/21/2008) - No big deal here
• 8.25% line of credit - e.g. I paid off $2,000 and if I draw that back, the rate on that money is 8.125%


My options as I see them:
• Do nothing until the end of 2009 just before my rate is about to jump and try and refinance then hoping the value goes up. In the meantime, pay as much of my HELOC off now.
• Request a loan modification to extend my interest only period for another 2-3 years until home values start to go back up (guessing here)
• Refinance now to a fixed rate. I am not sure if I can get a loan based on the comps at this point but it’s possible since my credit is outstanding. The conforming loan limits jumped from 417k to 725k so in theory I should be able to get a loan at the confirming rate of ~6%. In which case I would refinance the k44k at ~6% and pay $3,200/month + the HELOC payment. Or I just refinance both into 1 loan (544k)if I can.
• Rent it for about $1900/month but there are rental restrictions and I have to get on the waiting list from the homeowners association which I am on but I don’t expect I can legally rent for another 5 years.
• List it as "Pay what I owe and I will rent back for 2 years for $2800/month) but I don't like this idea.
• Call a realtor and sell it but would probably only get 475k at best and have to pay 30k in fees leaving me with 95k needed to cover the difference...not cool.

Any advice would be appreciated. Oh and property taxes are about $6,700 year

[Moe Bedard]

Hi Dublinman,

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



Start by putting together a hardship letter..............a modification is given based on hardship..........click on the link below for examples.....

Examples of a Hardship Letter


Then call Citi and Wells to get started and to see what options the investors on the loans have for your type of loan.

CitiMortgage Home Retention
1-866-255-3901

Wells Fargo Loss Mitigation
1-800-416-1472


Please keep us posted on your progress..............

[Dublinman]

Hey thanks for the quick response!

Would you recommend I send a hardship letter to both Wells and Citi and should I call first or just send the letter to them via email? (I got the contacts from another thread).

Also, here is my hardship letter I plan on sending for future reference.

To whom it may concern,

The mortgage I currently have with Citi Mortgage is scheduled to adjust from an interest only fixed rate to an adjustable interest rate in January 2010. I have made several phone calls to Citi Mortgage asking to refinance into a fixed rate but was declined due to the fact that my home is now worth $100,000 less than what I owe. In an attempt to avoid default, and in good faith, I would like to ask that you consider my request for a loan modification.
This is my first home and I purchased it in January 2005 for $555,000. I currently have an interest only 5/1 ARM at 5.125% and I have had no problem making my interest only payments of $1900/month for almost four years now and do not want that to change when the rate adjusts. Although I cannot predict what the rate will be after the adjustment, it can increase as high as 10.25% ($4075/month) in which case, along with my second HELOC and living expenses, I would not be able to afford with my monthly income of $9,000.
My mortgage was originally written by another company and bought by Citi Mortgage. I was assured that refinancing would not be a problem but that turned out not to be true due to the downturn of the housing industry. In addition to the phone calls to Citi Mortgage asking to refinance into a fixed rate, I have also visited Citi Bank branches in XXXX and XXXX to speak directly with mortgage specialist but was also denied any refinancing options. I conducted a counseling session with a woman named (Consumer Credit Counseling Service) from 995-HOPE and submitted a monthly budget. According to the counselor I am utilizing 63% of my monthly income for housing costs which is way above the national average and will only increase after the rate adjustment.

The main problem is that my property is now worth about $100,000 less than what I paid for it which is preventing me from being able to refinance. Is it possible to have my current adjustable rate mortgage converted to a fixed rate? If this is not possible can the first rate change be postponed to a future date to allow me to hopefully refinance. Any other solutions you could provide would be greatly appreciated.
Thank you in advance for your time and consideration in this matter. Attached are recent pay stubs showing my current income. I am looking forward to working with Citi Mortgage to resolve this situation to avoid default and stop foreclosure my home. If you have any questions please contact me at

[Moe Bedard]

You would need to call first to see what options you have.............they will tell you what they need you to send in.................also look at the examples of the hardship letters as well to get some additional ideas of what they are looking for.

[Dublinman]

its been awhile since I replied here but I have convinced Citi to modify my 1st loan to either a 30 yr or 40 yr fixed at the same rate 5.125%. Of course I will choose the 40 yr but before I agree does anyone know if this means my first loan will now be considered a recourse loan?

I will still probably walk away at some point since I am 200k underwater and if modifying my loan means it becomes recourse then I will just not accept.

thanks!

[Moe Bedard]

take a look over in the Deed in Lieu section of the forum..........I believe the Professor had already answered this question of another member.