Does federal law discriminate against homeowners with poor income or credit?
By: Jeff Lazerson
Something that gets very little attention is equity-rich homeowners who have fallen temporarily on hard times.
I’ve gotten five SOS calls in the last month from homeowners who have hundreds of thousands of dollars in untapped equity. That well-earned and nurtured equity can easily get them through the rough patch. It’s your home. It’s your equity for Pete’s sake!
But tapping into it has been difficult since Uncle Sam adopted his one-size fits all and we’ll protect you from the evil predatory lender empire mentality.
A series of so-called ability-to-repay rules imposed during and after the mortgage crisis banned any type of owner-occupied, cash-out home loan if you can’t document enough income or a history of on-time payments.
As a result, more and more families are selling their homes so that they don’t get wiped out in a foreclosure.
There are a limited number of options besides selling your home. None of the alternatives listed below are ideal but there are a few that you might be eligible for.
A loan modification from your servicing lender can’t help you to get cash-out, but may temporarily reduce your house payments.
You can add someone to your title that you deeply trust and take yourself off. In six months that new borrower can get cash-out financing through Fannie Mae. You can always retitle back to yourself at a later date. Check with your tax advisor about taxable events. Check with the county tax accessor about any increased property tax triggers.
Keep Your Home California may be able to help you to cover payments temporarily.
Lastly, there are companies that may buy a fractional interest in your home for a period of time. It’s not a loan, however.
It’s time for Uncle Sam to own up that it is unintentionally discriminating against homeowners who have run up against hard times and change this rule.
Jeff Lazerson - Mortgage Columnist since 2011