Underwater mortgage

I owe $40,000 more than my home is worth. I do not qualify for harp as my mortgage is not owned by Fannie Mae or Freddie Mac. I lost my job last year and just started social security benefits which don’t cover my monthly bills and I am going thru my savings.

I have very good credit and never been late or missed any payments.

Is there any way I can get out of my mortgage without paying taxes on the $40,000 by doing a short sale or is there any refinance program that can help?

Terry Says:  This is a tough situation, and you are not alone.  You need an experienced realtor to help you through a short sale — because they will have to contact the bank to make sure they will accept less than full payment on the loan.  It will still ding your credit — but not nearly as badly as a foreclosure.    So start the process by finding a good realtor in your neighborhood, perhaps one who has sold other homes nearby, successfully.  Explain your situation.  He/she may have potential clients who are willing to pay more for your home.  (Don’t mention that $40,000 “gap” in what you owe and what you believe your home is “worth.” ) Ask the realtor how much you should list for, and what you could reasonably expect to “net” on a sale.  ONLY then, tell her that leaves you underwater — and see if the realtor has experience in dealing with lenders in situations like that –

Remember, the smaller the “gap” the more likely the bank is to work with you — instead of going through the foreclosure process and all the costs.  But surely you must face this problem sooner, rather than later, when you have run through all your savings.  Please write back and let me know how this develops.