[jroeber]

We are one of those unfortunate family that bought a house in 06 when they were high. Now 2 1/2 years later our property value has dropped, so we owe more than its worth. We are also unfortunate because we don't qualify for anything having to do with the bailout. We are current on payments, my husbands job is stable and our payment is within the 38percent of our gross. Our home has depreciated more than 5% also. We currently owe 670,000 and the bank told us its worth 517. Ouch.

My question is, what can we do. Our HELOC is 9.05 percent and home loan 6.5 percent. We called them a few months ago and asked them to lower our interest rates. (its chase by the way) They told us we don't qualify. Its sad because they won't help us, even when we are great customers.

I personally blame banks for the financial colapse. You think about it, they provide the appraiser for your home... they can inflate or deflate as much as they want. They also know they have you once the loan is written.

We have a 401K that has 160000 in it. My husband is 43 years old and I am 45 and a housewife.

Do we just keep bugging our bank to lower the interest rate? Is there anything else we can do?

We have 3 children and are struggling monthly to cover all expenses. Also, we live in AZ.
JRoeber

[ScottGem]

I'm sorry, but I'm afraid I don't see you as an "unfortunate". You have a stable income. Sure, your equity is gone now ON PAPER. So you sit tight. You keep up your payments. Your mortgage interest is a little high but not hugely so. Your HELOC however doesn't make a lot of sense. In 2006 you should have been able to get a HELOC at or below prime.

I would work on paying down the HELOC as quickly as possible. That will alos increase your equity. You may have to tighten your belts a bit, maybe adjust your budget to manage the monthly expenditures better.

But I would keep pressuring Chase to adust the interest on the HELOC.

[jroeber]

We got the HELOC the same time as the first mortgage, so we didn't have to pay PMI. In a sense, it is a second mortgage for 20percent. That is 135000? That I am sure is a lot higher than most. Looking back, it shocks me that they would even do that. We owned another home at the time that we were trying to sell. It's just unfortunate that someone didn't predict what was going to happen. We would not have bought the house at the time. We don't plan on ever moving. How could we? We would still owe on this house, even after we sold it.

[ebaines]

It's a difficult situation, but ScottGem is correct - as long as you can afford to stay put and pay the mortgage and taxes you should do so. Admittedly being under water ties your hands with respect to being able to afford to sell or refinance, so you'll just have to plan to ride this out for at least several years. Regarding your 401(k) - don't think about taking a distribution for mortgage payments or to pay off some of the principal unless or until you are absoultely forced to. You may want o consider taking a loan against the 401(k) to pay down some of the HELOC - a loan has no income tax or early withdrawal penalty implications. If you have any savings available other than the 401(k) you should use that first.

No offense intended, but I don't understand how you can be so "shocked" that Chase gave you the loan you requested. You are just as aware as them as to what your financial situation was. The big mistake that Chase (and you) made was in assuming that housing prices always go up.

[jroeber]

I am not shocked about Chase giving the loan, I am saying that banks caused the financial collapse. We are in AZ, which along with CA, FL and NV, prices of homes became overinflated and then the huge collapse. I think 20% of all mortgages being upside down is way to high. We are talking people owe 2 times as much in some cases than there home is worth. That's crazy.

I am wondering, do you work for a financial institution?

[jroeber]

I should add, I have 1 sister and 2 brothers, and my parents also live in town. All but one of us, shows our home being worth more than is owed, just barely. How is that for statistics? I think that 20 percent is a low number. The one that is not upside down has lived in his home for over 10 years, but the others only 3 years.

[ebaines]

Looking back, it shocks me that they would even do that. We owned another home at the time that we were trying to sell. It's just unfortunate that someone didn't predict what was going to happen.

I am not shocked about Chase giving the loan, I am saying that banks caused the financial collapse.

I am wondering, do you work for a financial institution?

I agree with you that the banks are the principal contribtors to the problem - their short-term greed and incentives for their employees caused them to do some pretty stupid things. Basically there were no adults in the room to say "no" - no one with the common sense to think that housing prices could ever go down, and no one with the common sense to turn down your HELOC loan application as you and I (and I bet even Chase) now believe they should have.

No - I don't work for a financial institution.

[jroeber]

The HELOC was done the same time as the original mortgage. You are definitely right about the greed. I know for sure our mortgage rep pushed it through. He definitely did not have our best interests at heart, nor did the real estate agent.

[ScottGem]

I know for sure our mortgage rep pushed it through. He definitely did not have our best interests at heart, nor did the real estate agent.

And why would you think they would? The only ones who would have your best interests at heart are you and those you pay to do so. That means you share some of the responsibility.

[NeedKarma]

Basically there were no adults in the room to say "no" - no one with the common sense to think that housing prices could ever go down,

Well there are the applicants who could crunch the numbers and figure that a large mortgage payment for an extended period is not a wise decision.