Saving Your Second Home or Rental Property
The Obama Program, whether it works or not, is solely for the modification or refinance of primary residences. Many families took the opportunity to acquire a second home during the housing market boom. We’re running across a lot of families who have sunk their life savings into an investment property which was intended to be their cushion for retirement or their kid’s future. Worse, some homeowners borrowed heavily against the equity in their primary residences to finance second properties.
Now, with both their first and second homes “underwater” , rents dropping and a rental market top heavy with vacancies they are looking at the very real possibility of having to cut loose their investment home.
There seems to be an urban rumor floating around that second properties cannot be modified. This isn’t true. It may be more difficult, and you may not get as strong a result as the modification on your principal residence, but there is a very real possibility that your lender can be persuaded to give you a good enough modification of loan terms so that you can keep your rental.
We did a recent survey of all the major lenders in the U.S. The majority of them reported to us that they would indeed enter into negotiations with us to modify a second home depending, of course, on the borrower’s circumstances.
Don’t give up your nest egg until you’ve explored every possibility of keeping it. The rental market is coming back in many major urban areas and if you can white-knuckle it with a lower payment and a lower rental income for a year or two, you could be back to a positive or neutral cash flow in the future.