After two years of bewildering futility, John and Linda DeCaro thought they had finally found a way to hang on to their home.
They could no longer afford their mortgage payments and had slipped into delinquency. They could not refinance to take advantage of low-interest rates because they were among the nearly 11 million American homeowners who are "underwater," meaning that they owed the bank more than their house was worth. Bank of America had already initiated foreclosure proceedings.
Then in the spring of 2011, a nonprofit lender, Boston Community Capital, presented a potential fix, one it has used to aid some 200 underwater borrowers in Massachusetts over the last two years. The bank would buy the DeCaros' home at market value -- about $87,000, which was barely half of their mortgage balance -- and then sell it back to them for a little more, providing a manageable loan. Bank of America affirmed the sale price as fair value.
But one powerful obstacle stood in their way: Freddie Mac, the government-controlled mortgage giant, owned the DeCaros' loan. Freddie has a policy of refusing to approve so-called short sales -- those where the purchase price is lower than the mortgage balance -- unless the buyer signs a legal document promising not to resell the property to the original homeowner. The document bars the buyer from even renting the home to the initial owner.
Read the rest of the article at The Huffington Post
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