"Underwater" primary residence -- what would you do??

[FreshStart2009]

Ok, first off BIG THANKS to bk forum for all the information on the board. I learned a lot from this board and it was immensely helpful in planning my BK process. I am now discharged and closed

My home was included in BK (chapter 7) but I kept making the payments because we want as a family to stay in the same home. I'm wondering how to approach the bank for some kind of loan modificatin. Here are the details:

Property Value: $230K
1st Mtg: $300K
HELOC: $30K
Both 1st Mtg and HELOC are with BofA (used to be with Countrywide).
Interest Rate: Adjustable every month, currently very low 3.25%

What are my best approaches to get principal reduction, if at all possible?
My monthly payment is the same as paying rent for a comparable house.

1. Shall I offer to settle the HELOC? May be 10 cents on the dollar.
2. Bank wouldn't talk to me as long as I was current, so decided to withhold payment for a couple months now. What is the risk of doing so? Will I be putting at risk the low interest rate I'm enjoying right now?

[Flamingo]

Principal reductions are not being done. If banks were giving houses away even those without financial issues, those that have filed or those discharged would be in line for handouts (principal reductions) also since everyone's home lost value. In your situation you are $100,00 over the value of your home and are now debt free and still have your home. Home values will rise so you can either sit it out as you obviously can afford your home or let it go if you feel you don't want to stay there. You will have to let payments go for at least three months before the bank will work with you with anything but since you are obviously able to afford the payments now with no debt, the issue is not the payment but equity. You will either have to stay there and ride things out, sell the house or let the house go - but don't expect a principal reduction by the bank.

[FreshStart2009]

Flamingo, thanks for your reply! Agree that my issue is not ability to pay but the negative equity of -$100,000. It's going to be a while (many years) before home prices go back up to that level.

How about asking the bank to fix the adjustable rate at the current rate? Would that be possible?? I'm trying to get ready to talk to the bank and I wanted to have a few proposals that the bank is likely to accept. Thanks for the help!

[hereforinfo]

You can ask, but they aren't likely to do anything for you. Half the country is underwater. People who have lost their income or have extreme hardship are having trouble getting a modification, let alone anyone else. They don't do principal reductions because they'd have to do them for everyone and then the banks would all go under and our economy would be crushed forever. Since your payment is the same as rent for a comparable home, there is no need to walk away, especially considering the tax deductions. Skipping payments when you can afford them is not a good idea because you will be stuck with late charges and potential attorney and collection fees on top of not getting a modification.

[Flamingo]

If I were you, I'd stay in the house since you have a house right now, can make the payments, etc. Don't expect much from the bank because you are now debt free and can afford the payment. You can ask the bank to do anything as to your rates but there is no guarantee they will do it under the present circumstances.

You may want to revisit being late with any payments if you want to stay in your house because you will start racking up late fees. It all comes down to what you want to do...stop making payments and let the house foreclose; keep your house since it appears you want to stay there and live there for a while or sell the house. Only you can decide which one you want to do. Me? I would keep the house cause you may not be able to get another one again for a long time....