Alternatives to a jumbo short sale

DEAR BERNICE: Our house has been on the market for almost six months and we've had only one showing. It shows like a model and is in perfect condition. We listed with the top agent in the area who has a stellar record. Our list price is actually under what the comparable sales suggest, even though we updated the entire house just two years ago. We just lowered the price again from $899,000 to $799,000 and still no showings. Even if we were to close the deal at $799,000, we will still have to come up with another $75,000 of our own money to pay off the existing loans. What can we do? --Tom D.

DEAR TOM: Sadly, this is a story that millions of homeowners are facing throughout the country. It's particularly difficult for anyone who lives in an area where property values skyrocketed. These properties, due to their increased valuation, no longer qualify for what is known as a "conforming loan." Any borrower who needs a loan higher than the conforming loan rates for your location will have an extremely difficult time obtaining financing. In most cases, the maximum loan that you can obtain in the continental United States is $729,750. You can determine the exact loan limit for your particular property address here after registering at Fannie Mae's Web site.

To illustrate how difficult it is to obtain jumbo financing in today's market, one loan officer had more than 200 applications from his bank's top-tier customers. (A jumbo loan is one that exceeds the maximum amount allowed for conforming loans.) His institution only willing to fund only 15 of these loans, and these were for their very best customers!

The challenge is that with the meltdown of the financial system, lenders could no longer make loans, bundle the loans together, and then sell them to other investors. (These investors included pension funds, hedge funds, or a number of other financial entities. As a group, this is known as the "secondary" market.)

The reason the conforming loan market is still active is that Freddie Mac, Fannie Mae and the Federal Housing Administration (FHA) provide a means for lenders to make loans and sell them on the secondary market. If a lender cannot resell the loan, that means they must put it in their own portfolio. "Portfolio" loans are funded from the deposits the lender has at their institution. The lack of a secondary market for jumbo loans has made selling more expensive properties exceedingly difficult.

So what are your options if you can't sell? ...CONTINUED

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