'Underwater' doesn't equal hopeless

Mood of the Market

I was recently interviewed on a news program, on which I was asked for my learned response and advice to a highly outraged homeowner. This gentleman had purchased a home for roughly $1.5 million, near the peak of the San Francisco Bay Area housing market, circa 2007.

Having watched uber-low interest rates come and, most recently, threaten to go, maybe for good, he decided that it was the right time — economy slightly up, income good, credit good, mortgage soon to adjust, and rates still very, very low, though on the rise — to take his lender up on its frequently mailed offers to refinance his mortgage for free.

The lender deemed him to be highly creditworthy but, alas, his home appraised at right under $1 million — more than $500,000 below what he paid for it a few years ago.