Homecomings Financial - Please help

[Joel Fraser]

Hello. This is long, I apologize.We bought our house 2 years ago - we live in California - land of high cost everything. We bought our home for $317k, and financed 100% - that included everything, including closing costs.. (I am sure you can see where this is going). At the time we were looking for a bigger place for our family, and weren't able to find one to rent (we had 5 children, now have 6 - and another on the way due in June).. (we have 6 children 1 with special needs [well, really 2 but one is undiagnosed].. and with a family as large as ours there are not really other options and no where else to go.. 3 of our children are teenagers, 2 are 7 and 9 and a 9 month old baby) we looked into home ownership, we wanted more education on what we needed to do to make ourselves ready - to get a grasp on what we needed, etc. Well, welcome to the world of the loan sharks... and the sub prime market! My fiancee has some derogatory stuff (old medical collections) - and I had 2 things that are now gone (they were about to expire).. We found an all too eager realtor, who we actually liked who we thought was really in it for us.. and a mortgage broker he referred us to. We got into a 40 year mortgage with a fixed 2 year rate - with prepayment penalty, then an ARM for our 1st mortgage, (the second is fixed, but with a horrendous interest rate) with the assurance from all involved that it would be SO easy and NO problem to refinance before it EVER went adjustable! ANd we'll have such a better rate, what with our payments always being on time - who wouldn't want to refi us!? The mortgage broker and realtor were even so nice as to pay $3000 for us as the lender required we pay the property taxes before getting the house... which we didn't have, so we were going to have to back out - they paid this for us. As well as the realtor giving us $1600 cash back at closing. Now I see it for what it was, they needed their $ - I am not so sure how much they were actually trying to help us. Yeah well.... now the market has dropped - which doesn't concern us as much as everything else - we're now upside down on our loan but never planned to move - we really plan to stay in this home forever. Except, that we can not refinance it - a couple of reasons. 1. the value of similar homes in the area is about 40k+ less than we bought ours for... 2. the new lending standards... 3. We have a high debt to income ratio - but all payments are timely and current. 4. we have no savings for any closing costs or fees. We were notified by mail that we received a few days ago, our first mortgage is now being adjusted. When we were looking into refinancing we were told that most companies aren't actually adjusting the rates right now due to the foreclosure rates and new legislation... well no one told our company that.. Our payment is going up $180 per month... beginning in December (Merry Christmas!). And is then scheduled to increase again in June (when our baby is due). I now found out that they have paid our taxes, which we were behind on due to having a baby in January and our income being reduced due to being on disability.. we threw our tax $ to the bills rather than the taxes. Well, we haven't gotten official notice yet, but it's actually going up from $1606 to $2684 to cover the escrow for the taxes as well as our ARM. This is also to take effect in December. That is more than a thousand dollar increase, just in our first mortgage. The second is $655. (30 year fixed interest rate 11.99%). Homecomings has submitted a proposal to pay the escrow over 24 months instead of 12, which would make the payment on our first mortgage $2369.68 + the second, we don't know yet if that will be approved. I had thought about filing bankruptcy on my credit card debts in order to have more $ to go to the house, though I am guessing this will probably drive our rate up further - I admit I don't know how this works really. And in order to pay the mortgage I will be forced to do this, as the mortgage will be over $3k per month, our income is a little less than 5k per month, and we have two car payments and 6 children. I did contact Homecomings, they took some info from me and said they'd see IF they can help... they will 'notify us in 30 days'... well nice. Thanks! We're struggling but making our current payments... our mortgage was already nearly half of our income! Yeesh. We have struggled for a couple of months now, and we have been told before that they will not help us unless we are delinquent (nice!)... we had to repair our broken AC this summer $800, and this month our hot water heater broke, another repair. We've wiped out the little savings we had... and I fear that this IS the month where we will become delinquent.... I just don't know if we should pay the 1st or 2nd mortgage... I can only pay one - I simply don't have both. I have contaced the HOPE program, but am having trouble getting through due to so many people calling - I am waiting for them to call me back in 24-48 hours. I had also contacted NACA re: their home save? program... i have to find some documents to get to them. Any advice or help is greatly appreciated. We really really don't want to lose our home, I'm scared, stressed, and am not really sure what to do. And I am fairly certain that our children will have no Christmas.. and maybe no home. I wish I knew how to explain that to them.