Posted on March 13, 2009 at 7:00 am My friend had an underwater mortgage and she was crying over her financial situation over coffee last month. The bank was threatening all sorts of action against her. She simply wanted to give up and walk away. We were in her home while we were talking, so I walked with her around her home. It's a lovely 2 storey place, but the paint outside is peeling and chipped. She hasn't done any gardening in a couple years. I asked to see the attic space. It was bare and used for storage. The basement was unfinished and also used for storage. The back yard was barren. I suggested she convert the basement into a games room for her three kids. Her brother put up new dry wall and created a room separator in the middle. This created a separate laundry away from the new games room where the kids all hang out regularly. She pulled out the boxes from the attic and insulated it before putting dry wall on the ceiling spaces. She turned the attic space into her teenaged daughter's bedroom. Her daughter's old bedroom is now an office space for her, which cleared out her dining room from all the computer-clutter. She had a yard sale and the proceeds from this paid for her little renovations. She put a few things on ebay. The sales from those things paid for the paint for the outside of her home. My mom and I helped her to plant some new shrubs in her yards so they don't look so sparse and bare. It's been a hard month for her but we all helped her and she got there. The bank have revalued her home at $80,000 higher than it was before due to the addition of the room in the attic space being used properly and the basement being converted into usable space. She's not underwater any more. Now her

Posted on March 13, 2009 at 11:03 am Raven, Nice job of helping out your friend. I'm surprised the lender actually revalued the home but if that is  how they do it in Australia (am I correct?), that is even better for the consumer. I can't imagine any American lender doing that for their borrowers. But it would b enice if they did. Again, super job.

Posted on March 13, 2009 at 5:07 pm Yes we're in Australia - but the banking policies are the same (some of our banks are funded by US major banks - same policies). While banks will tell you that you currently owe more than your house is worth, you must remember that the value of your house on their database may be outdated. My friend provided a council valuation showing that the house was worth more than the bank had listed on their file for her. That didn't sway them. So she did the renovations anyway and ordered a new valuation to be conducted. That swayed the bank's decision. They recognized the updated, renewed valuation and they stopped hassling her about owing more than she owned. It can be done with American banks. My friend's mortgage with with Homeside and I'm certain they're US-based with US policies.

Posted on March 16, 2009 at 7:55 am In the USA the bank should have been able to revalue the home from an approved appraisal,cosmetic changes such as you did would have been improved saleability but not necessarilyvalue.  There are so many homes on the market here that this situation is a very bad problem.I don't know how then new homeowner relief package is going to work, the last I heard they were working with 110% of value. This does not matter of course, what you did help her and it was a great thing to do.  Thank you