So I owe $ 250,000 on my house which recently appraised for $ 70,000. I’m a little upside down to say the least. Las Vegas (where I currently reside) has the highest foreclosure rate in the country and last I checked the highest unemployment rate as well. For one year I have tried to refinance my house or best case scenario a principal reduction. I currently have an adjustable rate mortgage (option arm) that puts money on the backend of the loan. Why would I get such a mortgage you ask? Well allow me to retort, I got it as an investing strategy and here’s how it works. If I would have gotten a 30 year fixed my mortgage would be $1675 a month with most of that amount going towards the interest and a very small amount going towards the principal. The bank using arbitrage takes this money and earns interest on it. Interest on interest, a pretty slick way to have money work for you. So the plan was to pay the least amount on an option arm which was at the time $840. And then I invested the difference as such $350 into a VUL (variable universal life insurance) and $450. In various international mutual funds. Both are considered low risk and very safe. (Unless of course the world market crashes) so the plan is to do this for 3 years then refinance into a fixed or sell the house if it’s a good market. My plan was foiled by the recession big time. Through out the past year I have tried various tactics to resolve my housing issue where every month I owe more and every month its worth less. I qualify for the TARP program help for homeowners, Hope, and HAMP. All these programs where created to help stop foreclosures and help are economy bounce back. All these programs in reality are smoke and mirrors because the banks have the ultimate say so on any loan modification, refinance and principal reduction. My bank, Chase, received 60 billion dollars for people in my exact situation. I’ve come to find out that less than 5 percent of people applying for these various programs are being approved. So here’s why the banks aren’t helping anyone. The home loans are all FDIC insured so the banks can write off the loss and still make additional money on the property through a short sale or refinance. I’ll use my situation as an example, I owe $250,000 on my house I short sell it (because the bank leaves me no choice) for $70,000. The bank gets around $250,000 from the FDIC and $ 70,000 from the short sell making more money than the original loan in a shorter amount of time. Why would they help anyone when they could make so much more money much faster by not helping, the answer, they wouldn’t. This fact angers me to the core having tried for over a year to refinance my house. From hiring a mortgage broker, an attorney to trying myself and nothing was accomplished. What a waste of time, money and energy. In my next article I’ll address some strategies that will help home owners and people with large amounts of debits in these turbulent times. Here’s a great article about how to deal with a forecolsure or bankruptcey.