Loan Modification: Do the Terms Favor You or The Lender?

Listen in on a Interview I did on Loan Modifications and the

Fannie Mae and Freddie Mac Streamline Loan Modification Program

THIS ARTICLE IS GOOD BUT READ

HOW TO REFINANCE AN UPSIDE DOWN MORTGAGE

So I just reviewed a readers Loan Modification Agreement from his lender and it was interesting to see that yet again he was only getting what he asked for and nothing more.

To fully understand what made this unique let me set some groundwork:

1.    The Homeowner was more than 120 days behind on his mortgage payment
2.    The home was more than $170K upside down
3.    He was in a fixed rate loan currently but had a personal set back that caused him to be late on his payment
4.    The bank agreed to a modified forbearance and loan modification and the client was unsure about the agreement and contacted me

Now if you were a bank and were out to make money, with absolute disregard for the individual who is struggling, what kind of terms would you think the bank would put together on their Loan Modification?

The OBVIOUS answer is terms that FAVORED THE BANK!

That is exactly what the bank did with this Loan Modification Agreement!

So the Loan Modification agreed to lump all missed payments onto the back of the loan and increase the payments $100 of the existing note payments.  They kept the interest rate the same and the term they extended the length of the missed payments.

Now to do this, the bank never agreed to discontinue reporting mortgage late payments to the Homeowner’s credit report.  Ironically the loan would have continued to report late month in and month out until all the missed payments were paid in full.   At a $100 per month clip that would have taken the client in excess of 6 years, so that would have been 6 straight years of missing payments OUCH!

They also threw in a clause that took away the bankruptcy protection a homeowner has by stating the loan could NOT be included in bankruptcy at any future point.   Now 30 years is a long time and a whole lot can happen in that time and to not have that protection moving forward could potentially be detrimental to the homeowner because at some point he may need that protection and not be able to have it because the loan modification would have prevented it.

I can only imagine how many other people out there have signed these kind of loan modifications.  They have either been taken advantage of or they got what they were looking for I guess it depends on how you look at things. People keep their home under the banks loan modification terms, win – win?

As always I am here to help so please let me know what I can do to help.  Tell me your story and I will see what I can do to help.

Hiring a Loss Mitigation Negotiator for Your Upside Down Mortgage

Here is yet another email from a reader looking for a solution to his mortgage problem.

BE SURE TO READ THE RESPONSE AND BOTTOM FOLLOW UP AS IT MAY BE THE MOST IMPORTANT PART TO THIS WHOLE POST.

Brent,
I happened on to your Blog and saw you were helping a lot of people.  This is more than likely a similar situation as most people who write you.

I bought my house 3 years ago and at that time it was an 80% First trust, 15% Second trust and 5% down payment.  I bought it for $585K in “some city, Some State.  My neighbor has their house on the market and it’s the exact same model for $549K.  It’s only been a month so my fear is they will probably lower their asking price even more.  The first trust is an Interest-only ARM and it will adjust January 2010 and I know if it adjusts I will more than likely not afford the new payments.  When we first bought the house we only planned on living here for 4-5 years and than moving out of the area, but since then are plans have changed and couldn’t do it now even if we wanted to.  My goal is to keep close to the same payments as I have now and we don’t plan on moving any where in the indefinite future (if we can help it).

What options do I have?

Thanks,
T.

Hi T.

Here we have a classic example of a first and second mortgage that is slightly upside down and the solution is easy.

It’s only made difficult when we look to solve the second mortgage equation.

So my math, purchased at $585K and have loans to 95% of that price or $555,750.00.

We have a first of $468K and a second at $87,750.00.

Now for some standard loan guidelines to support our scenario, a FHA loan will refinance in first position to 95% regardless of CLTV (combined loan-to-value).  Translation, YOU CAN EXCEED 100% LOAN-TO-VALUE and in this case solve the Upside Down Mortgage problem you have.  Now not all lenders do this or even know this is allowed but it can be done and I do it often.

Your next move, we need to get you qualified for a FHA loan to 95% LTV.  Once we have that done we will need to hire a Professional Loss Mitigation negotiator who understands your scenario and has the ability help us solve your second mortgage equation.

The second mortgage will need to agree to do one of two things:

1.    Subordinate allowing us to refinance your first to something that isn’t out of control.
2.    Agree to settle the balance by taking cash out with the first mortgage in hopes of paying only a portion of the balance owed on the second under the notion they would waive the remaining balance.

I guess we could chalk up a third option, they could agree to nothing and we would be stuck!

I think it’s obvious which option is best, we want them to settle and allow us to move on with only one mortgage at a balance that is lower than the current balances combined.

Not to get these companies to make these types of adjustments you need to be a Real Estate Attorney or you need to hire one.  You could go out and do this on your own and pay through the nose for it or you could go with my team and pay a pre-negotiated amount.

If all goes well and according to plan you should end up with a lower loan balance and in turn a lower mortgage payment than you may currently have.

I hope that helps you and your family with the decisions ahead.  As always I am here to help and together we can make GREAT things happen.

Be in touch.

Brent Lane

To hire my team to assist you and your family it will cost $1350 which will go to cover both a Real Estate Attorney to review your loan documents as well as the hiring of a Professional Loss Mitigation Negotiator to negotiate the settlement.  If no settlement can be reached we will refund you $450.

More information on a Professional Loss Mitigation Negotiator can be found at PROFESSIONAL LOSS MITIGATION NEGOTIATOR

You can email me for a copy of my contract to review at Brent@brentlane.net

To get started right away, I will need an email from you listing your scenario, copies of all your loan documents from your last loan either scanned or faxed to me (916-580-6650) and I will forward a contract to you to sign and get back to me as well.