Loan Modification...............Has anyone done it? (PMI, interest rate, escrow, approved)

[Thinking-man]

hi,
We're talking about a property (rental condo) that is worth less than the loan. (current on payments. bought in 2004)

of course i'm not talking about refi but instead simply having the bank modify the term of the loan.

1. has anyone done this? what has been the outcome?
2. costs?
3. why would the bank do this?

[Hemlock140]

I know plenty of people that have gotten modifications when they took a pay cut, or lost their job and got a new one that paid less. The process cost nothing, but they had to spend a lot of time jumping through hoops over many months. The bottom line is the bank ends up with the same money,
just takes longer due to the smaller payments.

I have never heard of a modification being granted to someone current with their payments. Like any other investment, home buying is a gamble. The prices went up fast but dropped even faster. A bank is not likely to lose revenue to help you when you are able to meet the current contract. If the home suits your needs, stay there and maybe in another 10-15 years the value will go back up above what you paid, and meanwhile you will have paid down some of the principal.

[Modification Specialist]

Originally Posted by Thinking-man

hi,
We're talking about a property (rental condo) that is worth less than the loan. (current on payments. bought in 2004)

of course i'm not talking about refi but instead simply having the bank modify the term of the loan.

1. has anyone done this? what has been the outcome?
2. costs?
3. why would the bank do this?

Right away since it is an investment property - the only modification you could apply for is restructuring missed payments back into the loan. 99% of the time there is no drop in the interest rate for rental property's.

To get a loan modification approved you must demonstrate a real financial need to qualify, and you will be required to provide documentation to support your request for a loan modification on your mortgage.

Hemlock says above many people have easily done their own modification. This is true, but he doesn't mention how many more people have tried and became victims. An analogy of this banks only go one layer deep in working with home owners. When there is a required 2nd or 3rd layer, the result can be a denial or foreclosure. If your situation is easy and all the ratios work, your stand a good chance to attempt this your self. Unfortunately, most mortgage lenders will not consider a loan modification request until the homeowner is severely delinquent on their mortgage, which often begins when the mortgage is more than 90 days delinquent. At that point you are at the mercy of the lender.

Hemlock is somewhat correct about the banks getting the full amount they lost. Not in every case - have personal worked on predatory and high interest rates loans/mods, receiving completed modifications resulting in substantial savings. Again it depends on the situation - no two modifications are the same. The reason behind this is its for lender it is not their money, mortgage banks are owned by investors.

My personal opinion is that an attorney will do a much better job fighting those monsters than you ever will. Because the homeowner is part of the problem. The bank is on top, the loan in the middle and the home owner on the bottom.

The link below shows the report card on banks approving and denying modifications...

Link - Loan Modification Progress Chart | Eye on the Bailout | ProPublica


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[Grainraiser]

Getting a loan mod is not rocket science. If your current on your mortgage a bank is not going to MOD the loan. You are paying the loan on time so why would they lower the payment. A loan mod does not always mean a lower payment. Many times the payment goes up instead of down because the borrower has a interest only or payment option ARM with no escrows. Most lenders will only mod a loan to a fix rate mortagage and they will escrow taxes and insurance. In many cases a homeowner will pay a higher mortgage payment but will be better off with the loan. For those thinking about a MOD the formula is pretty simple. Take your gross monthy income and multiply it by 31%. Use 45% if you have a second on the home. This is considered a affordable payment and this is the figure the lender will try to MOD your payment to. If your already there you have what is considered a affordable mortgage and will not be offered a MOD. If your mortgage payment is roughly 45% or greater of your gross income you can forget about getting a MOD. It would be impossible to get your payments to the 31-33% level. Most lenders will lower your interest rate to a minimum of 2% and your term to a max of 40 years or a combination of these two. If they can't get your payment to 31-33% you will be declined. No third party or attorney is going to change these facts. If you have a good amount of equity in your home forget about doing a MOD. The lender will make money if they take your home and put it on the market for sale. A modification is not to put money in your pocket but rather the lender taking less upfront to keep from having a foreclosure. Remember it is a business and the lender is simply trying to cut there losses.

[Modification Specialist]

Originally Posted by Grainraiser

.....Getting a loan mod is not rocket science.....

Grainraiser -

You can not tell everyone to go late, that their bank will automatically give them a modification..................

Your trying to stereo-type modifications, that is not the case. Every situation is different. The key is what is the loan amount vs personal income that determines getting approved, and determining what the interest rate and final modified payment will be.

Years ago when the government bailed out the major banks, the only requirement was that they had to set upto help distressed home owners was loan modification programs. There is no requirement to make a lender give a individual home owner a modification.

Many banks set up 800 numbers to modification departments, located in other country's. Where English is not the 1st language. An example is AHSC, where they read of off of scripts, you interrupt them, they start reading the same thing from the beginning....

Your on the right track mentioning interest only or payment option ARM's with no escrows. These types of loans receiving as low as 2% modifications (that get approved). What you do not mention is - banks look at this as if a person can afford an interest only payment, or an option arm payment, turning it into a P/I payment, how can they make it affordable? I have seen these type of loans take up to a year to get modified. Option Arms were designed for self employed indivuals with fluctuating monthly income. They were not designed initially for for people with "W2" income.

You don't mention what happens if the investor is Fanny or Freddy? What about in-house modifications, what about RHS, VA and FHA loans with PMI, what about loans having interest rates over 7% (today took in a mod having 11.8%). What about predatory loans, with rates up over 50%, what about private banks, what about multiple-use homes having commercial loans....

In the last week had two conversations that really hit me.

A 76yr old lady in Illinois, who her husband had passed. Behind on her payments over a year. She was trying one last time if anything could be done, since her foreclosure was the next day. She told me her bank told her she had to be late in order to be approved for a mod. She listened to them, now she was losing her home. They had lived in for over 40yrs.

A 55yr man in Texas, the day after his foreclosure spoke to me if anything could be done. Being that his state his no redemption period, that was nothing he could do. He said how he rebuilt his home, spending $1,000 for improvements, that this home had been in his family for years. Some one told him go could go late to be approved, now he also became a victim.

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