Wells Fargo Pick-A-Pay Modification (insurance, loan, foreclosure, requirements)

[royconner]

Will be submitting a modification to Wells Fargo (WF) for a Pick-A-Pay loan. I have seen that Wells normally uses a HAMP2 DTI of 25%-42%. But I have looked at the numbers and the modified payment will be less than 25%, like around 18%. House is well underwater and NPV will be positive. But I don't think that matters if the DTI is less than minimum. Does this mean denial? Does anyone know if Wells has an in-house mod that uses the 10%-55% DTI?

[Modification Specialist]

Originally Posted by royconner

Will be submitting a modification to Wells Fargo (WF) for a Pick-A-Pay loan. I have seen that Wells normally uses a HAMP2 DTI of 25%-42%. But I have looked at the numbers and the modified payment will be less than 25%, like around 18%. House is well underwater and NPV will be positive. But I don't think that matters if the DTI is less than minimum. Does this mean denial? Does anyone know if Wells has an in-house mod that uses the 10%-55% DTI?

Very familiar with the old 10 year Pick a Pay loans from Wells Fargo.

The objective of a modification is getting you into a regular mortgage with a monthly P/I payment. These are the types of loans where they can consider also 480 months (40 years) to make the payment more affordable.

DTI is not used for modifications, instead the ratio of 31% of the gross income (the other 69% is figured for other debts besides the mortgage). The only number the lender is considering is the mortgage. If you show too many other debts chances are you will be denied. They can say the mortgage is not causing a problem.

Applying for a mortgage modification is a request, not a demand. The two factors that are initially looked at is how much income you earn, and what type of hardship your have. A couple of years ago did a modification for a friend that had a Pick a Pay that was not late on the payments. Had to go up 7 levels of management before finding someone that understand the recast point creates an unaffordable payment. Especially if the minimum payment was only made creating a larger balance. Took 16 months right before recasting - final result was a 40 year at 2% fixed.

HAMP is used if the have a government investor (Fanny or Freddy). Having an Option Arm you most likely have a private investor. Having an option ARM, the original bank was probably World Savings which Wells Fargo brought the servicing rights. If your investor was Fanny or Freddy, that is in your favor.

Trying to calculate a modified payment is two parts.

• First you have to show you can afford the minimum payment. Calculating the principle, interest taxes and insurance payment. At 360/480 x 2% x Loan Amount. The gives your the minimum payment required. You can divide that number by 31% to see the income needed to support the payment.

• The second part of the calculation is looking at your total gross monthly income and dividing that by 31%. If there is another person on the loan you will need to include their gross income as well. This answer will give you a realistic what to expect for your payment. If that answer is below 31%, chances are you will be denied.

• If the gross income is less than the lowest modified payment. If will show you do not earn enough income. Dealing directly with the lender, your giving them the keys to your checking account. Being that the lender is Wells Fargo, they will string you along for months before denying you.

Dealing with Wells Fargo is really tough, they are a straight faced lender. They do not have a history of losing documents as other lenders have. They will not give you any incite on any actions before hand. They will assign and notify you of an impending foreclosure date which comes and goes. Then not notify you when second or sometimes third date is scheduled, because they notified you of the first date. The homeowner doesn't realize their home as been sold until there is a knock on the door by the sheriff serving eviction papers. I have witnessed this countless times.

How you earn your income plays a part on how fast the modification will be completed. W2 fix income is quicker. If you are self employed, expect 8 to 12 months. If you are not late and earn more than enough income (less than 31%). You will be denied.

Regarding the NPV, every lender has different requirements which are secret for their own Net-Present-Value testing. It is rational thinking if a property is underwater. Wells Fargo would have less to gain if they foreclosed. There are other factors that are looked at before the property value.

Lastly when dealing yourself with your lender, you need to understand position bargaining....

Good Luck


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[Susan Daniels]

We need your help. Wells Fargo is treating us terribly on a Pick-a-Payment Negative Amortization loan. They are telling us they are pressing for a foreclosure judgment while reviewing our loan mod app. It is complicated because we are self-employed. They also show equity in our home. I have sent comp sales that are lower than their appraisal and provided proof of w-2 income. We are now at the executive level of review. What can we do to prevent foreclosure?

[Modification Specialist]

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Hi Susan welcome to City Data

We need your help.

Wells Fargo is one of the lenders that is terrible to work with because they will not give any guidance, and will remain straight-faced through out the modification process. My law firm has completed many Pick-a-Pay modifications, as mentioned above had one case a few years ago, we had to go up seven executive levels before someone understood how a negative amortization loan works. Being represented by an attorney is unquestionably better than not being represented, mostly because that attorney won’t be subject to the bank’s tactics of trying to shame, guilt or scare, and as a result of that, is likely to get a better deal than you would be able to. The government has issued many programs that can help, but unfortunately many lenders aren’t following the rules. This is why it is important to have someone on your side that can help you negotiate with your lenders and force them to abide by the government guidelines.

It is complicated because we are self-employed.

Providing there is enough income, being self employed is actually in your favor. Lenders uses a complex process called a Net Present Value test is to determine whether a homeowner qualifies for a loan modification. The test compares two scenarios – modification and foreclosure – which would be more profitable for the lender. If it’s foreclosure, the lender has no obligation to modify the loan. You should use the full amount of your W2 income and make up the shortage with your net business income. Simply shown on a profit and loss statement. The most likely end result - have seen fixed principle and interest payments structured over a 40 years. Also depending how long you have had the loan and how much interest that went back into the loan, could possibly receive a principle reduction. It is important to understand if you show too much income, your payment could really go up, or the modification could be denied.

Where are you?

It is important to understand if your state does a non-judicial foreclosure, or has to go through the court process for a judicial foreclosure. The time to lose a property in a non-judicial state is shorter than a judicial state. Some non-judicial states can foreclose on the first day of the fifth month of non-payment. Where judicial states can take over three years of non-payment before a home can be lost to foreclosure. Wells Fargo can make you to feel ashamed, guilty, or afraid. They may get you confused, or give information that can be used to deny any assistance. Saying you have equity, this is in the banks favor because if they foreclose and recoup the balance of the loan.

Pressing for a foreclosure judgment?

If your lender has hired an attorney to represent them, and or if you are receiving court notices with a sale date. If less than 30 days away, at this point the only option is filing bankruptcy to halt the foreclosure. If there is no sale date notice from the court, my advice is to continue working to have your loan modified. If you need assistance send me a PM.




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