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Old 03-01-2012, 09:36 PM
 
61 posts, read 197,879 times
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Like many, we have a non-Freddy/Fanny subprime loan on a house that is worth less than 1/2 of what is owed. It is such that with about a year of renting and saving we could afford to pay cash for a similar home at the current rate.

The "Big ol Bank" (BoA) will not refinance the loan to market rate, since they have us locked into paying more, the loan is not government backed, and the house won't appraise so we can't go to another lender.

I would like to request a 'workout". My arguments are sound. The house is worth a fraction of what we owe (8 years into a 30 year loan) and will not equalized for at least another 8 years if we pay as agree - so it is ultimately a bad financial decision from a purley logical prospective. Additionally, the original loan did not have PMI, and since the original loan is the only loan on the house and we are located in California, they will not be getting money from us (non-recourse) or an insurance company if it forecloses.

I would like a streamline re-fi to reduce our interest to market rate. We have the credit and the income, just not the property value. My question is, will a person with a brain and the power to act actually look at my proposal, the details of our loan, and realize that the bank will come out ahead refinancing us into a lower fixed rate loan on the current balance (ie without an appraisal).
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Old 03-02-2012, 02:24 PM
 
Location: New York
2,251 posts, read 4,529,743 times
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Quote:
Originally Posted by Lillp View Post
Like many, we have a non-Freddy/Fanny subprime loan on a house that is worth less than 1/2 of what is owed. It is such that with about a year of renting and saving we could afford to pay cash for a similar home at the current rate.

The "Big ol Bank" (BoA) will not refinance the loan to market rate, since they have us locked into paying more, the loan is not government backed, and the house won't appraise so we can't go to another lender.

I would like to request a 'workout". My arguments are sound. The house is worth a fraction of what we owe (8 years into a 30 year loan) and will not equalized for at least another 8 years if we pay as agree - so it is ultimately a bad financial decision from a purely logical prospective. Additionally, the original loan did not have PMI, and since the original loan is the only loan on the house and we are located in California, they will not be getting money from us (non-recourse) or an insurance company if it forecloses.

I would like a streamline re-fi to reduce our interest to market rate. We have the credit and the income, just not the property value. My question is, will a person with a brain and the power to act actually look at my proposal, the details of our loan, and realize that the bank will come out ahead refinancing us into a lower fixed rate loan on the current balance (ie without an appraisal).

My $00.02

You do not provide enough details to try and analyze your situation. Answering your top question - yes your existing loan terms do come into play when applying for mortgage assistance. When I speak with home owners my first test is to show affordability. Looking at the interest rate, type of loan, and income to determine whether or not to accept a case. I am understanding your goal, trying to lower your payment. You mention the original loan did not have PMI, does that mean your paying PMI now? Are you in an FHA loan?

By paying PMI - if you default on the loan, the bank gets reimbursed by the mortgage insurance. Since most FHA loans have PMI, modification rates are around 5%. Because loans with insurance only benefit the bank, banks feel they do not have to give you a lower rate.

Your question whether a loan will have an appraisal? In the past - there were lenders years ago that would do AVM (computer) appraisals. Those days are come and gone. Because you would be footing the bill, banks now require a full appraisal with a minimum of 3 to 5 comparables. You crying that your property value is only half of what is was, will fall on deaf ears especially with Bank of America.

Just yesterday took in a case involving BoA. A single man 50yrs old, 2yrs ago his wife passed and was left with 4 teenage daughters. He has a valid hardship. His income more than enough income to support the loan. He fell behind, when he asked for help, BoA refused to work with him. He paid his taxes and insurance separately, which were current. I called to check the balance and arrears, found out they added an additional $40,000 for escrows, which they had no right to.

It is very oblivious who the victim is...

Many times people who tried to work from their lenders end up becoming victims. An analogy of this is the bank is on top, the loan is in the middle, and the homeowner is on the bottom. Because Attorneys have no existing relationship with the loan, this puts them at a higher level and able to negotiate with the bank’s loss mitigation department directly. Banks do not want you to have an attorney negotiating and getting the most for you. Because this puts their profits at greater risk and “any misstep” could be subject to a legal claim.

California is the only state we do not have attorney affiliation due to SB 94. Thanks to Ralph Calderon - you should write a letter to him, better yet start a movement to have SB 94 modified!

They say the bill was to protect people from being scammed. I some what agree will this, but for every bad company, the are many more that are doing the right thing. What are the actual numbers? Right now there are almost 32,000,000 home owners across the country that are in default. The number of people that got scammed compared to the number of people who lost there homes to foreclosure. I would like to see and compare the true numbers.

There could of been tighter provisions (rules) in determining how a home owner can protect themselves - to protect their homes. Instead the rules of SB 94 were designed to protect the banks.

Look at the facts - BoA only approving 31%, of loan modifications. They are almost at the bottom of this list! See link Loan Modification Progress Chart | Eye on the Bailout | ProPublica

Calderon who published SB94 - had a conflict of interest, because of his Senate seat, at the same time he was the chairman of the Consumer banking Committee. I am really surprised there has not been one attorney challenge this in court.

Lillp - sorry I got a little off topic, but I'm empathizing with your idea letting your house go to foreclosure. You are thinking short term, if your not late and working it would be a bad financial decision for your future to let your home go. Having a foreclosure on your credit report - you will 100% pay more for things for the next ten years. Yes the value dropped, but as our economy rebounds people will start buying and your value goes back up. Again I don't know your situation, if anything wait it out a little while longer.


Good Luck...


..

Last edited by Modification Specialist; 03-02-2012 at 02:37 PM..
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Old 03-02-2012, 02:52 PM
 
Location: Richardson, TX
11,815 posts, read 18,840,536 times
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OP, what does streamline refinance mean to you?
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Old 03-02-2012, 03:48 PM
 
28,461 posts, read 76,043,485 times
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There is currently no "program" to assist home owners like the OP and lenders are not under any special obligation to do anything to work with homeowners in a situation like the OP -- upside down on house with mortgage held by the lender directly.

My hunch is the OP may have originally been part of some kind of program to help out folks with other non-conforming loan and while the potential loss to the bank is rather large the kinds of "strings" that went with some Alt-A/subprime loans would open even more dangerous can of worms so they prefer not to stir up that hornets nest. I'll also guess that unless the OP is now a uch better credit risk the realistic range of current rates is still not nearly as low as for conforming loans so even at lower loan amount the "risk premium" for this type situation is NOT GOOO in the borrower's eyes...

As ModSpec reports CA is a bit of special case and the strategy in that state is often not the same as elsewhere.

I guess if the OP came back with more details there is some chance that there is angle that has been overlooked but simply being underwater, with no other extenuatting circumstancess, is not really grounds for a lender to allow the loan to be modified anymore than having HUGE paper / potential gains are a valid reason for the lender to attempt to get more out of the borrower...
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Old 03-02-2012, 04:13 PM
 
Location: 92037
4,630 posts, read 9,340,552 times
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Do you have any idea who owns your loan?

I have not heard of any program besides the recent mortgage settlement or HARP that would change the terms of your loan which applies to Fannie or Freddie.

Your options sound very limited.
1. Attempt to short sell your house
2. Walk away
3. Keep paying like everyone else regardless of its market 'value'
4. Wait for another Govt program
5. Keep calling BoA about a loan mod and give them "or else"
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Old 03-03-2012, 12:58 AM
 
61 posts, read 197,879 times
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The loan is uninsured and has always been so (2004).

We do not have a financial hardship, we purchased a home we could afford, and then our bank (specifically) lent to people that could not afford it, directly impacting the value of our home. This would typically not be a big deal, except we really did not think that our "first" home would be our 30 year home. It is a starter home, it is tiny, in a poor school system, we though that in 5-7 years we would be able to move up – we never imagined that in 8 years we would owe almost 100K more than the home could sell for.

As far as long term ramifications, we are in a good position to save. We can either pay down the negative equity on our home for 3-4 years to sell it and walk away even (making 2-3xs the required payment), or let it foreclose and rent/save and buy a similar home for cash (no credit) in a year. From a strictly financial perspective that is a very difficult fact to negate. We are debt free except for the house, and do not intend to seek additional loans in the future.

We are not paying PMI. BofA owns our loan (and has always). We had a traditional loan for 175K, have paid it down to 146K over 8 years (30 year loan), and the home would sell for about 60K. Our loan is affordable per our income, but the simple fact is that our 2 bd, 1 ba, 630 sq ft house is not suitable for children, and by the time we can pay it down to move, we may no longer be able to have children.[/SIZE]

From a purley financial perspective it makes the most sense for use to default immediatly. We can rent for less than our mortgage, and then purchase for cash. I'm wondering if the bank would consider then when reviewing our request for a modification, because I would rather no walk away and watch squatters trash a home that we have put so much into - at the same time, I'm not sure if I'm willing to devote all of my funds for the next 3-4 years and then walk away with nothing, when I can legally walk now and get it over with. A workable alternative requires us renting it at a reasonable loan/rent ratio, a refi to market rate would minimize our per month loss to about $50 (not including vacancys and repairs). We can currently finance another loan on a more suitable home, for less than our current home (while carrying both homes), but I would rather not do that because long term the numbers don't work out well (ie result in hardship over time because the original home's mort payment is so much more then it will rent for).

To me, a streamline refi would mean paying standard closing costs to refi a loan to market rate without an apprasial.
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Old 03-05-2012, 01:03 PM
 
Location: New York
2,251 posts, read 4,529,743 times
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Quote:
Originally Posted by Lillp View Post
....We do not have a financial hardship,

To me, a streamline refi would mean paying standard closing costs to refi a loan to market rate without an apprasial.
You answered your own question on whether or not you will be approved for a loan modification.

Loan Mods are based on two things - showing you have affordability to pay the loan at the smallest rate. Then proving you have a valid hardship.

You are incorrect on your definition of a streamer-line vs. a refinance.

On a standard refi - the loan is going to be financed through a different bank. The refi costs vary between each bank, the main cost is the loan origination fee (broker fee) and the title charges. The new bank is going to require a title search be done to guaranty the property is free and clear aof any additional liens. Also including legal and state fees/taxes. See the state-by-state costs listing for your state - link State-by-state costs

A Stream-line refinance - your staying with the same lender. Since they already have the loan, there is no transfer of title, other then a notary witnessing you signing documents, there is no formal closing. Basically you are paying the bank a very small change (if any) to restructure you loan.

As for the reason why there is an appraisal? They want to see the property is in good condition.


..
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Old 03-05-2012, 01:31 PM
 
28,461 posts, read 76,043,485 times
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An appraisal is NOT just to verify that the house is in good condition, the reason that mortgages are the number one kind of secured loan is that the VALUE of the house must cover the lender's exposure. In the secondary market the whole basis for what constitutes an acceptable exposure has been scaled back in the wake of collapsing real estate values and a solid appraisal that shows the borrower NOT overly leveraged is what investors need to see.

If you do not have equity there are currently very few options to refinance...
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Old 03-06-2012, 12:38 PM
 
Location: New York
2,251 posts, read 4,529,743 times
Reputation: 1611
Quote:
Originally Posted by chet everett View Post
An appraisal is NOT just to verify that the house is in good condition, the reason that mortgages are the number one kind of secured loan is that the VALUE of the house must cover the lender's exposure. In the secondary market the whole basis for what constitutes an acceptable exposure has been scaled back in the wake of collapsing real estate values and a solid appraisal that shows the borrower NOT overly leveraged is what investors need to see.

If you do not have equity there are currently very few options to refinance...
Well Said Chet!!

If you do not have equity there are currently very few options to refinance..
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Old 04-12-2012, 04:57 PM
 
61 posts, read 197,879 times
Reputation: 57
Breaf follow-up. It is still in the air, but the bank appears to be willing to modify the loan interest rate to a fixed market rate, without additional fees or changes to the loan (ie internal bank modification, no closing fees, no new loan, no impact to credit). So maybe they do look at the details?
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