Quote:
Originally Posted by shianti12
My father fell on some hard times and got behind on his mortgage and now he is in foreclosure. He is in the process of trying to get a modification, but we don't know how that will work out since he isn't upside down. So I looked into a reverse mortgage for him and it my work but he will be short around 10k if the house appraises around the 250k value we got. My question is, are we able to ask the bank who has the mortgage to take a short payoff so that he can pay off the existing mortgage and maybe get some extra cash to catch up on extra bills that he also fell behind on. The mortgage balance is around 134k. Does anyone have any suggestions? It would be greatly appreciated.
Thanks,
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Modifications are based on a pass/fail score of a net present value (NPV) test. Each lender has their own guidelines tabulating the score.
Predicting what the lender will do, they will choose the most profitably outcome for them. The lender is control of a modification when a borrower work's directly with them . This is a one way direction for a flow of information and documents. It's a waiting game, and it's all about profit....(their profit)
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As to your question on value. The lender has the advantage if there's equity, to move faster towards foreclosure. Compared to being upside down with no equity, there's no motivation for them to move quicker.
Lenders are not looking to do you any favors, the requirement is being able to afford at least a minimum payment. The final (higher) payment after a modification is determined by the monthly income.
If there's enough income to pay above the minimum payment, chances are good for being approved. If the income drops to not being able to afford a minimum payment. Most likely will be denied for a modification because his loan is no longer profitable.
For you recommend a modification to save the home. Need to analyze your fathers financial information to review where he is and what needs to be done. His lender will not provide any information till their final determination. If there is not-enough income for him, need to add more income (for example a contribution from you). The trick is not showing too much income where the lender raises the payment. You still have to show enough for the total house hold income to show affordability. To comment further need more information - father's gross income, lender, balance ($134k), payment, months late, yearly tax and HO insurance info and the state you live in.
Reverse mortgages - the key to understanding these types of loan are determined by the equity and value. There's no income or credit score requirement, but you need to have a than a 50% LTV (loan to value) score (plus be over the age of 62). If he has enough equity he can pay off his debts, and come current of the mortgage.
I personally do not like reverse mortgages' seen cases fail where siblings trying desperately after a parents passing try to save the home they grew up in.
The sibling's are first in line to buy the property. It's regularly a losing battle because amount of backwards negative amortization, the once smaller principle is now a very large amount. A new loan is needed to payoff the reverse mortgage, which will not be affordable with other bills and debts.
"Short Payoff" (as in short sale) involves selling the property
(moving out) and settling on the mortgage less then what is owed. There is no money to be taking out, your basically giving the house back to the bank. Some states allow deficiency judgements allowing the lender to come after you years later for the difference between what was settled to what was owed. I do not know your state or situation, there is an IRS guideline. Getting protection his he receives a 1099c.
Every situation is different, could write a book to thoroughly explain this...lol..
