Loan modification with principle reduction gives owner equity---Owner says...SELL!

An old client recently completed (4 months ago) a loan modification, with a significant principle reduction to his loan, giving him approximately 75k in equity. He now wants to sell.

What if any issues might he have by selling soon after his modification. I have not heard of a similar situation and was hoping to here from someone with some experience with this, any response would be greatly appreciated.

Thank you

Francisco Ramirez

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I haven't actually seen a loan mod with a principal reduction.  You need to read the actual modification agreement to see if there are any restrictions, or "give backs" on a sale within a certain time frame.

Wayne I have seen one and I am not sure if there is language that they can not sell for a period of time?

I doubt there are any restrictions, or "give backs", but they just need to read the agreement. It seems odd they would reduce far enough to give that much equity.

Thank you for the responses. This gives me a good set of questions to ask when i meet my client this weekend. I will definitely check to see if was a HAMP modification.

Thabnks Bryan and Ron.  As I said, I've never been involved with one with the principal reduction, but it just made sense there might be some condition like that.

Situations like this is why mortgage companies are not readily giving principal reductions.  I would imagine that there are provisions in the modification agreement regarding the owner selling within XX number of years.  Those provisions will restrict sellers from walking away with money that is not really theirs.

If it was the Principle Reduction Program through Keep Your Home California, they put a lien on your home for the amount of the reduction, and if your home is not sold or re-financed for 5 years then the lien is forgiven.

I have seen one similar to this and it is just as Penny said below.  I recommend you get a copy of the executed Loan Mod and Principal Reduction documents and read them yourself.  Also, I would ask a title company to pull a prelim report to see if anything is recorded. Good luck !

Before your client attempts this, I think he should talk to a RE attorney. I would not want to assist in any possible claw-back by his lender.

Hilarious! Anxious to see how this works out!  Like others said, it is likely there is something in the fine print that insists the forgiven money be repaid if proceeds are received from sale of property within X amount of time, BUT, you never know...



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