Little Known Problems with Loan Mods
A local lender sent out the email below. Alhough hardly anyone gets a loan mod, Sellers who are considering modifications -vs- short sale really need to know the info below:
In these difficult economic times home owners are often forced to make difficult decisions about how to handle mortgage payment they can no longer afford. One of the options is a loan modification. Everyone knows they are tough to get, but here is the problem almost nobody knows about:
ALMOST EVERY LOAN MODIFICATION INVOLVES DEFERRED DELIQUENT PAYMENTS that are rolled back into the loan in order the bring themortgage history current.
EVERY traditional loan program available today - Conventional,FHA, VA, USDA, etc., considers a loan with deferred payments as an ONGOING DELINQUENCY, regardless of the history on the credit report.
This means NO NEW LOAN CAN BE MADE UNTIL AT LEAST 1 YEAR HAS PASSED AFTERTHE LAST DELINQENCY.
Some loan mods stipulate that the borrower catches up on the deferred payments in the first few years after the mod. In this case they may be able to get a new loan 1 year after the deferred payments are caught up - maybe 4 or 5 years in the future - probably more than the 2-3 year time frame for a foreclosure or short sale.
IN ADDITION, MANY LOAN MODS DON'T STIPULATE A TIME FRAME.THIS MEANS THEY WILL NOT BE ABLE TO GET ANY NEW LOAN (REFINANCE, PURCHASE, WHATEVER) UNTIL 1 YEAR AFTER THE LOAN IS PAID IN FULL.
In other words if someone does a loan mod in year 3 of a 30 year loan they won't get another loan until at least 1 year after they sell or pay off the property. Making normal payments, that would be 28 YEARS IN THE FUTURE.
OUCH!
Comment
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Comment by Enrique Vasquez-Plaza on June 29, 2011 at 9:40am
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You are right!
I have tons like that!
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Comment by Christina Conrad on June 29, 2011 at 7:45am
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It is hard to convince sellers to not do a loan mod. I just had a seller come in the office this past Friday, who has a f/c scheduled on 7/6/11..we bust our butt to get the ss initiated, only to have the seller call the bank 2 days later to do a loan mod....say goodbye to your home..it is going to f/c for sure now!
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This is an article I wrote about loan mods, hopefully It turns the why I want (excel /word). I have it on Word Format. I call it : "LOAN MODIFICATION: Reality Check"
►►► Based on your situation, please see if you truly qualify.
Loan Modification -Definition. – All mortgage loans have 3 terms:
1. Loan Balance (DEBT).- This is what you owe. No lender –except Wachovia (only 10%) – will reduce your principal. If someone says that can reduce your loan principal or bring it to its current market value, please run away: THAT is a huge lie!. You will actually end up paying more, because all your delinquent balance +late fees and other junk ones will be added to the total debt. ***The only thing that can happen is that the lender can “forbear” part of the principal. This means the lender will freeze a portion of if (to make it more affordable). You will not make payments or pay interest on it, but you will have to pay it off once you refi or sell*** “I call it a rat trap”
2. Interest Rate (%).- It’s the Percentual Rate you pay on your mortgage. The minimum interest rate that can be granted under the Government Modification is 2%.
3. Term (5yr/10yr/ 30yr /15yr..) .-This is the amount of years that you owe on your loan. Normally the lender will not modify this, but lately, since everybody is way upside down, they will “help you” by extending your loan term to 30yrs (again) or up to 40yrs. Yes guys, there is no 50 or 60yr.
********************* ALL MODS will include taxes and insurance on your payment *********************
Loan Modification –REALITY CHECK –Who qualifies? .-After being working loan mods for over 5 ½ years, there is no attorney, no magician, no bank , no loan mod guru and no Non Profit that can save your home, if the numbers don’t make sense. Here is my reality check table:
**Assuming they give you a 2% for 30 yrs. (since 40yrs is rare) This would be the lowest mathematically possible payment you can receive. This payment includes tax+insEst. Principal Taxes Insur
$150,000 156 40 = $750**
$200,000 208 40 = $987**
$300,000 312 45 = $1,465**
$400,000 416 60 = $1,954**
$500,000 520 65 = $2,433**
IF YOU ARE EXPECTING YOUR NEW MODIFY PAYMENT TO GO LOWER THAN THIS –INCLUDING TAXES AND INSURANCE- YOUR CHANCES OF GETTING IT ARE “0” “ZERO. A lot of “mod reps” lie to people just to steal some dollars. Sometimes the truth hurts, but we all deserve a personal realty check.
Enrique Vasquez-Plaza
REALTOR®
CA-DRE Lic. 01868555
NMLS Approved/NMLS #402884
CHS (Certified HAFA Specialist)
NVSI Val-U-Cert-Provider
www.enriqueplaza.com
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Comment by Karyl Moore on June 18, 2011 at 5:33pm
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It's the same in our neck of the woods, Clay. And you know they can't believe what those lyin' realtors say!
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