I cannot believe this is happening, but if anyone can explain what the chances are that my sellers will be allowed to get a loan modification and keep their home. I hope SPS is really telling the sellers the truth. I am so affraid they will get foreclosed upon. After having declaired bankruptcy several times, and have not paid their mortgage for over one year, my sellers were contacted yesterday by someone at SPS, and were told they are willing to take a look at them and possible modifiy their loan. I find this so surpprising since it has taken the short sale department 7 months to completed a second BPO so we can finally get the approval to agree to accept our contract.
Does SPS normally do a loan modification after this much time has elapsed and a sjhort sale contract has been in their hands for 7-8 months with a buyer waitng to close anytime.
Please advise, are they going ahead with loan mods, while in the middle of short sales?
thanks, Tanya
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It's quite common for lenders to reach out to the borrowers to see about a loan mod. They have to offer foreclosure prevention options to the borrowers. It really has nothing to do with whether or not the short sale will be approved.
My experience is that loan mods are rarely given. However if the sellers want to try and keep their property then they may want to give a loan mod a try. This option should be eliminated prior to listing a short sale.
Just discuss the options with your seller and let them decide what they want to do.
A loan mod, unless with substantial principle reduction, is a band aid. A short sale is a permanent solution.
Ron -
Principle reduction is real. I had a client last year who owed over $2.8 Million on a property at the time worth only about $1.2 Million. His loan principle was reduced to $1.225 Million and amortized over the remaining 22 year term at 3% interest. That's a $1.575 Million Principle Reduction - not added to the back end, just plain reduced. I saw the documents at the time - it is VERY real. Granted, it's the only one of this magnitude I've seen, but it can happen. The servicer was RCS.
Thom;
I have encountered a few clients or acquaintances that have recieved principal reductions.
I am always curious as to the specific circumstances of those files.
The 1.5 miilion dollar principal reduction that you describe has got to be close to a world record for residential modifications.
Do you recall any back-story on that transaction? What loan type was that original loan, fixed, arm or pay option arm? Who the investor was? Was that contract negotiated within a BK filing? And most importantly the IRS Tax liability that this homeowner may have accrued with such as huge default balance waiver? Did the Homeowners Tax Relief Act insulate him on the entire $1.5 million or any of it? Did they send him a 1099-C that following January? Is that homeowner current today on those new loan mod payments?
I'm sure you don't know the answer to most of these questions but I think it would be helpful to a lot of folks on our forum to get an update on those circumstances.
Is it to much trouble for you to follow up with that homeowner and get back with us?
This has happened recently to more than a half a dozen of my clients.
In every single case they were denied this new opportunity for loan mod. These LM denials came back fast and hard.
It is my opinion that this is an attempt by servicers as an "appearance of compliance" with the 50 states settlement and other litigious issues some of these servicers, lenders and investors are facing.
You can safely say that there is not a snowballs chance in hell that your short sale client will be approved for this late date loan mod offer.
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