Loan mod questions?

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sxassy

231 Posts

Posted - 07/30/2008 : 09:36:27 AM

A couple general modification questions. I have never done one of these before so I'm not sure what information is relevant.

1. Does it matter if the borrower is still in a negative equity position after the modification?

2. What complications can arise if the property is a 2 flat and borrower needs rental income to qualify?

3. How realistic is a rate reduction and or cutting some principal?

4. Does it matter if the property is in Cook County, Illinois?

I'm trying to get a deal done with Chase so if anybody has worked with them in the past that would be great.

Thanks guys,

J & S Hanley

Hustler12

1286 Posts

Posted - 07/30/2008 : 09:51:06 AM

quote:
Originally posted by sxassy

A couple general modification questions. I have never done one of these before so I'm not sure what information is relevant.

1. Does it matter if the borrower is still in a negative equity position after the modification?

2. What complications can arise if the property is a 2 flat and borrower needs rental income to qualify?

3. How realistic is a rate reduction and or cutting some principal?

4. Does it matter if the property is in Cook County, Illinois?

I'm trying to get a deal done with Chase so if anybody has worked with them in the past that would be great.

Thanks guys,

J & S Hanley

1. No. It doesnt matter, however I'm not quite clear on your question. But the lender is not required to do anything, let alone change to balanced owed
2. Is it owner occ? if so, you are fine. All income from all people living there over 18 will be counted. If its NOO, it will be tougher to accomplish, but believe it or not, they are starting to do investment properties
3. Rate reduction, rate freeze are highly possible. Principal reduction is the most rare occurance.
4. I can't answer this

sxassy

231 Posts

Posted - 07/30/2008 : 10:28:21 AM

Thanks for the reply.

--1. No. It doesnt matter, however I'm not quite clear on your question. But the lender is not required to do anything, let alone change to balanced owed--

I not clear on whether the present value is a factor. In this case the property is worth about 100k less than is owed. Borrower wants to hang on to it because they think it will be next to impossible to qualify for financing within the next 5 years, also some emotional reasons. I guess my question is this: can a lender do a mod even if it means the borrower will still be upside down?

alanadanielle

106 Posts

Posted - 07/30/2008 : 4:48:08 PM

Yes, they do it all day long if the property is upside down. However, every situation is unique and based on the hardship and income.

mojojojo_1

838 Posts

Posted - 07/30/2008 : 4:58:59 PM

that would seem to be a advantage for the bank to do the mod. if they are upside down, but they could get the hoeowner to afford the home and make a preforming loan on the book, they wont have to hold onto the bag if it forecloses so to speak.

Hustler12

1286 Posts

Posted - 07/30/2008 : 5:02:12 PM

quote:
Originally posted by alanadanielle

Yes, they do it all day long if the property is upside down. However, every situation is unique and based on the hardship and income.

I think the term "all day long" is an exaggeration. I would say it's 1 in 20, at best. I've double checked with several other loan mod companies comparing their results to mine, and I've heard the same thing.

alanadanielle

106 Posts

Posted - 07/30/2008 : 5:04:02 PM

There is recent legislation in California signed by the Governor mandating that all servicing banks MUST speak to the client on the phone or in person to work out a loan mod prior to placing the client in foreclosure.

http://www.sacbee.com/111/story/1069360.html

I agree with you as I am doing one for myself.

Hustler12

1286 Posts

Posted - 07/30/2008 : 5:07:07 PM

quote:
Originally posted by mojojojo_1

that would seem to be a advantage for the bank to do the mod. if they are upside down, but they could get the hoeowner to afford the home and make a preforming loan on the book, they wont have to hold onto the bag if it forecloses so to speak.

The only problem with this is that we are assuming the banks are using common sense, which unfortunately is not the case. Most have investors to worry about on the back end not just the consumer. I'm sure there is some crazy calculus formula they use, but I'm not aware of it.

I agree that it should be more common, and I think it will be in the near future, but right now Pricipal Reduction is the rarest mod.

alanadanielle

106 Posts

Posted - 07/30/2008 : 5:08:25 PM

Does the value of the home affect the fact that the borrower can or can't make the payment? If they cannot afford the home based on the amount they borrowed (loan amount), then they simply don't qualify.

alanadanielle

106 Posts

Posted - 07/30/2008 : 5:09:57 PM

I agree with you completely. Write-downs are very rare.

sxassy

231 Posts

Posted - 07/30/2008 : 5:15:23 PM

I wasn't sure if there was some 'net tangible benefit' that had to be met. Since a loan mod is essentially a new loan I wasn't sure if there might be an issue with having a borrower essentially take out a new loan, albeit more favorable, on a property that would be worth significantly less than the 'new' loan amount.

Hustler12

1286 Posts

Posted - 07/30/2008 : 5:17:32 PM

quote:
Originally posted by sxassy

I wasn't sure if there was some 'net tangible benefit' that had to be met. Since a loan mod is essentially a new loan I wasn't sure if there might be an issue with having a borrower essentially take out a new loan, albeit more favorable, on a property that would be worth significantly less than the 'new' loan amount.

Therein lies the confusion. It is not essentially a new loan. it is simply a re-negotiation of existing terms. No escrow, title or HUD. So, the bank has every right to look out for their best interest, just as the borrower has every right to hire someone who has experience to represent them.

FLProcessor

429 Posts

Posted - 07/30/2008 : 5:21:19 PM

Beau-

> I think the term "all day long" is an exaggeration.
> I would say it's 1 in 20, at best.

That is extremely interesting information, to me at least. If you stacked up all of the different types of modifications, do you have information on the likelihood of each being accomplished, and an average timeframe?

You should publish this on your site, I find it very refreshing, rather than the "rah, rah, we'll get your out of your obligations, the banks screwed you" sort of thing I see a lot here in South Florida.

Hustler12

1286 Posts

Posted - 07/30/2008 : 5:23:23 PM

quote:
Originally posted by FLProcessor

Beau-

> I think the term "all day long" is an exaggeration.
> I would say it's 1 in 20, at best.

That is extremely interesting information, to me at least. If you stacked up all of the different types of modifications, do you have information on the likelihood of each being accomplished, and an average timeframe?

You should publish this on your site, I find it very refreshing, rather than the "rah, rah, we'll get your out of your obligations, the banks screwed you" sort of thing I see a lot here in South Florida.

we keep our conversation numbers high because we reject 25-35% of the files submitted. We dont want to waste anyone's time or money...including mine. I'm running out the door for "date night" with the missus, but email me at BBarnhart@newlend.com and I would be happy to share more info. I think most people on this site will tell you I am a straight shooter.

alanadanielle

106 Posts

Posted - 07/30/2008 : 6:07:59 PM

Beau is correct, these mods are NOT new loans. The existing loans are modified for a period of time, usually between 3-5 years. After that time, the original terms go back to normal. If borrowers have back interest payments, escrow shortages and attorney fees, these may be added to the balance of the loan with investor approval. Some lenders are offering a temporary re-payment plan (forebearance) and once timely payments are made for the specified period of time (3-6 months)they will then grant the modification based on the financials at that time.

beauphus

124 Posts

Posted - 07/30/2008 : 6:17:34 PM

1 in 20? ouch

ForeSolution

7 Posts

Posted - 07/30/2008 : 7:22:23 PM

Some sort of harship has to happen for a lender to consider the modification. You need to show your borrower's financials in order to get a new mod. If the numbers make sense, a new loan term may be establish for either a short period or long term.

A loan modification will prevent the lender from further cost of either a short sale (short payoff) or foreclosure (legal fees and much more). It will also bring the mortgage back to current. This will result in the loan to become a performing asset once again. It's a win win situation for everyone.

Hustler12

1286 Posts

Posted - 07/30/2008 : 8:32:21 PM

quote:
Originally posted by beauphus

1 in 20? ouch

1 in 20 for principal reduction <-- I just want to be clear.

However, if you asked me 60 days ago could we mod Neg Ams, I would have laughed. Now, we are getting those done.

The definition of a negotiation is when both sides walk away unhappy, well, its the def of a loan mod too. The lender hates to do it but has to, the borrower always wants more.

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