Is This Kinky Loan for You?
by John Occhi REALTOR
Realtor Consultant to Foreclosure Investors
I was reviewing some of my previous writings on other sources whan I came across this article on a very kinky loan program that I had written about last December, Just when we thought we saw the Kinkiest of Loans....
Jeremiah Miller, President of Mortgage Payment Deferral, Inc. has announced a patent pending program that will allow homeowners the ability to defer their mortgage payment for a full year - that's right defer your mortgage payment for a full year! He says that it will work with ANY type of mortgage. The program has 2 names that it will be marketed under - first for those who prefer the English language, there is the "12 Month Deferral" if you prefer to sound cool and quote jargon then you're in luck because the program is also known as the "12MoDef".
According to the website, there are now 6 mortgage companies writing these loans and the process for a mortgage broker to get involved can be found on the website.
Miller says, "I was inspired to create 12MoDef with the idea that a year without mortgage payments could give someone financial freedom and stability for a better future." He goes on to say, "Everyone has their own reason for using 12MoDef. Many of our clients are making job changes, starting families or struggling with a new business venture; while some are being crushed by meeting the monthly financial burden of their mortgage payment AND credit card debt. A year without the stress of a mortgage payment allows people to reassess their financial situation and regain control of their life again."
The idea took three years to bring to fruition. Needless to say, he found his share of naysayer's. He is quoted as saying, "During our initial research and development of the product, we were informed by many banks, lawyers and title companies that the idea was impossible and we were basically wasting our time. We refused to believe it and fortunately we refused to give up. Now, all of our hard work and dedication have paid off with the inception of this truly wonderful product. Without a doubt this has been the most rewarding endeavor in my entire career."
The program acts by creating a trust with some of the equity you have in your home. The money in the trust account is invested and earns an ‘aggressive' interest. The program guarantees that the trustee will make each payment, on time, every month - to the correct lender.
I'm not sure, but my guess is if you enroll in this program, then you'll be able to include 2nd and even 3rd mortgages - assuming you have the equity.
What brought me back to this article is the work I am doing with pre-foreclosure homeowners. If they have any equity, this might just be a great way for them to salvage their home and at least get it ready for a reasonable sale - again assuming they have the equity.
The one limitation I see is that the program only works with fixed rate loans - as they have to know how much money goes into the trust. If the payment were to escalate - then they can't predict. So, if the loan payment is fixed for a sold year, then the max this loan program could be implemented for would be the 12 months of fixed payments.
Each month the homeowner then receives a monthly statement showing the balance of the trust as well as all activity on the actual mortgage. At the end of the 12 month period, the trust simply closes and all remaining funds, including the earned interest, are returned directly to the homeowner.
Although the program is know as a 12 month program, it is actually available for any time period spanning 3 to 36 months.
I am not endorsing this product, so I won't be telling you where to sign up. What I do know is that the company is aggressively looking for brokers and lenders to market the program.
Hoping to make your California Real Estate Investment...
A Pleasant and Profitable Experience,
John Occhi, Hemet CA REALTOR
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