As I was sitting here this am, I was thinking about some clients I just met with regarding their pending short sale. It was an interview situation, but they were so thrilled to actually meet with an agent that was more compelled to exploit their awful financial situation to the newspaper regarding the lack of compassion on the "lenders part ..name not disclosed).
As I sat and read through the papers of the loan modification that was signed in 07, I realized these people were being taken to the bank! Literally! The loan was set up for failure no matter what! In 07, I think we were beginning to see a dramatic change in our Real Estate environment, yet lenders, small mortgage companies were still trying to sale products that would only kill the client! These clients, like most that have been affected in today's short sales, happen to be in their 80's. They have been in the home for years! A family home! You know the story. Parents died and left the house to the siblings. Siblings wanted to sale. One sibling wanted to keep and live in the home. Hence, the one sibling bought everyone out by taking out a loan against the home!
This seller signed a refinance in 07, a 5 year interst only loan to come due in 12. The payment's were acceptable at that time, with hopes the market would be better prior to 12 for another refi. Well kids, I am not so sure they read the clause that stated: "If the home value drops below a 115% of loan value, the lender could increase the monthly payments to cover the loss in house value." REALLY? Did they explain this in full detail to the client? Guess not! They are now in bankruptsy with a loan that the bank WILL NOT perform a loan modification on. WHY NOT? Their credit scores were solid. Interest rates are lower than their 7.35% from 07.
REALLY MORTGAGE BANKS? You are going to make an 80 year old man, with good credit (at least he did), forclose on his home because you don't want to perform a loan modification on his home?
What has the mortgage industry come to? I would love to hear if this is happening to anyone else?