Loan Modification Question, How Can You Get Help If You Value Your Credit?

By
Mortgage and Lending with Guild Mortgage Co - Oak Harbor WA

Loan Modification has been my cry for some time. I believe it will do more to help us get out of the foreclosure mess than almost anything else under consideration. However, mortgage loans that are not delinquent and/or on the verge of foreclosure and being forgotten. I got this e-mail this week because of a post that I did on loan modification and honestly don't know what to do for this person. If anyone has any ideas, I would appreciate hearing from them with ideas:

I was wondering if you could by any chance provide me some advice or lead me to a good source in respect to getting a FNMA conventional loan modified that is currently not delinq. I am unemployed and need to reduce my monthly amortiz. The current amortiz is based on 2x the current balance. I have attempted to work with the servicer, Citigroup, and they won't budge based on FNMA mtg pool rules that state a modification can only be done if the loan is actually delinquent. Of course this is absurd as I would have to destroy my credit rating to get this done. I have sufficient savings to continue paying mtg payment for about 12 months but it will significantly decrease my financial flex and leave me no emergency funds. If I could get the current balance refinanced under similar terms to the existing terms I could gain significant relief. It seems like I have to be a distressed borrower to get something done that would avoid Citigroup/FNMA having one more default which is not what they need.

I believe this is one of the major problems were are facing currently. There is a lot of discussion on how to help people that are facing foreclosure (rightly so), but nothing for helping those that take their responsibility very seriously and have done everything they can do to keep their mortgage current. I know that Todd Clark recently started a new group called Short Sale and Loan Modification Nightmares with the premise of sending these stories to our Congress critters in hopes of getting some better programs working. I will post this in that group.

In the meantime, if anyone has any ideas how I or they can help this person, let me know. They are located in the Northeast. Please contact me and I will give you the person's e-mail if you believe you have something that will help them. Don't bother if you just want to collect money up front with no guarantee of accomplishment.

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Re-Blogged 1 time:

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  1. Rosemary Brooks 06/13/2010 04:41 PM
Topic:
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Groups:
Loan Modification Program
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Internet Empowered Consumer
Short Sale and Loan Modification Nightmares
Tags:
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freddie mac
fannie mae
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mortgage delinquency
loan modification

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Rainmaker
160,728
Retired Notworking
Tallahassee, FL

It seems to me that from the bank's perspective, a loan modification where the value of the home is adjusted to current market value is pretty much the same as a short sale. When life events such as divorce, unemployment, medical problems cause financial hardship, it is great that banks will work with owners to help them out with a loan mod or short sale. I can remember hearing about a time when they foreclosed, period.

If the owner doesn't currently have a financial hardship, why should banks take a loss on his loan? It sounds like the homeowner this blog is written about is very conscientious and has taken pains to be financially responsible.  He is obviously someone who thinks and plans ahead and is therefore worried that he'll go an entire year before finding work. He's saved his money in case he has a life emergency, this is it, and he's prepared.

We are told that banks are overwhelmed with short sale and loan mod requests from people who are already facing financial hardship. This is why short sale approvals take so long. Would banks become paralyzed if they started doing loan mods for people who are not currently in financial hardship?

Dec 07, 2008 10:24 PM #32
Rainer
130,186
Rich Dansereau
Positive Real Estate Professionals - Knoxville, TN

I have been wondering what happens to those who do eventually loose their home for whatever reason. I would hope that the vast majority become renters or have relatives to live with but what of the others? Homeless families and families going on federal and state assistance pose a further strain on an already stressed system and are more of a stress on society in general. Will we become a nation of thousands of foreclosed properties while our citizens become homeless or dependent on public assistance? I think loan modification and any other available program to help people stay in their homes must be explored. I do understand Colleen's point above but there are the very real faces of this crisis that cannot be forgot. Political, economic and any other ideologies do not help families in crisis or teetering on the verge of crisis. The question of whether it is your obligation to help is easily answered as no. It is not your obligation to help on any citizen or taxpayer type level; there is no big brother government who will force you to do what you can. But as a person who is a part of a larger society, as a member of the human race, yes that alone should compel you to want to help. As this issue is debated and the political will to address it is muddled, people like the one in your example and others, real people, face this grim reality daily. There is a saying that is more appropriate than anything I can write, "There but for the Grace of God, go I." It is important that these issues are addressed but action must follow. I hope the person you refer to and the thousands of other who are facing the reality of these issues is able to get the help that is needed.

Dec 08, 2008 01:02 AM #33
Rainer
75,344
Dan Hartman
Province Mortgage Associates - NMLS #2861 - Providence, RI

Hi, Fred, Thanks for bringing this to light! I've been working with an attorney here in Rhode Island who has had success in negotiating modifications for borrowers who aren't yet delinquent, but will be. They key is to show why the current situation is worse than that originally underwritten, as hardship can exist without delinquency. Dan

Dec 08, 2008 02:55 AM #34
Rainer
173,065
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Colleen - Good points, but I believe that banks could get out of their paralyzed state if they had people working for them that knew what they were doing in real estate and finance. In most cases we are dealing with accountant types that don't understand real estate market forces. There are enough people from our profession (some of them very good) that need jobs, how about hiring them to help in this problem? Also, how about someone that will make a decision in a reasonable time. Again, I think we are governed by fear here, fear of being wrong in the decision. One thing my dad taught me over 50 years ago was to make a decision. He always told me I would get into more trouble by not making a decision than for making the wrong one.

Rich - Excellent point, "There but for the Grace of God, go I." All of us in this business do have a responsibility to help our clients in every way we can. Are you forced to? No. Should you? Yes.

Dan - Thanks for that information Dan. I will contact you directly, maybe he can help my guy.

Dec 08, 2008 04:03 AM #35
Rainer
722
Kevin Spencer
Sterling Savings Bank - Meridian, ID

Fred - the only way to go with this scenario is through an attorney (check out www.debtadvisoryalliance.com for a modification attorney in the specific area), but the no 'money up front' and 'guarantee of accomplishment' are unrealistic requirements.  There isn't an attorney worth having that will not require a retainer, nor will they guarantee results. 

Dec 15, 2008 04:44 AM #36
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173,065
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Kevin - I don't expect that will attorney will work for free, but I do have trouble with a non attorney charging for something they can't deliver.

Dec 15, 2008 05:07 AM #37
Rainer
2,686
J H.
EJ Home Solutions - Windsor Hills, CA

Yes. My company has had a 93% Success rate. We are attorney based and we have had a lot of success with clients who are not delinquent yet. You can email me at Jhall@myloanhost.com

www.Ejhomesolutions.com

Dec 22, 2008 06:15 PM #38
Rainer
173,065
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

JH - That is pretty good success rate.

Dec 23, 2008 03:08 AM #39
Rainer
5,356
Matt Hinkle
McGuire Real Estate - San Francisco, CA

Fred - Although provisions are being made to accomodate troubled but current mortgagors, your client's options are limited until they are late on their payment. In the banks eyes, as long as an asset is performing there is no motivation to modify its terms.

That said, your client does have a hardship (unemployment) and banks are aware that some of their loan products/pools are better modified now than later. The likelihood of securing a modification without a job is not good. Your client needs to be making money for debt service. If your client's home has any equity the likelihood of modification decreases too.

As for the absurdity of destroying your client's credit rating, I think this notion is overblown. A mortgage late is not uncommon in the current financial environment. The Sun will again rise. Twelve months from now, after your client has found a job, modified the terms of his mortgage and is actually saving money, the late will be removed from his credit report.

Dec 23, 2008 06:22 AM #40
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173,065
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Matt - At least it appears that this person found someone at his lender that understands it is better to catch these thing earlier than later.

Dec 24, 2008 03:41 AM #41
Rainer
6,360
Dan Harris
Brian McCaffrey Attorney at Law, P.C. - New York, NY

Citi is relatively easy to deal with on loan mods. The lady who runs their Office of Homeowner preservation is Hala Farid. Before joining Citi, Ms. Farid worked for NHS of NYC for 7.5 years, developing curriculums, conducting seminars and counseling first time homebuyers and borrowers in danger of losing their homes.

Hala has a heart of Gold and plenty of empathy.

That being said, the issue here is that this is a Fannie Mae loan and as such can't be modified without being in arrears.

EXCEPT.... There is a Fannie Mae program that does fit the bill. It is called a "Special Forebearance". This plan allows the homeowner who is current to make 4 payments at 25% of their current payment (without being reported late on their credit report). At the end of the "Special Forebearance" period the mortgage is then modified into a payment in keeping with the borrowers demonstrated ability to pay.

The "Special Forebearance" in effect has the homeowner 2 months in arrears at the end of the 4 month plan. This allows the loan to then be modified under Fannie Mae guidlines.

 I have personally helped many homeowners do this themselves, it is possible if you know what is available, know the programs, know who to talk to at your lender, and have the tenacity to not take no for an answer.

Now that you know the name of the program you fit into you can call back and suggest it to them, my thought is whoever you spoke with originally wasn't educated by their employer properly in all of the help available today for at risk borrowers.

You can contact Hala directly:

Hala Farid  hala.farid@citi.com

OR, contact The Office of Homeownership Preservation: mortgagehelp@citi.com  Or call 1-866-915-9417

Dan Harris -

Author of "How To Modify Your Mortgage"  http://www.loanmodbook.com

My E-mail for questions  mailto:dan@homeretentiongroup.com

Dec 26, 2008 10:39 PM #42
Rainer
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Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Thanks Dan, that is very helpful.

Dec 27, 2008 03:14 AM #43
Rainer
732
Johnny Matua
UNITED LAW GROUP - Anaheim, CA

Loan Modification does work, your outcome depends on who you have do your loan modification.  Well Fred, I've come across many situations similiar to hers in my capacity and I've broken it down this way. If you don't have a definitive plan of how your going to get out of your present loan and your pulling money from your savings or 401k plan or wherever just to make up the mortgage payments than your only forestalling the inevitable.  You will end up back where you started but with your savings and retirements depleted. You will not have the resources that would give you more choice and so you will end up falling behind in your payments which will ruin your credit and if it continues on this path you will end up losing your home.  The whole economy has problems, people are losing hours and overtime if they're lucky. Unemployment rate is on the rise everywhere, to me it's easier to rebuild my credit than to rebuild my life from homelessness.

Jan 25, 2009 04:27 AM #44
Rainer
173,065
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Sorry Johnny, not sure I know what your point is here.

Jan 25, 2009 05:10 AM #45
Rainmaker
90,411
Craig Chapman
Call Realty / Access Appraisals - Mesa, AZ
The Value Guy

Fred

I'm with you on your idea that loan mods will help more than anything else.  As for the delinquent issue, I have found a company who has what sounds like the idea.  When you go 30 days or more delinquent that is when it hits your credit.  So, they tell their clients if they are not already behind to pay on obout the 25th of the month before it goes to their credit report.  I guess it stands to establish that the owner is having a difficult time paying but w/o the negative hit to credit. There is more to it than that, but that is one of the issues involved in qualifying the owner. They have several staff lawyers who work the negotiations etc & have fantastic success with getting people some very nice payment reductions.  I think they seem very legit.  If you would like to know who they are, please e-mail me. I would also like your input as to if you have heard of them.  Currently they are completing over 1000 per month.  Sounds like they are doing something right.  Oh they do have a 100% money back guarantee if they don't get you a nice amount off your payment, & they specify a number % amount.  Only ones I've found that do that on the guarantee.

Craig Chapman   CraigsHouseDeals@yahoo.com

 

Mar 18, 2009 04:35 PM #46
Anonymous
Bryan

After reading all the above comments I have to say that is exactly what I have been going through with the modification on my second mortgage.  I have submitted it 3 times and all 3 times it has been turned down for some reason or another.  The last time I received a call from GMAC telling me that I could afford the payment and then 3 days later I received my denial letter stating "insufficient income to support request"  I would be willing go along with this stupid game if we didn't have to pay taxes, but this is our tax money at work. 

I told them that I have an appraisal on my property and that it appraising out to barely cover the first and it is both of our best interest to work something out because if I default and you foreclose you are not going to get a dime and you will have to pay off the first in order to get nothing. They did not seem to care and told me the same thing I read numerous times from the above comments. There is nothing we can do because you are current on your mortgage. 

I don't want to stop paying because as screwed up as this firm is there is no guarantee that they will modify my second and then I will have marks on my credit. 

In my case it appears the ONLY document in the modification packet that they are looking at is the income and expenses and basing the entire decision on that document.  If they would look at everything they asked for and see my paystubs and tax returns they would be able to see a distressed homeowner.  My tax returns show that I cashed in all my 401K which I know was not prudent, but I can't lose my house. 

It is a shame that such ingnorant people have jobs like this when I am sure there are more competent unemployed or underemployed people that could do this job much better than the inept people at this firms mitigation department. 

 

May 30, 2009 02:37 AM #48
Rainer
173,065
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Bryan - I know that the 2nd mortgage holders are going to be more and more of a problem as we continue on in this problem.

May 31, 2009 10:16 AM #49
Rainmaker
66,965
Susan Templeton
Bellingham, WA

Fred, Borrowers do not have to be delinquent to be considered for loan modification but every lender takes a position on this. They must demonstrate a hardship or an eminent default situation. They also need a watertight financial package and hardship letter (in their own words) explaining how the hardship has impacted their situation and how they intend to cure it. For most folks, negotiating on their own is high anxiety for them as well as the mitigator. Suggest this person call a local bankruptcy attorney for a referral to someone modifying loans successfully in their area.

Jan 19, 2010 06:01 PM #50
Rainer
6,360
Dan Harris
Brian McCaffrey Attorney at Law, P.C. - New York, NY

Imminent Default Explained by Freddie Mac: http://www.freddiemac.com/avoidforeclosure/scenario1_borrower.html

Unfortunately there are many loans that have been securitized in MBS pools and the servicers and investors are hiding behind their specific imminent default provisions. Many investors/servicers claim that their PSA's (pooling and servicing agreements) only allow for modification in the case of serious delinquencies.

This means that if your mortgage is in one of these pools the investor wants to suck every last drop of money you have available from your accounts (if you let them), before you can get assistance.

If you are in this situation you will be forced to think and consider long and hard the ramifications of draining your retirement and paying the 40% tax and penalties on that withdrawal as compared with halting payments and having your credit suffer.

My opinion is that if you have suffered a short term hardship that caused you to fall short then taking some money out of retirement funds might be ok.

If on the other hand you have suffered a long term hardship that is ongoing like a loss of income, and draining your retirement funds is only going to prolong the inevitable default on your mortgage then it would probably be more prudent to make your payments as long as possible with your normal disposable income and stop paying when you can no longer keep up.

One other thing, many homeowners fall into the trap of using credit cards to pay bills and buy food so they can keep current on thier mortgage. If your loan is included in the above scenario YOU ARE BEING PENALIZED for this behavior. Don't borrow money at revolving credit card interest rates to keep your head above water. The credit card debt will become the lead anchor around your neck and it won't be long before you drown in debt.

PLEASE make absolutely sure the professional you hire knows this area very well...

You don't want them "cutting their teeth" on your file

Author of "How To Modify Your Mortgage"  http://www.LoanModBook.com

Free Loan Modification Advice Forum:  http://www.LoanModMan.com

 

Jan 19, 2010 11:15 PM #51
Ambassador
566,489
Rosemary Brooks
BMC Real Estate - 209-910-3706 - Stockton, CA
The Mother & Daughter Realty Team

I agree with Dan.  There are some that really do need the loan modificaiton and would benefit from it.  Of course, there are those that will go default again, but in the big picture... who are we to say who needs it and who doesn't.

I work in a housing counseling position too and I know from that .. that there are homeowners out there that really need the modification and really deserve.  But the lenders are not giving them to many.

And that is just because of their own greed - has nothing much to do with the homeowners.

Jun 13, 2010 04:37 PM #52
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