Are lenders finally reducing loan balances on Loan Modifications?

By Ken Go

Caller: My neighbor has a loan modification package that reduced their loan balance by about $200,000, which reduced their payments by about $600-700 per month. I have a very similar situation and we have the same lender. What do you think my chances are to get the loan modification like my neighbors? They seem to be very satisfied with this modification package and are now living very comfortably with their mortgage.

Ken: This caller was actually referred to me by the neighbor she is referring to. I am fully aware of the loan modification package that was sent to the neighbor and has asked for permission to discuss her situation with this caller.

Here is what happened to the modification offer by the lender Ocwen Financial. The homeowners owe about close to $500K on their property with only one loan, the current market value is about $300K or so and the homeowners were behind on their payments and have made several attempts to get this loan modified. The homeowners do make the income to actually make the payments but it was really tight and they would be working paycheck to paycheck just to survive this mortgage.

This property is considered by lenders to be in a declining area and the homeowners were actually offered a mortgage payment only on the current market price of about $300K at 2% interest rate for the first 5 years increasing to a maximum rate of 5% for the next 40 years. But the remaining $200,000 is actually going to be a balloon payment at the time the property is sold, refinanced or paid off. They are not making payments on it, but it would not go away.

Do you understand where the confusion might be? If someone tells you that my loan balance has been reduced to a lower amount, don’t stop there when you are asking those questions. Ask if there were any deferment or forbearance on the remaining balance. This particular homeowner really needs to stay in the area, has too many people depending on the house to have to move, therefore this option of a reduced payment was acceptable to them.

Everyone has very different priorities. For someone who has short terms plans for the property, this might not work. But if you have long-term plans and believe that your property will go up in value by about 40% in 5-7 years, then this loan option is for you.
I am starting to see this type of loan modification being offered to more homeowners, as long as you are fully aware what you are signing now and don’t regret it later. You can then stay in your house that might be under water.

Caller: Ken, I am not happy with my agent who is currently working on my short sale. They are telling me to move out even before the house is actually closed. I feel disrespected because of how they treat my family and I. I feel like I have no say in anything and all they want is for me to leave and sign the papers for closing. What can I do?

Ken: I am sorry for agents that are mistreating people like that. I want you to step up and tell your agents that a lot of people are in the same situation like you. I want you to let them know that even if it’s a short sale, you still have the say to everything. I want you to tell them not to disrespect you because you are going though some hardship. Sometimes, we are so passive due to our way or culture we just keep things to ourselves. If it makes you feel better, send them a letter via email or mail addressing your concern.

Now remember as a seller in a Short Sale Transaction there should be two forms that the agents are making you sign, that is a CAR ( California Association of Realtors) form called the: Mortgage Assistance Relief service Short sale negotiation notice and Mortgage Assistance Relief Services offer of mortgage relief notice.

These forms will state that you as a short sale seller should be able to cancel the listing contract for any reason and that you will not be liable to a commission. You are allowed to accept or reject any offer. Remember to be careful with a listing agent who is also representing the buyers. You want to make sure they disclose that to the lender and get you the highest and best offer to a short sale.

HAFA is Home Affordable Foreclosure Alternatives (HAFA) Program, go to this website: www.makinghomeaffordable.gov/programs/exit…/Pages/hafa.aspx

This has to be always part of your short sale because if you are approved, HAFA will offer sellers a $3000 relocation fee. If approved by HAFA, your lender will give you a deficiency waiver and a lien release towards any remaining balance of your mortgage. There are terms and conditions mainly for homeowners still residing in the property and owner occupied loans, so please check out their website.

If you want to report your agent, you can call the Department of Real Estate and get their license number and state your case. These calls are anonymous and you will prevent them from mistreating others.

I understand it’s hard enough to have to go thru this short sale let alone experience an agent from HELL trying to bully you around.

Thanks for your inquiries and support. Please call Ken Go at 1st Innovative Finance Group at 562-697-7028 or write to Kennethgo@verizon.net.

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