Loan mod may be better than selling
Tactic gives owners time to recoup market value
By Bernice Ross, Tuesday, August 11, 2009.
DEAR BERNICE: I need some advice to know what to price my home at when we do sell. We got an appraisal on our property and it said we lost more than $100,000 in value. Is there any way to sell it for what we paid for it? My husband thinks if we refinance our home we could sell it for what we paid for it originally. Is that true? --Rachel D.
DEAR RACHEL: The price you paid for your property has no bearing on what it is worth right now. A good analogy is the stock market. If I paid $100 for IBM stock and today it's selling at $60, I would have to settle for $60 a share if I wanted to sell today.
Refinancing won't change this situation. If your appraisal came in low, lenders will refinance your property based upon the current appraised value only. The only way to sell the property for what you paid is to wait for the market to improve.
In July, the Obama administration asked the nation's largest lenders to modify at least 500,000 loans by the end of 2009. If you are selling because you're facing hardship, you may be able to obtain a loan modification from your lender. The first step is to document your hardship in the form of a hardship letter. (Click here to view some samples of hardship letters.)
Loan modifications can be a wonderful solution for a distressed property owner. Bankruptcy and foreclosure are usually the most damaging to your credit. Giving the lender the keys back to your property (called a "deed-in-lieu of foreclosure") may be somewhat less damaging. Loan modifications are usually the least damaging of all these options.
In a loan modification, the lender may lower the interest rate to as little as 1 or 2 percent. This results in a dramatic drop in your payments making it easier for you to stay in your property. For example, if you have an adjustable-rate mortgage (ARM) and it readjusts to 9 or 10 percent, the lender may lower your existing mortgage rate to 3.5 percent for five years and then raise it to 6 percent for the balance of the loan.
In other cases they may allow you to pay off the loan over 35 or 40 years as opposed to 30 years. (This may be a bad idea for you because it generates huge amounts of additional interest for the lender.) On rare occasions, the lender may even consider a principal reduction.
The two key requirements the lender wants to see are that you plan on staying in the property and that you have sufficient income to keep making the payments. Some loan modification programs have a three-month trial period. If the borrower keeps up the payments during the trial period, the loan modification becomes permanent. ...CONTINUED
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Submitted by Jillayne Schlicke on August 11, 2009 - 1:01pm.
50% of all loan mods re-default at the six month mark.
Some folks will need to sell NOW before prices go down even further during the next six months.
Submitted by Mark Bustamonte on August 11, 2009 - 1:41pm.
Bernice, Good article but I am beginning to believe that some of your comments are simple intended to stir controversy. The comment regarding the not using the companies that are advertising on radio and TV because they will rip you off is really broad stroking the industry. Obviously you need to be careful who you use but I certainly wouldn't say they all rip you off. I personally am not in the loan mod industry but do refer clients to a local company that assist clients with loan modifications. Their clients for the most part are homeowners that have attempted there own loan mod by contacting their lender and got nowhere. I liken the client contacting there lender for a loan mod similar to contacting the loan shark and asking him to shave a couple of points off because your having a hard time paying him. Fortunately the company I refer clients to does such a good job that the majority of there business is now referral business.
Mark Bustamonte
United Credit Education Services
Sales Director
Field Trainer
http://www.vrtmg.com/mbustamonte
954-707-2932 Direct
Submitted by Barb Van Stensel on August 11, 2009 - 2:29pm.
Bernice, I am not one for compliments but you have laid an excellent foundation for the homeowner who needs to consider the option of a loan modification. There are so many people out there that are in financial distress that do not know where to turn. You have given them some solid answers and information for them to seek out.
I believe the consumer needs to be told "to be careful". It is not broadstroking but raising a flag of concern. One that says "Hey, listen up, seek professional help and go to your accountant or an attorney."
The morale and "loss of spirit" that I am seeing everyday in the field with the financial crisis is just staggering. People feel beaten up. It is similar to a person who is drowning. Someone attempts to save the person who is drowning. The victim grabs hold of the individual who attempts to save him/her but the victim just pulls on them to reach the surface where they can breath and survive! If the person who is attempting to save that drowning individual doesn't know or understand how to save the victim, they both will drown!
So, BRAVO to you for guiding the consumer to the correct and most importantly, the best place to find refuge during such a bad storm.
Barb Van Stensel
Keller Williams Chicago
Submitted by Danny C. Flucke Jr. on August 11, 2009 - 2:36pm.
Bernice:
The issues homeowners face is not knowing what type of loan modification they qualify for.
According to the US Treasury stats - Less than 21% of DIY modifications are approved.
There are specific requirements to receive the MAXIMUM allowances per modification guidelines - And when homeowners leave the task up to the over worked/under paid clerks in a loss mitigation department - It certainly explains the low sub 21% success rate.
A modification company that is marketing itself is not automatically a bad company. And a few questions go a long way towards "weeding out" prospective modification companies:
1) What is your fee? ( Anything more than $1000 to $1,500 is waaaay too much... )
2) What is your performance guarantee? ( All homeowners deserve a 100% money back guarantee... )
3) How do you calculate the MAXIMUM modification terms/IE: Lowest rate/payment? ( If they tell you the "lender decides the terms” or “we have no control over that” - Call another company... )
As with everything else - Buyer beware.
There are reputable modification companies out there helping qualified homeowners – Who can deliver exactly which modification options are available for each case file - At a very reasonable fee with a 100% money back guarantee for homeowners who do not qualify.
SIDE NOTE: A certified spreadsheet detailing EXACTLY how/which modification options the homeowner qualifies for - Builds the strongest possible case file for requesting the maximum modification.
Compare that to sending check stubs and W2's to the loss mitigation department and letting them decide which modification options they will "allow".
Homeowners can either negotiate their modifications from a position of knowledge and strength - Or simply accept their lenders findings...
Thanx, Danny
Danny C. Flucke Jr.
Senior Partner
Nationwide Mortgage Experts, LLC
Direct: (714)624-9479
DCFJ@NationwideMortgageExperts.com
www.NationwideMortgageExperts.com / www.NaMoEx.com
Submitted by David Curry on August 11, 2009 - 2:50pm.
Really? Loan modifications as the solution? Loan mods are proven to default at a similar rate as those loans that have not been modified. People aren't "losing" their homes because the payment is a couple hundred bucks too high. They're "losing" their homes because the negative equity in the homes makes walking away a very easy decision. I'm surprised by Bernice's simplistic point of view. I've written on this many times, and the while loan mods don't work, the administration can only come up with this as a reasonable way to stop foreclosures. Lame.
David Curry
Geneva Lakefront Realty
49 West Geneva Street
Williams Bay, WI 53191
262-245-9000
www.genevalakefrontrealty.com
Submitted by Matthew Reyes on August 11, 2009 - 3:46pm.
Bernice, ........................................
........... YOU ROCK! I was going to write a bunch of flowery intelligent sounding stuff but the heck with it...
You just ROCK. That's all there is to it.
Matt Reyes
Rialty Real Estate LLC
Statesville, NC