Loan mods or bust
Letter to the Editor
By Inman News, Tuesday, April 7, 2009.Re: 'Negative equity: a housing time bomb' (April 6)
Dear Editor:
The people who are current and paying from savings or partially from savings will most likely default when savings runs out. The negative equity compounds the situation -- why would you use up all your savings to pay for something that isn't worth what you're paying for? It also creates a situation where the individuals who bought their property this year will pay half as much as an individual who bought their house three to four years ago.
Let's say a bank gave a $300,000 loan on a house that is now worth $150,000. If the person who owes the $300,000 doesn't pay, the bank forecloses and sells it to someone else at $150,000. Why not modify the loan amount owed to today's value so the owner doesn't have to foreclose? Right now there is a lot of fear out there -- if you recast everyone's loan to today's value, you eliminate that fear and people will go out and spend again because they will know that the feds have got their back.
Makes too much sense, I guess.
Mark Cohen
Loan officer
America's Best Lending Network
Fort Lauderdale, Fla.
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Submitted by Jon Astaris on April 7, 2009 - 12:33pm.
Here's the reason: This loan mod program is a sham, a complete snow job on the sheeple! The politicians keep yapping about helping the homeowners while the banks are in fact foreclosing as fast as they can. There are 85 billion earmarket for the homeowner "help", trillions to "help" the banks so the banks would "lend" but the bans are tighter than ever and the government has promised to buy the banks' "toxic assets" i.e., the bad loans and foreclosed houses, at a price the bank will agree on.
It is, I hope, clear to you. The bank doesnt have to worry about selling your 300k house to me for 150k ....Tim Geithner is going to pay them as near to 300k as possible, ALL WITH YOUR MONEY AND MINE. The loan mods are ridiculously small, 10 percent or less, and very difficult to get.
It is the biggest scam in the history of the world, but we the sheeple would rathert be scammed than face the facts.
Submitted by Jerzy (George) Szkup on April 7, 2009 - 12:57pm.
George Szkup
www.DestinationTucson.biz
Mark,
Very well said, but ... lenders follow some strange? logic. Is it possible that they, in part, make up in tax returns refunds?
The stranger fact is that now number of lenders started canceling trustee sales and walk away from the whole thing. In few situations city gets after actual owner for not maintain the property. In few other situations city sues the lender? This is relatively new twist in this type of situation (so far only in mid West).
George from Tucson
Submitted by Bruno Skopinich on April 7, 2009 - 7:06pm.
I have seen very favorable loan mods. They do work and have helped many homeowners.
Keep in mind that all this is very new to the lenders also. They have Never experienced this magnitude of defaults and hardship.
They have been adjusting and learning how to best handle the volume of requests. Buried within are many homeowners that apply who are Not in a real hardship and are just wasting there time.
Lenders are not just going to roll over and give everyone a monthly discount.
On the other hand there are many crooks now offering loan mods for thousands of dollars and are ripping off the public.
There is always chaos before the calm sets in.
It is a natural process when a completely new
phenomenon sets in.
Submitted by Jon Astaris on April 8, 2009 - 1:16am.
Bruno: Have you seen the Government's own numbers? From OCC and OTS reports:
Less than half the mods reduce the payment by more than ten percent, 26% redefault within 9 months. 25% of mods INCREASE the payment; HALF of the zero or increased mods redefault.
This is end of '08 data.
You keep hearing on the news that 93% of homowners pay on time. MBA says 88% as of December '08, and the delinquency rate has skyrocketed since.
You see "the calm" setting in?
Submitted by Michael Shannon on April 9, 2009 - 10:15am.
Pay the original loan or foreclose. No pay no stay. Too bad prices went down. That is life. Maybe we should do the same for everyone that bought stocks that went down. When people bought homes for cheap and made money it was okay, lose money and lets change the rules. NO WAY
Submitted by Tom Teece on April 13, 2009 - 9:40am.
Mark,
Good letter to the editor to get this discussion going. Nice idea to modify the loans instead of foreclosing. And as Bruno and Jon noted, some are actually being done, and some of those actually work out in the long run.
I believe the key to this is related to Mark's first statement: "The people who are current and paying from savings or partially from savings will most likely default when savings runs out."
The first step for any homeowner, is to evaluate their total income and expenses. Without this step, the "value" of the house then, now and in the future, really doesn't matter.
The poor results from the government's current loan mod programs have revealed that total housing costs more than 30-40% of take-home pay are not sustainable, regardless of the property value.
Re-fi's won't work if the property's appraised value today is less than the payoff amount. Loan mod's aren't typically allowed unless the homeowner can document an involuntary decrease in income or an unavoidable increase in expenses. And some lenders are modifying loans when a foresic legal audit of the existing loan reveals questionable details.
The good news is that there is a free step by step procedure any homeowner can use to determine their eligibility for the various options to avoid default and subsequent foreclosure. Call 888-995-HOPE for a HUD-approved housing counselor or visit www.995HOPE.org even if you are current on your payments. Their services are usually free and some even include credit consolidation to address the overall finances.
Best regards, Tom