Has anyone actually seen a successful loan mod?
Property Manager · Passaic, NJ · Member since 2008 · 369 posts · 83 votes
I have several friends in the middle of foreclosure and have been watching their struggle to obtain loan mods. It is a jungle out there!!!!!!! I was wondering if you know of anyone who has actually completed a successful loan mod and is happy with the outcome?
I have mixed feelings on this of course. One side of me says where was the government to help bail me out when values dropped in the mid 80's? No where. I found a will and a way and kept myself afloat to hang on through the storm thankfully. Now that what I experienced is now an epidemic and the government has stepped I must admit that I am a bit envious of the opportunity being provided if you call it that. I have several friends in this situation now, dealing with loan mod consultants etc. and I have not seen one bit of hope. They are in varying stages of foreclosure and hoping to keep their homes. They don't even know what stage they are in the process or how soon axe will fall. Thus again I ask where is all the bailout money going??
Yes, I have seen multiple Loan Mods successfully agreed upon by both parties. But there is where the problem begins. Getting BOTH parties to agree. Here are some of the items that I have seen that halt the process.
1) Property owner not understanding why the Lender will not just lower the amount that they (property owner) owes.
2) Property owner not understanding why the Lender will not lower payments to the level "wanted".
3) Property owner just not "working" and "keep in touch" with the Lender until the entire process is complete.
4) Lender NOT knowing what each part of their company is offering or even doing.
5) Lender just not working with Property owner.
6) Lender not listening or even considering the problems that the Property owner now faces.
This list could go on and on.... But here are the few I think are the most important to most failures. The BIGGEST one being that most Property Owners not understanding why the Lender will not just lower the amount owed.
But if a Property owner has the desire to work hard and when things look like they will never end, not giving up but make the calls neeeded. Then they can get a Loan Mod approved. (But they must remember that they are negotiating out a deal, not just getting to name the terms they want.)
Loan modifications rarely work out. I believe the reason is that the actual loan doesn't change. Someone who's behind in payments may be able to get the delinquent amount put on the end of the loan, or make up the behind payments by paying extra on each future payment. Most home owners want their loan changed so they are not paying more for their house than what it's worth, but the lender wants the full amount they loaned.
There were many lenders and agents doing loan modifications for a while and charging a fee of $1,000, which is non-refundable even if the loan mod didn't work out. Consequently, most didn't and people who were already in financial straits found themselves out $1,000 as well.
To top all that off, the loan modification takes a long time. When it may have been better for home owners in default to do a short sale and be fogriven their debt by Fannie Mae in only 2 years(as opposed to 5 for a foreclosure), they spent months trying to fix the loan issues with the bank to no avail.
The loan modification was only a good idea in theory, but in practice it hurt more people than it helped.
I know hundreds of people trying to get their loan modify. The only sure things is that they are all in the foreclosure process.
Only 12% of all loan modification are successfull. The reason be, most people want their loan modify but they have no reason for it. Think about it for a minute, if you were able to qualify for a $200,000 loan 4 years ago, and nothing change in your life (same job, same people in your family etc..) why would the bank change your loan.
And now let's say you lost your job, then why would they modify the loan when they know you are not gonna pay anyway.
Let's say you didn't loose your job but your income dropped, then now you don't qualify for the loan because of today's loan criterias.
In short, banks don't want to modify, because they don't want to create an habit for their customer to try to modify their loan.
I know it's not fair when you see how much TARP money they got from the govt. But who says govt and banks are fair anyway.
In my preparations for buying at sheriff sale, I frequently see recorded loan modifications. Ones made in 2007 and 2008 are going back into foreclosure in 2009 - no big surprise, since as Susan Horton mentioned, they rarely work long term; the problems for most of these people is not just in their loan terms.
One of my workers got a loan modification.
He owes 250,000.
His property is worth 90,000ish.
His payment was 2,000-2,200.
They gave him a loan mod to 700.
The term is 3 yrs.
Rent for the same thing is 1,200ish.
So if the property value does not get near 250,000 within the 3 yrs what will motivate him to make payments?
Basically the government/bank is subsiding his rent for 3 years to foreclosure on him later.
Makes no sense.
Define successful. I had a rental property that a tenant sat in until it went into foreclosue. After jerking around in court and with the lender for a year, they finally agreed to modify the loan and push the back payments to the end of the loan. I paid the mortgage on time for 9 months and never missed a payment. Out of the blue the lender stopped communicating with me and sent notice that I was in default on the loan to the tenant at the rental property. Feeling that I wasn't paying the mortgage, the tenant vacated the property. Then of course, I couldn't make the payments and being tired of the stupidity of it all, I wrote the lender and the courts a letter telling them a number of creative things they could do with that house.
Yes, I have seen multiple Loan Mods successfully agreed upon by both parties. But there is where the problem begins. Getting BOTH parties to agree. Here are some of the items that I have seen that halt the process.
1) Property owner not understanding why the Lender will not just lower the amount that they (property owner) owes.
2) Property owner not understanding why the Lender will not lower payments to the level "wanted".
3) Property owner just not "working" and "keep in touch" with the Lender until the entire process is complete.
4) Lender NOT knowing what each part of their company is offering or even doing.
5) Lender just not working with Property owner.
6) Lender not listening or even considering the problems that the Property owner now faces.
This list could go on and on.... But here are the few I think are the most important to most failures. The BIGGEST one being that most Property Owners not understanding why the Lender will not just lower the amount owed.
But if a Property owner has the desire to work hard and when things look like they will never end, not giving up but make the calls neeeded. Then they can get a Loan Mod approved. (But they must remember that they are negotiating out a deal, not just getting to name the terms they want.)