Loan mod strategies for houses with equity

[Gabe K.]

Hi Fellow Note Investors,

I own a NPN where the market value of the house is actually large enough to cover the UPB + all the accrued payments and fees (3 years). However, I want to be the nice guy and modify the loan and keep the homeowners in the house since they want to stay there.

What is the minimum number of months of accrued payments you would accept in the loan mod? I could technically foreclose and get a big payday so there is a balance here I need to strike.

Has anyone had this situation before? Thank you!

[Mike Hartzog]

Hi Gabe - When you do a mod, it is important that the end result is a solid performing note where the borrower can afford the payment over the long term.  Rather than focus on what is owed right now, I would suggest that the first step is to determine the maximum monthly payment that the borrower could afford based on their income and expenses.  Once you have that, you can play with rate, term, and principal balance to come up with the modified loan.  At that point you can decide whether a mod that works for the borrower is acceptable to you or not.