The sound that use to be made when it was believed you went to heaven.
Common sense is the key here.
Ask yourself this.
You loaned someone 200,000 on a now value property of 100,000
You have been paid 2,000 a month for the past 6 years.
The borrower is considering a new loan program to pay less at least that is what they hear on tv.
You as the lender have two options,
1. give the person a loan mod of 40 years instead of 26 years whereas they still owe the same amount ( no principle reduction ) but reduced payments for a few years to make you ( the bank or lender look like you are doing them a favor ) and knowing that if the seller hangs in there until 2013, as the idea of a seller walking away without the IRS and the CA Franchise board coming after you for the rest of your life as nothing stops the IRS. knowing full well you will collect an extra 80,000 from the idiots who do refi or HARP over time.
2. stand tough and let the sellers decide to keep their promise to pay their loan, or go through the next decade as if they were illegal aliens after a foreclosure.
Either way be your the borrower or the lender, sounds like someone will be playing a HARP.
The mere application may set the roll for the credit report, to be effected. In some cases bank fraud.
Seeing all of this from the banks eyes should help you in deciding what to do or what not to do.
Loan modifications is and has always been in the banks favor.
Loan Modifications reduces the payments temporarily and does the following.
1. it locks you into your own home like a prison as you can not sell as you are upside down and the lender already worked with you.
2. come 2013 the IRS and the state tax board will chase you down forever ( bankruptcy ) doesn't stop the Tax man.
3. you will pay more in the long run.
4. you will be stuck in the home for many years to come before you are no longer upside down.
You could short sell it ( if you qualify ) in 2012 be done with it and move on.
A short sale is a settlement of debt.
Currently the tax laws to expunge the property in 2012 are in the borrowers favor on a principle residence.
See your CPA and ask to make sure.
They were put in place by then President Bush and CA Gov Arnold.
This is not the case for 2013 so far.
A loan modification that has a four letter word for it should tell you something.
Quite often the things that happen during the Loan mod is a complete failure and make the person lose their home. for more info you can read some of the items as http://www.loanmodificationcalifornia.info
HARP is nothing more than a trap.
Harold Sharpe - Broker
So Cal Homes Realty
California Department of Real Estate Broker License # 01312992
Here is some information that might start you on your way to understanding whatâ€™s going on with Refinancing, Loan Modifications and in particular, Obamaâ€™s H.A.R.P. Program:
One report I read, showed that during the initial HARP period, only about 10% of the goal was achieved for helping homeowners in distress. While 10% is a pitiful result, the scuttlebutt is that the actual number is considerably lower; possibly as low as 60,000 (3%)!
One explanation was that INTEREST RATES had fallen so low, during the life of the program, that the Banks were doing Loan Modifications on their own! (Unbelievable!)
I understand that the primary reason for the breakdown in communication, is a new-fangled problem called â€œOUTLYINGâ€:
What this means, is that when a Lender declines a Refinance/Modification and they report the results to HUD, they do not have to give a detailed reason or explanation; they can merely say that the â€œAPPLICANT WAS NOT QUALIFIEDâ€ or â€œTHE REQUIREMENTS WERE NOT SATISFIEDâ€. HUD has been blindly accepting these refusals as Gospel and has not looked into the details of what these phrases mean. The Bank does not have to justify anything, they do not have to explain themselves to anyone. When they decline an application; they do not have to give the Homeowner or the Government a reason.
In addition; the initial parameters for Fannie Mae were 80 to 105% of the Loan to Value ratio, which was ludicrous. With the recent extension, this figure has been increased to 125%, which means that if the property had DECREASED more than 25%, then the new loan will not cover it and therefore will not qualify. (Those of you who are Math Whizzes and Mortgage experts; please check me on this; itâ€™s confusing).
There is absolutely no incentive for the Banks to give away anything; particularly PRINCIPAL!
There are two conclusions which can be drawn from this;
1.) Donâ€™t expect to see a lot of Loan Modifications
2.) There should be a lot more investigation here.