I do know, that those who are defaulting on Jumbo loans who think they're going to get a principal reduction to their "market value" is not working. Especially when their market value means the lender would have to do a principal reduction in the amount of $400K+. It just is Not happening.

In fact, out of the thousands or millions of people who have attempted or completed a loan modification only 1.8% of them saw a reduction to principal balance. This is the crux of the whole issue.

In Jumbo land, lenders aren't reducing principal down to anything that makes sense. I come across homeowners who owe $1.4M & their place is only worth $850K. Yes, they may get a reduction in interest rate or an extension of loan term, but then what. They sit on this asset for the next 5-10yrs waiting for values to go back up so they just Break Even?
What's the point in that?

Especially on a primary residence they should take advantage of being able to Short Sell their home, take advantage of the Mortgage Debt Forgiveness Act of 2007 which is good through 2012 and walk away. Within 2yrs or less they can buy again at the bottom & build equity back from that point.

Proof in the pudding: Go to any major Loan Modification company website & read their Testimonials page. I've been to them all, what I am NOT seeing as their Top Testimonials is this: "We were able to reduce Mr. Smith's 1st mortgage balance by over $300,000" In fact I don't see any boasting of Principal reductions. Not in Jumbo Loan Land.

Most of my answer was my venting about Principal reductions on Jumbo loans.

Obtaining a 'good' loan mod. Every case is different. Lenders go off of different guidelines depending on whether your loan is FDIC insured or FHa insured. Your HTI (Housing to Income Ratio) has to fall between 31-38% for FDIC & 29% for FHA. The lender will either reduce your interest rate or extend the loan term. Only in rare cases will they reduce your primary principal balance (1.8% of the time)

If you have any questions you can contact me at emilyknell1@yahoo.com

Hello,
I just wrote a 5 page Blog about this today so funny that you ask. Go to activerain.com and search for "My Journey through the Loan Modification Jungle" if you are interested in the long story. I think there is some good information in there to help you out.

I used to work in loan modifications for about 1 1/2 years and the experience was a roller coaster ride. In fact, I developed problems with sleeping because of all the stress and pressure. The problem is that a perfect or good loan modificatin is nearly impossible. There are so many factors that go into each loan modification so no two are the same. One huge factor is who is your lender. DIfferent lenders have different guidelines. On top of this, there are different investors behind each loan even within a lender so the outcome is never completely predictable. And then there is the fact that no two homeowners situation is the same which will change the outcome of a loan mod as well. Also, what a "good loan modification" is up to interpretation. What is good for one is often not a good thing for someone else.

When I worked in the loan modification business, I was usually able to secure a work out for about 90% of my clients, but were 90% of them satisfied? Did 90% of them save their home? Unfortunately the answer is no. Because of all the variables, I began doing short sales to help homeowners in foreclosure prevention. By doing a short sale I am able to help 95% of the homeowners I set out to help which is a much better success rate than I ever saw in loan modifications.

What I do for homeowners who would prefer a loan modification over selling is help them in whatever way I can during the loan modification including helping them put together a pacakge and calling the lender together for follow up, and I do this for free. I figure I shouldn't let the time I spent in loan modifications be in vain. In my opinion if I can help a homeowner obtain a loan modification then perhaps they will refer me to another homeowner who is in need of selling their home and in this way I am building my referal business. If you would like help or have more questions, please take a look at my website and give me a call. I am more than happy to help!

TNT,

You would have to define "good." I was listening to CNBC today and they said a total of 242 loan modifications were sucessful. Yes that number is correct and that is what I find working with my short sale clients. It does not work for the vast 96% majority. Let me know if you need anything else or help.

Joe Homs
Wright Realty Partners
949-625-4533