A Never Ending Saga of a Loan Modification

It all began in January of 2009. They were self employed and had not had a paycheck for a couple of months. they had struggled financially since early 2007 and in 2008, they cashed in all savings accounts, but now there was nothing left.

Jan. 16, 2009
They called their lender to discuss their situation, hopeful for a loan modification.
They were faxed some forms to fill out.
Jan. 23, 2009
They faxed back the requested forms.
Feb. 24, 2009
Spoke to a representative, but made no progress.
Told to complete another package of forms and mail to lender.
March 3, 2009
Mailed requested package of forms.
March 17, 2009
File was assigned to a negotiator.
March 24, 2009
Called and received confirmation that package was received and negotiator was assigned.
Was told it would be up to 45 business days for review.
April 1, 2oo9
Called for an update, was told file was active and open and it would be 30-45 days.
April 20, 2009
Called for another update, was told file was in process, and it would be 38-43 days, probably Mid May and that we would be notified by mail.
April 21, 2009
Received email from negotiator requesting still more documents.
April 23, 2009
Negotiator called to discuss the possible options of a loan modification, such as interest rate reduction, extension of mortgage from 30 to 40 years, forebearance, probably prinicipal reduction would not be an option.
April 28, 2009
Emailed all other requested documents to the negotiator.
May 1, 2009
Negotiator emailed to say she would complete analysis of loan modification, but only if our couple did not make their April payment.
As it turned out, because our couple is self employed, it was determined they would need another 90 days of income history. So the only option was to take a 90 day forebearance which reduced the mortgage payment to $500.00 per month.
May 5th, 2009
Received written approval for the 90 day forebearance. Signed by the couple along with the first $500.00 payment. (June)
July 1, 2009
Sent second $500.00 payment.
July 25, 2009
Sent third $500.00 payment.
July 30, 2009
Called to find out what needed to be done to get a permanent loan modification. Was told they needed ALL THE DOCUMENTS that were sent earlier in the year back to lender again.
August 4, 2009
Received written request to fax all documents to the lender again.
And it needed to be done within 10 business days or the file would be closed!
August 13, 2009
Faxed complete 91 page package to lender.
August 14, 2009
Called and got receipt that package was received and it would take 6-8 weeks to complete.
Continue to make $500.00 payments until such time.
September 14, 2009
Received letter from PMI company stating that lender alerted them that our couple was behind in payments and that our couple should try to work with their lender to work out a modification.
September 15, 2009
Called lender for an update, was told the file was assigned to a negotiator on Sept 11, 2009.
September 15, 2009
Emailed contact at the PMI company to explain the situation and asked her to call to discuss.

Although this sounds like a fictional story, it is a true account and I am not revealing the name of our couple or the lender in question to preserve the privacy of our couple.

I am also withholding my personal comments on this loan modification until our couple gets resolution. However, I would love to hear your comments and experiences regarding loan modifications.

Stay tuned as the saga continues...

Owner Financing Makes Sense in a Buyers Market

If you have owned your property for many years and do not have a mortgage, then you should seriously consider owner financing. Not to be confused with a lease option or lease to own, where the buyer leases for a period of time prior to purchasing the property. Owner financing is selling the property to the buyers and they accept the deed to the property. The original owner becomes a lien holder to the property. Should the buyers default on the loan, the original owner can then foreclose on the property (according to each States foreclosure laws) and can then take possession of the property again.

Of course, the goal is not to foreclose, but to sell in a buyers market and recoup more equity through the financing of the property. Generally, owner financing will garner a higher interest than a traditional mortgage and can be tied to a balloon mortgage (such as a 5 year or 10 year balloon). So even though the sales price will be lower, any loss can be recaptured through mortgage interest.

Here are some other benefits to Sellers:

• Maximize Profit in a "Buyer's Market"

Due to unprecenedted amount of foreclosures in Brevard County, prices have declined to record lows. It will take many years for significant price apppreciation.

• Relief of Property Tax Burden

Buyer will be responsible for all Property Taxes

• Relief of Hazard Insurance Burden

Buyer will be responsible for Hazard Insurance

• Steady Stream of Monthly Income

Buyer generally pays monthly interest only payments

• Sell Homes before Further Depreciation and/or Deterioration

Since many homes are vacant, they are sugject to deterioration due to inclement weather, vandalism, and pests, etc.

• Homes Sell More Quickly

Ability to price home competitively and offer financing which can be hard for a buyer to obtain in this market.

• Lower closing costs

Real Estate Commissions, Tax Stamps and Title Insurance will be based on the lower sales price.

• Another Financial Option for Buyers

There are very few financial options for Buyers without large down payments or excellent credit scores. Many qualified buyers can not buy due to new restrictions.

• Lower Monthly Payments for Buyers

Interest Only payments are lower than a conventional fixed loan, freeing up cash to enable the buyer to do improvements to the property.

• No Appraisal Necessary

Appraisal is not necessary for loan and condition of the property is not a deterrent as it might be with FHA or VA loans.

Of course, this type of transaction should not be undertaken without performing your due diligence and scrutinizing your potential buyers ability to afford the purchase. And as always, you should review all contracts with your attorney and tax consultant.