What lender is dumb enough to modify a home loan and not reduce the monthly payment for the homeowner? How about almost everybody! When you are bleeding to death, the doctor doesn’t suggest an IV! The first order of business is to stop the bleeding. So, why in the world would a lender modify a delinquent homeowner loan and not reduce the monthly payment? Shockingly, and against all common sense, this was apparently the norm last year.
Today, in an interview on CNBC, Federal Housing Finance Agency (FHFA) Chairman James Lockhart, stated that last year only 16% of loan modifications completed by their agencies (which include Fannie Mae and Freddie Mac) reduced the homeowner’s monthly payment. With that statistic, is there any question why 55% of these loan modification recipients went into default within 6 months? This was a terrible case of wasted effort and wasted time, when there is no time to waste. [Read more →]
After observing the struggle of today’s homeowner, I began working with attorneys and homeowners on a personal level to help them navigate the loan modification process with lenders. Through this process, I’ve gained inside knowledge of tips and tricks that I want to share with everyone.
Faced with an impossible choice of giving up their home or working with near-impossible bank constrictions, homeowners are facing foreclosures, short sales and looking for help with loan modifications. As I’ve said many times before, borrowers aren’t really worried about the fluctuation of their home values. Most realize that the value of their homes has significantly decreased. Bottom line, borrowers care about their monthly payment.
Most homeowners don’t want to lose their home. They still have good credit and don’t want to walk away just because they “bought at the high of the market”, and in the short run, may have made a bad deal. Those thinking about trying for a loan modification are in for a tough time, as my first-hand observation of the process has exposed what homeowners need to arm themselves with:
Check out my latest article on TheStreet.com! In it, I outline what I believe are some strong buy opportunities in a weak housing market. From stock picks to the luxury housing market, I call it how I see it! Read it and let me know what you think: Pulte, Lennar, Home Depot & Lowes Are Best Housing Bets.
Several weeks ago I went to my 25th high school reunion at my alma mater, Georgetown Prep, in Bethesda, Maryland. A classmate of mine, who is a reader of The Sumichrast Report, asked me for advice. His brother-in-law, Jeff, is upside down on his house and wanted to know what options he would have. I spoke to Jeff the other day and here are some of the facts:
Jeff and his wife bought an end-unit townhome for $200,000 in May 2006. They received 100% financing.
At the time of the purchase, they had a gross combined income of about $8 0,000. (At a 100% financing, this is well inside the 3x normal borrowing limits that historically would qualify.)
Their first mortgage was at a fixed rate of 6.875% in an interest only 5-year ARM. Their second (a HELOC) was at a considerably higher rate, but has recently been reduced by the bank to match the first. The lender was Countrywide, but is now Bank of America. They are current on their mortgage payments.
They recently had their first child. Jeff’s wife is on maternity leave, but her disability payments are about to run out. She plans on getting another job, but it will be part time, so their income is tighter. They are worried about not being able to afford the house.
Jeff had hoped that the house would appreciate in value and his fall back would be that he could resell it. But re-sale prices in their neighborhood are down 20%. Jeff believes his house is now only worth $160,000.
One of the greatest salesman that I have ever known likes to say, “if they want steak, don’t give them lobster.” Anyone who has ever sold anything knows the truth behind this saying. It doesn’t matter what you have to sell, if the buyer doesn’t want it, forget it, they aren’t buying.
Barrack Obama is selling. He’s selling hard. He’s making more speeches, more interviews than any President I can recall. He is articulate when he needs to be and folksy when it’s appropriate. He’s a rock star who is giving his fans and constituency what they want…more Barrack. Can you blame him? I don’t.
If you haven’t had a chance to see it, I urge you to take the 3.5 minutes and watch the short speech by Daniel Hannan, a conservative MEP for South East England, during Gordon Brown´s visit to the European Parliament on March 24, 2009.
I would urge anybody wondering how to understand the economic mess and what we need to do to get out of it, to watch JP Morgan’s CEO, Jamie Dimon’s speech today at the US Chamber of Commerce (3/11/09).
Reducing mortgage deductions on a few spells class warfare. Joe Robson, chairman of the National Association of Home Builders (NAHB), said in an open letter to President Obama yesterday, “with the housing market still reeling from its worst downturn since the Great Depression, this is not the time to talk about raising taxes on home buyers and home owners. This proposal will increase the cost of housing for many middle-class families.” He goes on to say, “the notion of ‘robbing Peter to pay Paul’ just won’t work. Not when the stakes are so high with our economy.”
