Tough Workouts (mortgage modification nightmares)

[Joanne98]

Lenders all say they want to help mortgage borrowers stay in their homes. But when homeowners contact lenders in search of mortgage modifications, they often find getting help very difficult. Here are some stories from readers who struggled to find solutions.

Sue Wright - Las Vegas Nev.

A few weeks after the July takeover of the insolvent IndyMac Bank by the FDIC, the agency announced a mortgage modification plan to help the bank's at-risk borrowers keep their homes.

One of the earliest homeowners to apply was real estate agent Sue Wright of Las Vegas Nev., which is one of the nation's hardest hit areas in terms of foreclosures and home-price declines. But because she was current on her mortgage payments, the bank said it couldn't help her and advised her to stop making payments for two months. She did that and called back right after her second payment was overdue.

She was given a plan with a reduced interest rate and told to make the new payments for three months and the modification would become permanent. But after doing that, she received a letter from the bank telling her the modification was off; the investors wouldn't approve it.

"It was the first time I heard the word `investors,' or that the modification needed any further approval," say says.

No specific reason was given for the reversal; it could have been any of 10 or 15 reasons listed on the rejection letter. The crazy part of the story is that the bank should be anxious to work out the mortgage for Wright and her husband, John.

They want to stay in the house; they've lived there for 15 years and, well, it's home. They're way underwater, owing about $510,000 on a property not worth much more than $350,000 right now. All they wanted was an interest rate reduction for five years. They didn't ask the bank to "cram down" their loan to the $350,000. Meanwhile the market in town is just horrid.

"Nothing is selling in Las Vegas," said Wright. "Nobody even goes to foreclosure sales anymore."

If the bank does follow through and repossesses the house, it stands to lose $200,000 or more.

"It's so unnecessary for people who are trying to work this out," said Wright.

A.G. Chancey - Longwood Fla.

http://finance.yahoo.com/real-estate/article/106472/Tough-Workouts

[JuniperLea]

1. That validates my fears...

My mortgage principal is now approximately $100k greater than the market value. No one is going to help me, and if I dared bring this to the attention of my bank, I'm sure they would start charging a mortgage insurance premium now that my equity isn't 30% of the value.

[Joanne98]

4. Sorry. Maybe it will get better now. Freddie Mack is getting another 35 billion.

Obama can do better.

:hug:

[Urban Prairie]

2. Already lost mine

To foreclosure a year ago. I eventually became diagnosed as disabled due to PAD, my wife lost her job to outsourcing two weeks later, her job provided our health insurance, $1000+ a month for COBRA? yeah, right!!

There it sits, empty since we moved out, and likely to remain that way. Stupid, if you ask me, now that I am (finally) receiving disability checks from SS and my employer, we could be making those payments now, but the mortgage company would not work with us. Lost our cars to repossession as well. Had to wait over a year to be approved. and we used up ALL of our savings to try hanging on. My advice to people who can afford it, is to purchase short or long term disability insurance from your employer or privately, wish I had!!

[Joanne98]

3. Sorry. Welcome to DU..

[SharonAnn]

5. My sister's $540,000 house bought in Naples (2007) just sold for $209,000

Somebody got a pretty sweet deal. My sister lost everything.

Obviously, she understands that she has to just look forward. But she says it's hard. She had over $200,000 equity in it and obviously, could've owned it free and clear at the $209,000 price.

[alstephenson]

6. In many (most) cases the "lender" has sold the mortgage,

so they are only servicing the loan (for a fee of course). The servicing agreements normally don't allow the servicer to negotiate modifications/workouts, but does give them the right (and duty) to file the notice of default when there is a delinquency and proceed through the foreclosure process. In many cases the servicer may not even know who the ultimate investor/owner of the loan is. The first question to ask when seeking a modification is "who owns my loan?". I hope President Obama will impose a 90 or 120 day moratorium on foreclosures and mandate that all borrowers be apprised of who currently owns their loan and how to contact them. That would be a good start towards fixing this mess.