With foreclosures steadily on the rise, one of the questions that has been surfacing is the possibility of homeowners simply walking away from their mortgage because they owe so much more than someone who just bought a foreclosure on the same block.
I’ve heard the term “buy & burn” used lately to describe someone who goes and purchases a new home that could even be in the same neighborhood at a cheaper price and then turn around and walk away from their current home and loan. The resulting default or foreclosure wont matter to them at this point because they’ve already closed escrow on a new less expensive home. I guess they just have to make sure they are set for a few years while their credit takes a huge hit.
Yes this is fraud and it is definitely NOT the right thing to do but people are doing it. I’m not sure if it is desperation or simply they don’t feel obligated to stick to what they originally agreed on. Either way, I think people that are doing this will definitely get what’s coming to them down the road and I don’t know how they could sleep at night.
What happened to personal responsibility? I guess if these people were lending out their money, they’d be ok with someone sticking it to them as well?!! ha ha. It’s just sad that so many people made really bad choices and now they are just dumping their problems onto everyone else across the board! Okay, Ok enough with my personal tirade….back to the point.
This morning I received an email questioning someone simply walking away from their home from a past referral. I’m going to paraphrase his email.
“The past 2 years has flown by and along my travels I was activated from the Naval Reserves and found my self in Kuwait for the last 10 months. To my surprise when I returned I was in shock …”Like Every One Else” over the housing market and the price of gas ! WOW what a year can do. We purchased in Murrieta 12/15/06 for $478,000 and just last week the County assessor had us valued at $384,000… very modest considering that the county would like to keep our taxes instead of losing them. I love the location of our home and when we purchased we never intended to (get rich quick) … It was long term. I am just concerned that when all the neighbors start to walk away from there homes…. because they are … My justification for waiting out the market starts to waver. I have been reading all about the FED trying to help the home owners that are on the verge of foreclosing by helping them with promise notes or $$$ against what there homes are worth now to refinance into fixed rates. My question is they love to use the term “struggling home owners” does that mean the home owner that has decided not to pay there mortgage for months and are ready to walk away or does that mean they will take a consideration all homeowners that would like to better there way of life by renegotiating there home loans.”
Back to personal responsibility. If you are a homeowner and you truly can’t afford to make your new adjusted loan payments then a Loan Modification is what you should be looking into, NOT walking away from your commitment and obligation.
A Loan Modification is a negotiated change in the terms of a mortgage in order to meet a of homeowners current situation. A homeowner has to show TRUE finanical hardship and document their hardship as well. Your loan terms will be negotiated with your current lender to lower your interest rate, lower your payment, forgive past due balances and late fees and possibly even lower your principal balance.
Hardship has to be in the form of lost employment, military service, death of a spouse or co-borrower, failed business, job relocation, illness and divorce are a few of the reasons for hardship. In addition to submitting all of your monthly bill statements, you will need to write a hardship letter and document that actions that you have taken thus far to remedy your situation. Although this isn’t necessarily Easy, it’s the right way to go about improving your situation.
The cost of a Loan Mod can vary and I can only speak for my company but if we don’t think someone qualifies for a modification after reviewing all of the necessary documents then fees will be refunded.
I’m sure we will be hearing a lot more about Loan Modifications over the next few months. I’m always open to questions so don’t be shy.
Hello,
Thanks for the information. The sad part is I did lose my job and instead of waiting for the loan to be behind I got right to the mortgage company and told them my situation and i did request a loan modication because I will not be making the same amount of money in a new job(Hint: I did apply for a job similar to my old one and they told me I only qualify so much with them and I had to take a pay cut from my old job to the new one however they never hired me) so I know I had to get right to it and they told me I dont qualify for a loan modification so what the point of this process if we homeowners are trying to fix the problem before it goes out of hand. If I was late on my payments they still won’t help me unless I pay so much of it back so whats the point of holding on to a loan if the company won’t help you sometimes its best to just walk away to let them know if you don’t help me I can’t help you.
I was Googling loan modification and wound up here. Truly enough insight and opinion to go around.
My experience is that the lenders LOVE the idea of a homeowner trying to do their own loan modification without the benefit of an education. It gives them the opportunity to offer a truly lackluster deal to the borrower and stick it to them.
Countrywide will modify a loan for a homeowner lickety split. They offer great rates on these for unsuspecting homeowners. Why, they will even let a homeowner roll the back payments into the new principal balance. How benevolent of the big bank!
Their customer service reps are trained to do this well. I have seen them send a loan modification agreement at 7.5% at the drop of a hat.
And the added bonus for the bank besides working with WC Fields “sucker” they get the homeowner to sign away all of thier rights to remedy any damage done on the prior loan.
No, I for one do not recomend a homeowner try this on their own without alot of research and education. Lest they be taken advantage of by the lender.
I would never accept the lenders 1st offer, and never accept anything that is not a realistic long term solution.
In full disclosure myself I own & operate a full service title and escrow settlement agency in NY, and we do negotiate loan mods for a fee.
I have also written a “Do it yourself” book on the subject.
There are many charlatans out there charging clients and not doing the job. They come in all shapes and sizes, there are former LO’s, loan mod companies, and yes even attorneys.
If you choose to hire a professional ask for references, make them show you examples of successful loan mod agreements. Check with the BBB, consumer affairs, negotiate your fees and most of all call your lender at least once a week to keep track of what activity is going on on your account.
Your lender will tell you who has called, when, what the conversation was and what progress is being made. Even though you are not negotiating yoursefl you should still make sure the person you hire is in constant contact with the bank.
The 700 Billion Dollar bail-out plan will do nothing to help those American familie’s through-out our nation who are on the threshhold of foreclosure.
In my opinion, to hell with Fannie Mae & Freddy Mac.”We the People” who do not have high paying jobs should be granted the right to borrow a low interest home mortgage loan based on income directly from the Federal Reserve Bank which should be nationalized for the people of our nation who for to long have been enslaved by bank’s and lending institution’s by high interest rates on money that they receive from the Federal Reserve Bank which might have spared the grief for the children of Sergeant Andrew Seabrooks of knowing that their father died in Afghanistan because he needed the money to stop a bank from taking their home away from them due to foreclosure.
Loan modifications are definitely welcome solutions on the part of the borrower. Life is indeed unpredictable and such unforseen events like a loss of a job, family health problem or any other event that can bring the family to a financial crisis can become a very big burden to the borrower. The good news is there is such a thing as loan modification to give them a brighter hope for the future.