A Realtor’s Insights on The (Not So) Wonderful World Of Loan Mods
From the desk of Bruce Lockwood Short Sale Specialist
*The opinion presented here is the sole opinion of Bruce Lockwood and does not
represent Oregon Realty Co opinion, statement, or policy. This article should not be construed as legal advice.
In the course of my tenure as a short sale specialist I witnessed countless well-meaning citizens who had either completed or attempted a loan modification. Out of these candid interviews from real people who have received or applied for loan mods I have uncovered certain trends which pose many risks to home owners who are trying to make the best of a bad situation. The following list are just a few of the potentially harmful terms nestled neatly in the fine print.
Beware of Loan Mod Terms That May Harm Home Owners:
a.. No principal balance reduction (even if the bank lowers the payment… if the loan balance isn’t reduced you may still owe more than the house is worth).
b.. Unwarranted revocation of a granted in place loan-mod even though all terms & conditions have been met (some banks reserve the right to cancel the loan mod whenever they want… and then a year or two later tell the home owner to pay them back the difference).
c.. Temporary payment reduction that culminates into a higher than usual payment a couple years out (this means (Sometimes the bank lowers your payments with the expectation that the home owner will be able to pay the late fees etc a few years later when the economy improves).
d.. Balloon payment after trial period (basically another form of item “c”).
e.. Never getting out of trial period loan modification status (sometimes, the bank will keep a loan modification on a “trial basis” so they can resume the foreclosure if it suits their ends).
f.. Additional years added to their original payment plan to account for the (some banks have reduced the payment by increasing the number of payments up from 30 years to 40 or 50… Are you really prepared to be paying for the house after you’ve retired?)
g.. $100 to $200 reduced payment (After all of the above, many people only saw a minor reduction in payment).
The above are just a few examples from real people here in our own community.
The bottom line is the banks have no skin in the game. Lenders have little motivation to give anyone a loan mod. National financial institutions are often only the debt “servicer”; meaning they collect money for the “investor” (often shareholders) who own the note to the house. And the federal government more than likely has guaranteed against investor loss so the investor will only lose so much money before feds pay out.
If you own a home and want to move ahead with your life consider a short sale. We help people sell their homes when they owe more on their house than it is worth. A successful short sale is when a bank and investor issue an approval letter that states the seller is free and clear of all debt now and in the future. Our commissions are paid out of the bank’s proceeds from the transaction proceeds (you don’t pay us). Call us, we are specialists here to help you. No obligation and no costs.