Rate my Loan Mod

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Submitted by stansd on July 17, 2009 - 10:18pm

Hi All,

Actually my brother's mod:

Stats:
-Purchased for 300k (40K countrywide at 8%, 260k credit union 6%). Now worth 200K
-2BR/2Ba 950 sq. foot condo
-He's been delinquent for 5 months to Countrywide, and 2.5 to the credit union.
Current payment = $1,550

The offer:
-Nothing worked out with Country-wide yet. We are assuming they will step out at some point for a nominal sum.

Credit union:
-2K upfront, rest of deliquent amount wiped
-I/O for 2 years-payment 1,000/Mo.
-After 2 years, payment = 1,175/Mo. Permanent interest rate of 3.5%

I need to run the numbers, but my early view is that the 3.5% is pretty good, but the lack of a principal write down sucks (he'd owe 260k on a house worth 200k).

I'm thinking he should ping back saying the 3.5% is good, but the principal needs to be written down to 220k-230k. That gives him a fighting chance at being right side up in a couple years.

The bank is adamant that they won't write it down, but I can't see why they would foreclose on a place they will clear 190k on after fees when they can keep the loan on the books at 230k albeit at a below market rate.

What do you all think? How hard is he likely to be able to push, or is this a good offer?

Stan

‹ Tired of doing the right thing...need advice Parallel price drops across high to low end tiers? ›
It's a good offer, principal
Submitted by temeculaguy on July 17, 2009 - 10:39pm.

It's a good offer, principal write downs are only temporary and incur a lien, they aren't as good as they sound. I've actually not heard of permanent lowered interest rates for 30 years, there's usually a catch. The FDIC loan mod guidelines allow for the lender to get something on the back end, they usually get everything back when it sells or returns to value.

The reason they will forclose and lose money is because if they fold, then everyone wants that deal and that deal loses them money. Since it is a credit union, and i belong to one, then it loses me money. If I had voting rights in my credit union, I would refuse any loan mods, just foreclose as quick as possible, destroy his credit, take the hit to the bottom line and stop the endless line of people with their hand out. I had a professor one who allowed you to dispute your grade, if he decided your argument was flawed, he lowered your grade. Standing in a line of ten people outside his office, the first guy came out and said he tried to argue his b to an a and the prof lowered his grade to a c. Everyone in line immediately left. Now that i think about it, that guy was probably pulling our leg, but it worked.

Tell your brother you and I said "your welcome" since inevitably you and I get to pay for this.

I give this an AAA+ rating.
Submitted by KIBU on July 17, 2009 - 11:48pm.

I give this an AAA+ rating.

TG nailed it. A $40K loss on
Submitted by CA renter on July 18, 2009 - 1:04am.

TG nailed it.

A $40K loss on five loans is much better than a $20K loss on five hundred.

If your brother gets a principal write-down, then everyone will be demanding them from their lenders, whether or not they need them, and they'd be right to do so.

Your brother should take the deal and run. Nobody owes him a chance to break even or make money on a purchase.

Personally, I'm very happy to
Submitted by Huckleberry on July 18, 2009 - 6:35am.

Personally, I'm very happy to hear they won't give him a principal write down!

I'm still hoping with all my might that the banks don't just start handing out free money (write downs), which are my tax dollars!!!

You can read at the below URL, banks aren't doing write downs, which thrills me to death! It allows the free market system more ability to work correctly...

http://effectivedemand.blogspot.com/2009...

Walk now or be priced in
Submitted by no_such_reality on July 18, 2009 - 7:36am.

Walk now or be priced in forever...

Frankly, that's what scares me the most about the mortgage mods. They are locking housing up of the market for a decade.

The people can rent it (unless it's prohibited in the mod) but they can't afford to sell it until the purchase price returns. That is bad.

Very good info. Thank you
Submitted by stansd on July 18, 2009 - 10:06am.

Very good info. Thank you all. I had no idea principal right downs were so rare.

Any other thoughts on interest rate, etc. are welcome. The other nut to crack is how to insure countrywide steps out.

Stan

Why must countrywide step
Submitted by threadkiller on July 18, 2009 - 10:20am.

Why must countrywide step out.Your brother wants to own a condo for $1000/mo.,yeah right! I personally think the deal offered is too good to be true,there has to be a catch there somewhere. If I thought I could get 3.5% on my mortgage I would stop paying right away.-TG maybe your prof told the first guy he would get an A if he could make the rest of you guys go away! Good story though,the analogy might be right on.