San Diego Housing Bubble News and Analysis

It is a tough question to answer. It all depends on what the terms of the loan mod are, if there is an actual reduction in your balance or are they backloading it... etc....

So you can either loan mod it, short sell it, or you can simply walk away as well. You can also talk to the bank about a deed in lieu of foreclosure which is basically handing them the keys but doing it in a more structured manner then simply letting it go to foreclosure. I also assume there is only 1 loan on the home.

The rate of recidivism on loan mods is quite high. I am not sure a loan mod will give you the security you are seeking. However if it substantially reduces your monthly payment WITHOUT hurting you on the backend (ie - they backload the deferred interest) then maybe that works for you.

Unfortunately without running the numbers it is hard to say. Many people complain about the short sale process and it is a pain in the butt. However most people who do go through and complete it, feel much better after they are out from under that debt load. At least that is my experience. sdr does alot of short sales and he may have advice on that as well.

You are more likely to get a loan mod if its your residence. You can get a loan mod fairlyu easily with a conventional 1st loan if that $2600 is more than 31% of your gross monthly income. The 2nd is another matter. With a short term plan anyway to sell in 3 to 5 years I'd probably sell but its really a personal decision only you can make. I can tell you there is good demand in your area. I just got another short sale approval this morning for a condo in Point Loma so I have seen that demand up close the last few months. The key to a short sale is your lenders. If you want to send me a private message with the names of the lenders I can give you better guidance.

I believe the government is urging the banks to do modifications for "responsible" home owners not greedy investors. What exactly is their definition of responsible is beyond me, but modifying a rental seems like it would be difficult.

I live in the home...it is not a rental now.

If you were denied a modification, I wouldn't consider a short sale a slamdunk. I am in a similar dilemma (underwater, want out) and my short sale was rejected because I wasn't distressed enough. Your sob story has to be a real tearjerker. Don't bother pointing out that your loan is non-recourse. My experience is they don't care.

Incidentally, I haven't made a payment since March and I called the County recorder this week--they haven't filed a NOD yet. My theory is they're praying that prices continue rising rather than take the hit. There's your shadow inventory.

Good luck, I wish you the best.

This is anectodal and not verified but I heard from someone that I had a listing appointment with about 6 months ago that they hired an attorney to work on a loan mod for them. They said that they had a principal reduction that was determined by an appraisal such that the value of the home was equivalent to todays standards. They also said they were put into a 4.5% fixed rate loan. Finally they did have to sign an agreement that should they resell, that any and all gains above the reset principal would be realized by the beneficiary until those gains equaled the forgiven balance AND all defered interest above the 4.5% fixed rate when compared to the current rate they had. I have NO IDEA if this is true. I checked the tax roll on the home and there is no change (which I expected). They said that the fee was not cheap but they are happy with the results. Conversely I have heard alot of the loan mod programs from various "workout experts" were shams and of no help at all.

blew_it
If I remeber correctly you wrote a pretty cavalier hardship letter saying it was a bad investment and thats why you wanted out. Its not wonder they turned you down. I have done several dozen short sales this year and hardship cases are pretty easy to get by from my experience.

Mary
When I start out with people the 1st question I always ask is "Do you want to keep the house or not?" That really is the crux of the matter if you have some sort of hardship which it sounds like you do. It does not have to be a real tearjerker. If you truly want to save the home, I encourage folks to go down the loan mod road first. If they really dont want the property, they should try to get rid of it.

SD R,
I would not be surprised at all if that were true. There is no book on what people get from their loan mod. Most 1st are changes to interest rates but 2nds can be negotiated away for de facto prinicipal reductions quite often. Every case is different and the results depend on so many factors. The skills and experience of the agent, attorney and/or negotiator on your side are paramount. But results can vary greatly based upon whose desk the file ends up on with the lender. Part of our success is due to the fact that we have established contacts inside many lenders that are good to work with who we can send our files directly to. I'm sure we are not the only ones that have done this.

Yes I agree. I didn't doubt that this person was telling me the truth about the mod. Who knows, the attorney may have dug up the loan docs and found something.

I have not done the heaviest volume of short sales and the two I am in now where I am representing the listing side have been really tough moreso because the buyers have come and gone several times. The current two do represent a dichotomy though, one is a very tough hardship case. The seller has had health issues which caused him to lose his job and subsequently the home. It is a very real hardship case and it has been hard but we have finally got a buyer who is in for the long haul after 3 previous buyers. As you know with each buyer and entirely new package needs to get sent in and basically everything resets (at least with the lender I am working with). The second case is opposite. This is a seller who bought at the peak, then basically bought another home a few months ago and decided to either let the first one go to foreclosure or try to short sell it. He is not distressed and has not missed any payments but by the same token he doesn't have a huge pile of money either. He has been very cooperative with the lender and we got approval on his short sale but again, it took several buyers to get someone who stuck it out for the long haul. Now the appraisal came in low so we just submitted it to the lender for a price adjustment. They gave a verbal approval but we don't have the letter yet. In both cases there were two lenders so it was a friggin grind.

In case 1 the sellers really anguished over whether they wanted to sell the home. Actually they listed in the spring of last year, then pulled the plug in September, then tried to do a loan mod, then didnt like the loan mod terms, then called me back to try again. So like you said, it comes down to do you really want the home or not?

However, I have not yet run across a case where the lender flat out denied a short sale but I have not had any cases where the lender was preconditioned by some event with the seller. So yes I suppose it can happen but I have not experienced it yet.