This is gonna hurt but I have agree with analyst on the loan mod. The fine print in all the mods I’ve seen, the principal write down is a mirage. That 250k is more than likely dormant, but comes out of hibernation of you try to sell or refi and sometimes has a clause where it comes back after a set amount of years or if appreciation kicks in. Sometimes those missed payments are dormant as well.
It makes sense for the bank, the loss is less than a repo, in a mod, at least they have the possibility of recovering all of their money, just not right now, in a repo, the money is gone forever.
Where I depart from analyst, I don’t think it’s the government’s fault or kicking the can down the road or anything to do with responsibility. It’s just a business decision on the lenders part, one that has more upsides in some situations than a repo for them. The guy will stay, keep up the place, make a payment (albeit a smaller one) and he will feel good about it, even brag about it. In time, they have a decent chance of getting all of their money back. You can envy that guy, i feel bad for him a little, if his value returns in the future, he won’t get the benefit of it that his neighbors will (like a renter), but then again, his other option is be kicked out and to rent for probably a similar price and this way he doesn’t have a landlord. Don’t do a loan mod as a strategy, do it if it is your last resort.
