OT-What a loan modification with principal reduction really looks like

[Anonymous]

From the OP:

> He also thinks that if he ever sells he has to pay back the foregiveness if he sells for a gain.

If he has to pay it back upon sale, then it’s not a principal reduction. It’s just an indefinite, 0% loan on the $40K.

Of course he can game this by never actually selling:

http://piggington.com/modification_madness

If it is true that he still owes the $40K, this is unusual. The example in the above thread is more typcial. I know a few people that have had loan mods (most of us do), and the principal reductions have been just that — the borrower simply owes less money (there are plenty of other old threads here with examples).

But why not put your money where your mouth is? You can loan me $440K at 5% interest. A year from now, we will simply reduce the amount I owe you to $400K. I’ll pay off the $400K the years, and you won’t lose anything, right?

[jpinpb]

pri_dk – good observations. Also note that the seller, if there’s a profit to be made, will have to give it to the lender. Squeezes profit margin for him.

It almost starts looking like he’s renting the house, except he has to fix things that break.

[jpinpb]

pri_dk – good observations. Also note that the seller, if there’s a profit to be made, will have to give it to the lender. Squeezes profit margin for him.

It almost starts looking like he’s renting the house, except he has to fix things that break.

[jpinpb]

pri_dk – good observations. Also note that the seller, if there’s a profit to be made, will have to give it to the lender. Squeezes profit margin for him.

It almost starts looking like he’s renting the house, except he has to fix things that break.

[jpinpb]

pri_dk – good observations. Also note that the seller, if there’s a profit to be made, will have to give it to the lender. Squeezes profit margin for him.

It almost starts looking like he’s renting the house, except he has to fix things that break.

[jpinpb]

pri_dk – good observations. Also note that the seller, if there’s a profit to be made, will have to give it to the lender. Squeezes profit margin for him.

It almost starts looking like he’s renting the house, except he has to fix things that break.

[pemeliza]

“Across the life of the loan the banks borrowing costs are and will be well below the interest rate he is paying.”

That is a big assumption and is only true if the government subsidizes the bank with cheap money like they are now for the next 40 years. By the way I happen to agree with you. I think the banks and governments are telegraphing their next move which is to keep money for mortgages cheap forever. If they can’t borrow it, they will print it. All in the name of “keeping housing affordable” so people can realize the American dream. If I am correct, this “mandate” will be payed for by the government in the same way they pay for the other “entitlements” which is to say that they won’t be paid.

[pemeliza]

“Across the life of the loan the banks borrowing costs are and will be well below the interest rate he is paying.”

That is a big assumption and is only true if the government subsidizes the bank with cheap money like they are now for the next 40 years. By the way I happen to agree with you. I think the banks and governments are telegraphing their next move which is to keep money for mortgages cheap forever. If they can’t borrow it, they will print it. All in the name of “keeping housing affordable” so people can realize the American dream. If I am correct, this “mandate” will be payed for by the government in the same way they pay for the other “entitlements” which is to say that they won’t be paid.

[pemeliza]

“Across the life of the loan the banks borrowing costs are and will be well below the interest rate he is paying.”

That is a big assumption and is only true if the government subsidizes the bank with cheap money like they are now for the next 40 years. By the way I happen to agree with you. I think the banks and governments are telegraphing their next move which is to keep money for mortgages cheap forever. If they can’t borrow it, they will print it. All in the name of “keeping housing affordable” so people can realize the American dream. If I am correct, this “mandate” will be payed for by the government in the same way they pay for the other “entitlements” which is to say that they won’t be paid.

[pemeliza]

“Across the life of the loan the banks borrowing costs are and will be well below the interest rate he is paying.”

That is a big assumption and is only true if the government subsidizes the bank with cheap money like they are now for the next 40 years. By the way I happen to agree with you. I think the banks and governments are telegraphing their next move which is to keep money for mortgages cheap forever. If they can’t borrow it, they will print it. All in the name of “keeping housing affordable” so people can realize the American dream. If I am correct, this “mandate” will be payed for by the government in the same way they pay for the other “entitlements” which is to say that they won’t be paid.

[pemeliza]

“Across the life of the loan the banks borrowing costs are and will be well below the interest rate he is paying.”

That is a big assumption and is only true if the government subsidizes the bank with cheap money like they are now for the next 40 years. By the way I happen to agree with you. I think the banks and governments are telegraphing their next move which is to keep money for mortgages cheap forever. If they can’t borrow it, they will print it. All in the name of “keeping housing affordable” so people can realize the American dream. If I am correct, this “mandate” will be payed for by the government in the same way they pay for the other “entitlements” which is to say that they won’t be paid.

[sdrealtor]

FYI, the reduced principal is due upon the note reaching maturity so if he makes it to the end of the term he owes the $40K at that time.

As for it being unusual, it is one of the infamous Obama HAMP modifications and I beleive they are pretty standard in design. I read the actual loan docs so I know exactly what he’s getting. Of the people you know, have you actually seen the loan docs?

I am not in the business of lending and if I was the terms would be set at the outset. If we needed to renogotiate down the line, we would have to and it happens all the time in contracts across the globe. My saying they are not taking a loss has nothing to do with putting my money where my mouth is smart ass. The deal was made and turned sour but that doesnt in and of itself create a loss. They are making the best of it and still in a positve net situation which is a gain.

[sdrealtor]

FYI, the reduced principal is due upon the note reaching maturity so if he makes it to the end of the term he owes the $40K at that time.

As for it being unusual, it is one of the infamous Obama HAMP modifications and I beleive they are pretty standard in design. I read the actual loan docs so I know exactly what he’s getting. Of the people you know, have you actually seen the loan docs?

I am not in the business of lending and if I was the terms would be set at the outset. If we needed to renogotiate down the line, we would have to and it happens all the time in contracts across the globe. My saying they are not taking a loss has nothing to do with putting my money where my mouth is smart ass. The deal was made and turned sour but that doesnt in and of itself create a loss. They are making the best of it and still in a positve net situation which is a gain.

[sdrealtor]

FYI, the reduced principal is due upon the note reaching maturity so if he makes it to the end of the term he owes the $40K at that time.

As for it being unusual, it is one of the infamous Obama HAMP modifications and I beleive they are pretty standard in design. I read the actual loan docs so I know exactly what he’s getting. Of the people you know, have you actually seen the loan docs?

I am not in the business of lending and if I was the terms would be set at the outset. If we needed to renogotiate down the line, we would have to and it happens all the time in contracts across the globe. My saying they are not taking a loss has nothing to do with putting my money where my mouth is smart ass. The deal was made and turned sour but that doesnt in and of itself create a loss. They are making the best of it and still in a positve net situation which is a gain.

[sdrealtor]

FYI, the reduced principal is due upon the note reaching maturity so if he makes it to the end of the term he owes the $40K at that time.

As for it being unusual, it is one of the infamous Obama HAMP modifications and I beleive they are pretty standard in design. I read the actual loan docs so I know exactly what he’s getting. Of the people you know, have you actually seen the loan docs?

I am not in the business of lending and if I was the terms would be set at the outset. If we needed to renogotiate down the line, we would have to and it happens all the time in contracts across the globe. My saying they are not taking a loss has nothing to do with putting my money where my mouth is smart ass. The deal was made and turned sour but that doesnt in and of itself create a loss. They are making the best of it and still in a positve net situation which is a gain.

[Author]

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