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CA renter.
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December 2, 2011 at 11:48 AM #733877December 2, 2011 at 11:58 AM #733879
bearishgurl
Participant[quote=Jacarandoso]Some people are fairly convincing that the loan mod is about them doing their very best to uphold their “obligations” or to maintain their pride in paying their bills. I believe some of them…plus they don’t have to move, or face up to “losing” the house.[/quote]
LOL…you can’t “lose” something you’ll never own, right?
December 2, 2011 at 12:41 PM #733893fun4vnay2
ParticipantGuys
There is no moral hazards/obligations here but pure business into playDecember 2, 2011 at 1:00 PM #733903Participant[quote=dd123]Guys
There is no moral hazards/obligations here but pure business into play[/quote]Completely agree. The borrower wants to live in a property/area he can’t afford for cheaper monthly payments (even if he never acquires any equity) and the lender wants to make sure he gets as much of the $$ he lent as possible and ALL the interest due, whether a little later or a lot later. The mods ensure the lenders recoup what is owed to them by the terms set forth in the mod and in whatever fashion they end up receiving the balance due, depending on future borrower behavior.
December 2, 2011 at 6:52 PM #733926ParticipantI’d love to live in a million dollar house provided someone else pay mortgage part although I can only afford a $600K
who would not want this kind of deal ?December 2, 2011 at 9:07 PM #733928Participant[quote=dd123]I’d love to live in a million dollar house provided someone else pay mortgage part although I can only afford a $600K
who would not want this kind of deal ?[/quote]dd123, in a mod, no one is paying part of the borrower’s mortgage. They simply get their interest rate reduced, more years added to their mortgage, or both. The entire amount (incl any deferred interest) will become due and payable when the fat lady finally sings (when they finally sell and a lender demand is sent for by escrow) :=]
A borrower can get a deal comparable to this by renting. When they give a deed in lieu of foreclosure early on, an underwater borrower begins healing their credit from that day forward. There is no guarantee that an underwater borrower (who is currently eligible for a loan mod and agree to its terms) will be able to sell in the foreseeable future and still cover their closing costs with the proceeds. Therefore they are prolonging the pain (of waiting out the damage to their credit) by agreeing to a mod today in order to continue living in a property in the future that they can’t afford (and likely have never been able to afford).
December 2, 2011 at 9:15 PM #733929sdrealtor
ParticipantExcept when they get some principal and past payments forgiven accompanied by a below market interest rate (2% for the next 5 years, then 3% in year 6, 4% in year 7 and capped at 4.5% in year 8) that makes staying in their house significantly cheaper than renting like a friend of mine got up in OC. Please stop speaking in absolutes that are patently wrong.
December 2, 2011 at 9:30 PM #733930Participant[quote=sdrealtor]Except when they get some principal and past payments forgiven accompanied by a below market interest rate (2% for the next 5 years, then 3% in year 6, 4% in year 7 and capped at 4.5% in year 8) that makes staying in their house significantly cheaper than renting like a friend of mine got up in OC. Please stop speaking in absolutes that are patently wrong.[/quote]
sdr, why don’t you tell us how much your “friend in OC” currently owes on their mortgage? How much of their mortgage was “forgiven” and how much is his/her property currently worth?? Is their mortgage capped at 4.5% for ALL years after year 8 (assuming they stay with the program that long)??
What is their current PITI (+ HOA dues, if applic) and what will their property rent for in the condition it is currently in??
Your borrower has to LAST on the “plan” you describe here. Underwater FB’s have typically been living off the “equity” in their homes. In addition, they have been squatting and not making any payments since the “serial cash-out” refi/HELOC party abruptly ended.
What makes you believe that your “friend in OC” can last 8 years on his “mod program??” And do you think he/she will EVER acquire any equity in “their” property??
December 3, 2011 at 11:42 AM #733940ParticipantI saw the loan mod papers as he asked my opinion before signing them. he absolutely can make it and will stay there forever. He has a tenant and his PITI net of the rent he recieves is about $1000. He is divorced and took out equity to buy the house. He was unemployed for a while. He went back and retrained in another industry and now has a very good job in stable field. He has been promoted twice in the last year since he started.
He had about 80K loan balance plus a year of missed payments forgiven and now owes about 450K which is about what its worth now. He absolutely will acquire equity and no repayment of the forgiven amounts will ever be required. I know this because I saw the loan mod papers. The 4.5% cap is for the duration of the loan also.
Stop with the blanket statements that are patently wrong. Every situation is unique and your stereotypical presentation of anything you write is always full of holes. You usually present one good possibility but its only one of numerous possibilities. the world is not as B&W as you make it out to be.
December 3, 2011 at 4:09 PM #733953Participant[quote=sdrealtor]I saw the loan mod papers as he asked my opinion before signing them. he absolutely can make it and will stay there forever. He has a tenant and his PITI net of the rent he recieves is about $1000. He is divorced and took out equity to buy the house. He was unemployed for a while. He went back and retrained in another industry and now has a very good job in stable field. He has been promoted twice in the last year since he started.
He had about 80K loan balance plus a year of missed payments forgiven and now owes about 450K which is about what its worth now. He absolutely will acquire equity and no repayment of the forgiven amounts will ever be required. I know this because I saw the loan mod papers. The 4.5% cap is for the duration of the loan also…[/quote]
I think it is wonderful your friend received a 4.5% (fixed?) interest rate for the remainder of his mtg. Even though I don’t personally believe interest rates will skyrocket in the next few years, I, too, have seen a few “proposed-mod agreements” and your friend’s arrangement is unusual since the consensus of “economist-types” seems to be that mtg rates will rise.
However a question looms in my mind on your friends situation: Why didn’t your friend and his ex SELL their property (at the time of dissolution) and split the proceeds amongst themselves so your friend would not be left holding the bag on a property that perhaps TWO INCOMES were helping to pay the bills while he was married? That’s usually what divorcing couples do in CA.
It appears the lender in question here “subsidized” your friend’s divorce settlement. Out of curiosity, one wonders why they would do that. If he was a year behind in payments, they could just foreclose on the property.
I understand the part about your friend needing to relocate (and rent the place out) in order to accept a position in his “new” field.
December 3, 2011 at 8:48 PM #733962ParticipantNearly all the loan mods out there start around 2% for 5 years and then go up a 1% a year until reaching todays current low interest rate whatever it is at the time of the mod.
He didnt sell the house because he weanted to keep it and could afford it. The divorce was several years ago and he was doing fine until he lost his job. FWIW many of the divorcing couples I know have one spouse hold onto the house particularly when there are school age children. Thats usually what divorcing couples in upper middle class communities do in CA.
The lender didnt subsidize his divorce settlement as it was about 5 years before he lost his job. He had plenty of equity and refied out her portion. He could easily afford the house after that in his prior career. He didnt relocate either and I never said he did.
You make so many sweeping assumptions I cant even keep up with them. Enough of this nonsense. Admit you are wrong and stop trying to put everything into B&W terms. You were wrong as you often are.
December 3, 2011 at 9:35 PM #733964SD Realtor
ParticipantWhy would someone go through the hassle of selling the home when the lender went ahead and granted them instant equity and a lower rate and basically valued the home at present day prices? Seems like a pretty easy decision to stay and keep the home.
You should be used to the sweeping generalizations by now.
December 4, 2011 at 8:42 AM #733972Participant[quote=sdrealtor]Nearly all the loan mods out there start around 2% for 5 years and then go up a 1% a year until reaching todays current low interest rate whatever it is at the time of the mod.
He didnt sell the house because he weanted to keep it and could afford it. The divorce was several years ago and he was doing fine until he lost his job. FWIW many of the divorcing couples I know have one spouse hold onto the house particularly when there are school age children. Thats usually what divorcing couples in upper middle class communities do in CA.
The lender didnt subsidize his divorce settlement as it was about 5 years before he lost his job. He had plenty of equity and refied out her portion. He could easily afford the house after that in his prior career. He didnt relocate either and I never said he did….[/quote]
So, let’s just get this situation straight here. Your “friend” has $1000 positive cash flow on a voluntary rental (“biz investment”) because his lender essentially “forgave” $80K? of his mtg (the remainder of his “cash-out” refi, 2nd TD or HELOC that he used to settle his divorce). Since he had “plenty of equity” before the divorce, had he not removed any of it, he wouldn’t have been underwater, correct?
And your friend is free to live in the property himself (with his “school-age children??”) but due to his generous “mod,” it is now much more lucrative for him to rent it out and keep the change every month, correct??
So his $1000 month “net rental income” originated from the interest rate reduction along with debt forgiveness of $80K?
Where can Piggs sign up for this program??
It sounds like this friend of yours not only got $80K of his divorce settlement paid for by his mtg lender but he wasn’t “upper middle-class” enough to “hang onto” the family home for his “school-age kids.”
December 4, 2011 at 8:57 AM #733973Participant[quote=SD Realtor]Why would someone go through the hassle of selling the home when the lender went ahead and granted them instant equity and a lower rate and basically valued the home at present day prices? Seems like a pretty easy decision to stay and keep the home.[/quote]
Except he didn’t “stay,” lol . . .
SDR, sdr stated that this individual’s divorce occurred several years before he lost his job. Then he lived in the property “free” for a year after defaulting and THEN presumably worked out the mod after landing a new job. Regardless of the $80K, this particular family (like most divorcing couples) would have been better off selling at the time of divorce and splitting the proceeds, IMO. It would have saved his credit. Now, neither party has this heartwarming, special house for their “school-age kids” to live in. Why?? Because “Dad?” is now using it for a biz oppty, courtesy of his generous “loan mod.”
He’s apparently so “upper middle class” (like ALL sdr’s “friends” are, lol) that he needs the $1000 mo rental income to supplement his income.
I thought the function of “loan mods” was to keep families together in their homes … a roof over their heads while they put their financial lives back in order . . . a second chance, so to speak?
December 4, 2011 at 9:05 AM #733974ParticipantYou have got to be the biggest busy body in the world. Again so many false assumptions you make and twist things to your slanted view of the world.
Did I ever say he didnt live there? I said he had a tenant (i.e. roomate) so his net cost to live there was $1000 out of pocket.
None of his equity was removed, his ex’s was and it was long before the bubble peaked or burst.
I never said he had kids, he doesnt. And he’s not upper middle class for that matter. He’s also orphaned and the only family he has to hold onto the house for is his dog.
The mod kept him in his house and that is where he will stay as long as he wants. It was good deal for the lender and a good deal for him.
You were wrong. Please admit it so we can move on. Just say the words. Its not hard. I..WAS…WRONG!!!
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