“Dear Homeowner, we lowered your payment” letter

[(former)FormerSanDiegan]

$500 per month is 4.3% of your income.
That’s what your talking about saving by walking away. And you’ve been in the house less than a year.

I know it is psychologically troubling that your house is $100K underwater. It might ultimately behoove you to walk away. But you have the option of staying there as long as you want before you walk for a relatively small fraction of your salary. Maybe your next raise or two will cover the loss. Small potatoes.
I’d at least hang around for another couple years to see how far it goes and what remedies might be offered before starting to walk.

It is likely that within a few years (maybe 5 or so) that rents will be equal to your payment or higher.

But, why even worry about what your house is worth in order to save a measly 4.3% of your salary ?

[djc]

Here is some more information. Yes, it simply was a letter and it is stated their loan’s interest would be reduced from 5.7x to 4.xx. All other parts of their original contract remains the same. It is simply an interest rate cut.

They did not call the number provided on the letter, but called the number they had for their bank and couldn’t get much information. Yesterday, they went down to a branch office and spoke to someone at the bank who told them that yes, this is legit, their interest rate is being cut and it will be in effect not this next payment, but the following. Nothing to sign! When asked why this is happening, he stated the bank received loans from the government and they have to use some of the monies for this purpose.

The person really didn’t have much else to offer after an hour of discussions and my friends are still confused. They said that they didn’t want this reduction as they are fearful of recourse (they also subscribe to the ‘no free lunch’ mentality mentioned above) and want things to ‘stay the way they are’. The bank gentleman didn’t know what to do and referred them to the number on the letter.

They are seeing a RE lawyer this week for advice.

—

I agree this whole thing makes no logical sense, but on the other hand, nothing in this industry over the last 3 months DOES make logical sense. For all I know, perhaps receiving the loans from the government has conditions that banks ‘help homeowners stay in their homes’, but didn’t specify any criteria. Perhaps reducing a loan 1% or so on a good standing customer meets that requirement and will keep that revenue stream open, whereas reducing it on someone who is underwater on two loans who will lose the place regardless only gives the bank the useless asset they’ll get anyway.

Or perhaps the banks are rewarding those who took out fixed loans they could afford.

[djc]

Here is some more information. Yes, it simply was a letter and it is stated their loan’s interest would be reduced from 5.7x to 4.xx. All other parts of their original contract remains the same. It is simply an interest rate cut.

They did not call the number provided on the letter, but called the number they had for their bank and couldn’t get much information. Yesterday, they went down to a branch office and spoke to someone at the bank who told them that yes, this is legit, their interest rate is being cut and it will be in effect not this next payment, but the following. Nothing to sign! When asked why this is happening, he stated the bank received loans from the government and they have to use some of the monies for this purpose.

The person really didn’t have much else to offer after an hour of discussions and my friends are still confused. They said that they didn’t want this reduction as they are fearful of recourse (they also subscribe to the ‘no free lunch’ mentality mentioned above) and want things to ‘stay the way they are’. The bank gentleman didn’t know what to do and referred them to the number on the letter.

They are seeing a RE lawyer this week for advice.

—

I agree this whole thing makes no logical sense, but on the other hand, nothing in this industry over the last 3 months DOES make logical sense. For all I know, perhaps receiving the loans from the government has conditions that banks ‘help homeowners stay in their homes’, but didn’t specify any criteria. Perhaps reducing a loan 1% or so on a good standing customer meets that requirement and will keep that revenue stream open, whereas reducing it on someone who is underwater on two loans who will lose the place regardless only gives the bank the useless asset they’ll get anyway.

Or perhaps the banks are rewarding those who took out fixed loans they could afford.

[djc]

Here is some more information. Yes, it simply was a letter and it is stated their loan’s interest would be reduced from 5.7x to 4.xx. All other parts of their original contract remains the same. It is simply an interest rate cut.

They did not call the number provided on the letter, but called the number they had for their bank and couldn’t get much information. Yesterday, they went down to a branch office and spoke to someone at the bank who told them that yes, this is legit, their interest rate is being cut and it will be in effect not this next payment, but the following. Nothing to sign! When asked why this is happening, he stated the bank received loans from the government and they have to use some of the monies for this purpose.

The person really didn’t have much else to offer after an hour of discussions and my friends are still confused. They said that they didn’t want this reduction as they are fearful of recourse (they also subscribe to the ‘no free lunch’ mentality mentioned above) and want things to ‘stay the way they are’. The bank gentleman didn’t know what to do and referred them to the number on the letter.

They are seeing a RE lawyer this week for advice.

—

I agree this whole thing makes no logical sense, but on the other hand, nothing in this industry over the last 3 months DOES make logical sense. For all I know, perhaps receiving the loans from the government has conditions that banks ‘help homeowners stay in their homes’, but didn’t specify any criteria. Perhaps reducing a loan 1% or so on a good standing customer meets that requirement and will keep that revenue stream open, whereas reducing it on someone who is underwater on two loans who will lose the place regardless only gives the bank the useless asset they’ll get anyway.

Or perhaps the banks are rewarding those who took out fixed loans they could afford.

[djc]

Here is some more information. Yes, it simply was a letter and it is stated their loan’s interest would be reduced from 5.7x to 4.xx. All other parts of their original contract remains the same. It is simply an interest rate cut.

They did not call the number provided on the letter, but called the number they had for their bank and couldn’t get much information. Yesterday, they went down to a branch office and spoke to someone at the bank who told them that yes, this is legit, their interest rate is being cut and it will be in effect not this next payment, but the following. Nothing to sign! When asked why this is happening, he stated the bank received loans from the government and they have to use some of the monies for this purpose.

The person really didn’t have much else to offer after an hour of discussions and my friends are still confused. They said that they didn’t want this reduction as they are fearful of recourse (they also subscribe to the ‘no free lunch’ mentality mentioned above) and want things to ‘stay the way they are’. The bank gentleman didn’t know what to do and referred them to the number on the letter.

They are seeing a RE lawyer this week for advice.

—

I agree this whole thing makes no logical sense, but on the other hand, nothing in this industry over the last 3 months DOES make logical sense. For all I know, perhaps receiving the loans from the government has conditions that banks ‘help homeowners stay in their homes’, but didn’t specify any criteria. Perhaps reducing a loan 1% or so on a good standing customer meets that requirement and will keep that revenue stream open, whereas reducing it on someone who is underwater on two loans who will lose the place regardless only gives the bank the useless asset they’ll get anyway.

Or perhaps the banks are rewarding those who took out fixed loans they could afford.

[djc]

Here is some more information. Yes, it simply was a letter and it is stated their loan’s interest would be reduced from 5.7x to 4.xx. All other parts of their original contract remains the same. It is simply an interest rate cut.

They did not call the number provided on the letter, but called the number they had for their bank and couldn’t get much information. Yesterday, they went down to a branch office and spoke to someone at the bank who told them that yes, this is legit, their interest rate is being cut and it will be in effect not this next payment, but the following. Nothing to sign! When asked why this is happening, he stated the bank received loans from the government and they have to use some of the monies for this purpose.

The person really didn’t have much else to offer after an hour of discussions and my friends are still confused. They said that they didn’t want this reduction as they are fearful of recourse (they also subscribe to the ‘no free lunch’ mentality mentioned above) and want things to ‘stay the way they are’. The bank gentleman didn’t know what to do and referred them to the number on the letter.

They are seeing a RE lawyer this week for advice.

—

I agree this whole thing makes no logical sense, but on the other hand, nothing in this industry over the last 3 months DOES make logical sense. For all I know, perhaps receiving the loans from the government has conditions that banks ‘help homeowners stay in their homes’, but didn’t specify any criteria. Perhaps reducing a loan 1% or so on a good standing customer meets that requirement and will keep that revenue stream open, whereas reducing it on someone who is underwater on two loans who will lose the place regardless only gives the bank the useless asset they’ll get anyway.

Or perhaps the banks are rewarding those who took out fixed loans they could afford.

[peterb]

OK 23109VC, your last post tells me you’re starting to think like an investor. Cut your losses and make the right move going forward. You just learned a great lesson. Your strategy sounds very logical to me. (Look into the tax implications if you default. I believe you’ll owe the IRS money.)
2009 could be an all-time disaster in CA real estate. Best not to be in it.

$140K/year, good on ya! Now use what you’ve learned to turn that into some real money in the future.

Also consider this…how many investments would let you get away with defaulting? Most people would just lose $200K in a typical venture…OUCH!!! I gotta believe that next year there will incredible amounts of non-payments on mortgages. But I doubt the lenders will be forcing the foreclosure process. They’re screwed.

[peterb]

OK 23109VC, your last post tells me you’re starting to think like an investor. Cut your losses and make the right move going forward. You just learned a great lesson. Your strategy sounds very logical to me. (Look into the tax implications if you default. I believe you’ll owe the IRS money.)
2009 could be an all-time disaster in CA real estate. Best not to be in it.

$140K/year, good on ya! Now use what you’ve learned to turn that into some real money in the future.

Also consider this…how many investments would let you get away with defaulting? Most people would just lose $200K in a typical venture…OUCH!!! I gotta believe that next year there will incredible amounts of non-payments on mortgages. But I doubt the lenders will be forcing the foreclosure process. They’re screwed.

[peterb]

OK 23109VC, your last post tells me you’re starting to think like an investor. Cut your losses and make the right move going forward. You just learned a great lesson. Your strategy sounds very logical to me. (Look into the tax implications if you default. I believe you’ll owe the IRS money.)
2009 could be an all-time disaster in CA real estate. Best not to be in it.

$140K/year, good on ya! Now use what you’ve learned to turn that into some real money in the future.

Also consider this…how many investments would let you get away with defaulting? Most people would just lose $200K in a typical venture…OUCH!!! I gotta believe that next year there will incredible amounts of non-payments on mortgages. But I doubt the lenders will be forcing the foreclosure process. They’re screwed.

[peterb]

OK 23109VC, your last post tells me you’re starting to think like an investor. Cut your losses and make the right move going forward. You just learned a great lesson. Your strategy sounds very logical to me. (Look into the tax implications if you default. I believe you’ll owe the IRS money.)
2009 could be an all-time disaster in CA real estate. Best not to be in it.

$140K/year, good on ya! Now use what you’ve learned to turn that into some real money in the future.

Also consider this…how many investments would let you get away with defaulting? Most people would just lose $200K in a typical venture…OUCH!!! I gotta believe that next year there will incredible amounts of non-payments on mortgages. But I doubt the lenders will be forcing the foreclosure process. They’re screwed.

[peterb]

OK 23109VC, your last post tells me you’re starting to think like an investor. Cut your losses and make the right move going forward. You just learned a great lesson. Your strategy sounds very logical to me. (Look into the tax implications if you default. I believe you’ll owe the IRS money.)
2009 could be an all-time disaster in CA real estate. Best not to be in it.

$140K/year, good on ya! Now use what you’ve learned to turn that into some real money in the future.

Also consider this…how many investments would let you get away with defaulting? Most people would just lose $200K in a typical venture…OUCH!!! I gotta believe that next year there will incredible amounts of non-payments on mortgages. But I doubt the lenders will be forcing the foreclosure process. They’re screwed.

[djc]

[quote=temeculaguy]djc, I wasn’t trying to be cynical, just looking at it logically and asking myself the question, “why would a bank who is getting all of their money every month and on time, suddenly ask permission to lose money?” Even when people are in distress they don’t get deals like that, why solicit reworks from your performing loans if you are the bank?

Taking the “no free lunch approach” I assume there is a catch or a part of the scenario missing. Be sure to ask questions other than read the letter. There is one other possibility, it could be a scam of some sort from someone other than their bank or someone posing as the bank, verify the phone number with the actual mortgage servicer’s number listed online or on the bill. There are outfits fleecing people right now and there have always been mortgage companies marketing to get people out of good loans into bad ones, countrywide was notorious for this, marketing to their own clients.[/quote]

tg,

Thanks for your reply and clarification. I too thought ‘why would they do this, this makes no logical sense at all’, which is why I brought the question here to solicit answers from people whose opinion I respect on the subject.

Speaking of, I am interested in the criteria you are using for your Temecula house hunt. As you may remember, I’m renting in VR as this is shaking out and may end up staying in Temecula depending on a few factors. You have some specific things you are looking for, one of which is orientation to the sun which is something I had not even thought of. Would you mind sharing some of this information with me so I know what to look for and what to avoid? If so, my email is svtdriver(at)gmail.

thanks

[djc]

[quote=temeculaguy]djc, I wasn’t trying to be cynical, just looking at it logically and asking myself the question, “why would a bank who is getting all of their money every month and on time, suddenly ask permission to lose money?” Even when people are in distress they don’t get deals like that, why solicit reworks from your performing loans if you are the bank?

Taking the “no free lunch approach” I assume there is a catch or a part of the scenario missing. Be sure to ask questions other than read the letter. There is one other possibility, it could be a scam of some sort from someone other than their bank or someone posing as the bank, verify the phone number with the actual mortgage servicer’s number listed online or on the bill. There are outfits fleecing people right now and there have always been mortgage companies marketing to get people out of good loans into bad ones, countrywide was notorious for this, marketing to their own clients.[/quote]

tg,

Thanks for your reply and clarification. I too thought ‘why would they do this, this makes no logical sense at all’, which is why I brought the question here to solicit answers from people whose opinion I respect on the subject.

Speaking of, I am interested in the criteria you are using for your Temecula house hunt. As you may remember, I’m renting in VR as this is shaking out and may end up staying in Temecula depending on a few factors. You have some specific things you are looking for, one of which is orientation to the sun which is something I had not even thought of. Would you mind sharing some of this information with me so I know what to look for and what to avoid? If so, my email is svtdriver(at)gmail.

thanks

[djc]

[quote=temeculaguy]djc, I wasn’t trying to be cynical, just looking at it logically and asking myself the question, “why would a bank who is getting all of their money every month and on time, suddenly ask permission to lose money?” Even when people are in distress they don’t get deals like that, why solicit reworks from your performing loans if you are the bank?

Taking the “no free lunch approach” I assume there is a catch or a part of the scenario missing. Be sure to ask questions other than read the letter. There is one other possibility, it could be a scam of some sort from someone other than their bank or someone posing as the bank, verify the phone number with the actual mortgage servicer’s number listed online or on the bill. There are outfits fleecing people right now and there have always been mortgage companies marketing to get people out of good loans into bad ones, countrywide was notorious for this, marketing to their own clients.[/quote]

tg,

Thanks for your reply and clarification. I too thought ‘why would they do this, this makes no logical sense at all’, which is why I brought the question here to solicit answers from people whose opinion I respect on the subject.

Speaking of, I am interested in the criteria you are using for your Temecula house hunt. As you may remember, I’m renting in VR as this is shaking out and may end up staying in Temecula depending on a few factors. You have some specific things you are looking for, one of which is orientation to the sun which is something I had not even thought of. Would you mind sharing some of this information with me so I know what to look for and what to avoid? If so, my email is svtdriver(at)gmail.

thanks

[djc]

[quote=temeculaguy]djc, I wasn’t trying to be cynical, just looking at it logically and asking myself the question, “why would a bank who is getting all of their money every month and on time, suddenly ask permission to lose money?” Even when people are in distress they don’t get deals like that, why solicit reworks from your performing loans if you are the bank?

Taking the “no free lunch approach” I assume there is a catch or a part of the scenario missing. Be sure to ask questions other than read the letter. There is one other possibility, it could be a scam of some sort from someone other than their bank or someone posing as the bank, verify the phone number with the actual mortgage servicer’s number listed online or on the bill. There are outfits fleecing people right now and there have always been mortgage companies marketing to get people out of good loans into bad ones, countrywide was notorious for this, marketing to their own clients.[/quote]

tg,

Thanks for your reply and clarification. I too thought ‘why would they do this, this makes no logical sense at all’, which is why I brought the question here to solicit answers from people whose opinion I respect on the subject.

Speaking of, I am interested in the criteria you are using for your Temecula house hunt. As you may remember, I’m renting in VR as this is shaking out and may end up staying in Temecula depending on a few factors. You have some specific things you are looking for, one of which is orientation to the sun which is something I had not even thought of. Would you mind sharing some of this information with me so I know what to look for and what to avoid? If so, my email is svtdriver(at)gmail.

thanks

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