“Renegotiate” Your Loan – banks giving in to buyers in distress

[23109VC]

I have an acqaintance who is in the real estate business. He did loans as a broker. Now that the market for that is dead, he has shifted to a new “product”. He renegotiates loans for people.

I ended up bumping into him, and he was telling me about his new business. It was weird, because I had posted a question on here a while back that touched on the very thing he was doing.

He basically said that he works with distressed home owners. He finds the people who have 100% financing, or AMRS that have reset, who no longer can keep their home, or who don’t want to keep their home because of hte high payments/low equity or NEGATIVE equity.

he then works with their lenders to renegotiate for better terms. He said that the banks are literally bending over backward now to do virtually anything to keep a person from walking. He said that he has had banks agree to forgive late payments, renegotiate the actual percentage rate, willingly convert ARMS into fixed rates, even forgive second mortages!!

yes. he stated that he has had people who had a first and second, teh house was financed at 100%, the house was now worth MUCH less (this is Temecula/Murrieta) and the home owner (and bank if they foreclose) is sitting on a house with say 100-150k in negative equity. say the home has a $80-100k second. the bank is agreeing to FORGIVE it. just wipe it away and say “the mortgage you owed us that WAS $500k…now we’ll just say that you only owe us $400k.”

they write up up, and the payments, interest rates, loan balances all reflect the “new” terms.

He explained that because the houses are worth so little, and the housing market is so slow that the banks will do anythign to keep from getting the house back. essentially, if the bank believes the owner can’t afford to stay, or would simply walk, and they will be forced to go through teh hassle/expense of foreclosing..then be faced with a house that won’t sell..that has no one in it, producing no income, and if/when it ever DID sell, they would lost $150-200k on the home, plus costs….. and the home owner is willing to stay but the bank has to eat say 50-100k in loan balance…or payments, etc…

they see the lesser of two evils and take it.

it almost seems like extortion…but in a way, it makes perfect sense. i’m the bank…my customer says I don’t want my house anymore. you can have it back. the bank knows it’s worth $150k less than the balance, so foreclosing on it is not going to get them anythign…it’s all a loss, the only question is how much. the buyer says, “but i’ll stay/keep the house if you reduce the loan balance by $50k, or if you reduce my interest rate to 5%, or if you do X, Y, Z, etc… and the bank does it…to keep the mney coming in on the loan.

in the end the banks investors are going to be left holding the bag..but for some home onwers this may be a way “out” of the mess they now find themselves in.

i have to admit, even though I’m comfortable with my home and payment… if I were to wind up horrifically upside down, and I knew that I coudl call my bank and essentially “have them overa barrel” and negotiate newer more attractive terms, that put me into a position that was more favorable… where is the downside?

are these “forgiven” balances taxable?

anyone else seen/heard this happpening? the guy I talked to implied that 6 months ago the banks were not very willing to do this and in the last 3 months he’s noticed a shift in attitudes and they are willing to do it.

[Raybyrnes]

Funny, I ahve heard of similiar stories with respect to credit card companies. Basically go delinquent threaten banruptcy and they forgive 60 % of the debt. You go through an workout program and get a hit on your credit but if their are no major purchaes coming up , who cares. Seems a little dodgy too me.

[Raybyrnes]

Funny, I ahve heard of similiar stories with respect to credit card companies. Basically go delinquent threaten banruptcy and they forgive 60 % of the debt. You go through an workout program and get a hit on your credit but if their are no major purchaes coming up , who cares. Seems a little dodgy too me.

[Raybyrnes]

Funny, I ahve heard of similiar stories with respect to credit card companies. Basically go delinquent threaten banruptcy and they forgive 60 % of the debt. You go through an workout program and get a hit on your credit but if their are no major purchaes coming up , who cares. Seems a little dodgy too me.

[Raybyrnes]

Funny, I ahve heard of similiar stories with respect to credit card companies. Basically go delinquent threaten banruptcy and they forgive 60 % of the debt. You go through an workout program and get a hit on your credit but if their are no major purchaes coming up , who cares. Seems a little dodgy too me.

[Raybyrnes]

Funny, I ahve heard of similiar stories with respect to credit card companies. Basically go delinquent threaten banruptcy and they forgive 60 % of the debt. You go through an workout program and get a hit on your credit but if their are no major purchaes coming up , who cares. Seems a little dodgy too me.

[mrwrong]

It doesn’t pay to be fiscally responsible in this country.

Mr. Wrong

[mrwrong]

It doesn’t pay to be fiscally responsible in this country.

Mr. Wrong

[mrwrong]

It doesn’t pay to be fiscally responsible in this country.

Mr. Wrong

[mrwrong]

It doesn’t pay to be fiscally responsible in this country.

Mr. Wrong

[mrwrong]

It doesn’t pay to be fiscally responsible in this country.

Mr. Wrong

[XBoxBoy]

You wrote: in the end the banks investors are going to be left holding the bag.

Exactly. And this is why we are seeing that although the rates on the 10yr are going down, mortgage rates haven’t gone down. All these workouts, bailouts and other programs in the end will make buying mortgages less attractive. And that’s why in the end they won’t stop the housing decline. (If investors don’t buy mortgages then the price of mortgages goes up. If the price of mortgages goes up, then the housing decline accelerates.)

XBoxBoy

[XBoxBoy]

You wrote: in the end the banks investors are going to be left holding the bag.

Exactly. And this is why we are seeing that although the rates on the 10yr are going down, mortgage rates haven’t gone down. All these workouts, bailouts and other programs in the end will make buying mortgages less attractive. And that’s why in the end they won’t stop the housing decline. (If investors don’t buy mortgages then the price of mortgages goes up. If the price of mortgages goes up, then the housing decline accelerates.)

XBoxBoy

[XBoxBoy]

You wrote: in the end the banks investors are going to be left holding the bag.

Exactly. And this is why we are seeing that although the rates on the 10yr are going down, mortgage rates haven’t gone down. All these workouts, bailouts and other programs in the end will make buying mortgages less attractive. And that’s why in the end they won’t stop the housing decline. (If investors don’t buy mortgages then the price of mortgages goes up. If the price of mortgages goes up, then the housing decline accelerates.)

XBoxBoy

[XBoxBoy]

You wrote: in the end the banks investors are going to be left holding the bag.

Exactly. And this is why we are seeing that although the rates on the 10yr are going down, mortgage rates haven’t gone down. All these workouts, bailouts and other programs in the end will make buying mortgages less attractive. And that’s why in the end they won’t stop the housing decline. (If investors don’t buy mortgages then the price of mortgages goes up. If the price of mortgages goes up, then the housing decline accelerates.)

XBoxBoy

[Author]

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