Why not fake default to get a lower rate

[patientrenter]

I heard there were services that provided you with W-2s etc to “help you out”. Paulson and Bair and others have made it clear they really, really, don’t want the loan servicers to go through the borrowers one by one and actually discover and weed out the ones who committed fraud, or can afford to pay. If Paulson and Bair and a lot of other people in charge of setting and enforcing the rules are showing near-desperation in their efforts to ensure lots and lots of voters will get nice deals in workouts, I don’t think the servicers will be allowed to get too fussy. We’ll see.

Patient renter in OC

[SD Realtor]

Not sure how they will handle it pr. Still though, it seems logical that pushing them through the mill one by one with scrutiny is an absolute must. Pushing them through in a boiler room manner like you are implying is what got them in trouble in the first place. It would seem to me that allowing loans to be rewritten (which translates to a hit to the return for the investors) would imply that the investors would demand that in exchange for giving up that return, that a comprehensive wunderwriting process is completed for those same rewritten loans. Just my guess…

The loan workout package is pretty much identical to the short sale package. When my most recent clients tried to get a loan workout done, and the lender in the end refused to rewrite the loan, they did not need to resubmit a short sale package because the entire file was simply forwarded to the asset manager.

SD Realtor

[SD Realtor]

Not sure how they will handle it pr. Still though, it seems logical that pushing them through the mill one by one with scrutiny is an absolute must. Pushing them through in a boiler room manner like you are implying is what got them in trouble in the first place. It would seem to me that allowing loans to be rewritten (which translates to a hit to the return for the investors) would imply that the investors would demand that in exchange for giving up that return, that a comprehensive wunderwriting process is completed for those same rewritten loans. Just my guess…

The loan workout package is pretty much identical to the short sale package. When my most recent clients tried to get a loan workout done, and the lender in the end refused to rewrite the loan, they did not need to resubmit a short sale package because the entire file was simply forwarded to the asset manager.

SD Realtor

[SD Realtor]

Not sure how they will handle it pr. Still though, it seems logical that pushing them through the mill one by one with scrutiny is an absolute must. Pushing them through in a boiler room manner like you are implying is what got them in trouble in the first place. It would seem to me that allowing loans to be rewritten (which translates to a hit to the return for the investors) would imply that the investors would demand that in exchange for giving up that return, that a comprehensive wunderwriting process is completed for those same rewritten loans. Just my guess…

The loan workout package is pretty much identical to the short sale package. When my most recent clients tried to get a loan workout done, and the lender in the end refused to rewrite the loan, they did not need to resubmit a short sale package because the entire file was simply forwarded to the asset manager.

SD Realtor

[SD Realtor]

Not sure how they will handle it pr. Still though, it seems logical that pushing them through the mill one by one with scrutiny is an absolute must. Pushing them through in a boiler room manner like you are implying is what got them in trouble in the first place. It would seem to me that allowing loans to be rewritten (which translates to a hit to the return for the investors) would imply that the investors would demand that in exchange for giving up that return, that a comprehensive wunderwriting process is completed for those same rewritten loans. Just my guess…

The loan workout package is pretty much identical to the short sale package. When my most recent clients tried to get a loan workout done, and the lender in the end refused to rewrite the loan, they did not need to resubmit a short sale package because the entire file was simply forwarded to the asset manager.

SD Realtor

[SD Realtor]

Not sure how they will handle it pr. Still though, it seems logical that pushing them through the mill one by one with scrutiny is an absolute must. Pushing them through in a boiler room manner like you are implying is what got them in trouble in the first place. It would seem to me that allowing loans to be rewritten (which translates to a hit to the return for the investors) would imply that the investors would demand that in exchange for giving up that return, that a comprehensive wunderwriting process is completed for those same rewritten loans. Just my guess…

The loan workout package is pretty much identical to the short sale package. When my most recent clients tried to get a loan workout done, and the lender in the end refused to rewrite the loan, they did not need to resubmit a short sale package because the entire file was simply forwarded to the asset manager.

SD Realtor

[robyns_song]

It entirely depends on the loan servicer, but from my experience, the practice has always been to go through each borrower and examine their financials like already described.

No doubt that some people “slip through the cracks” but it’s more common for loans to just not get re-worked when there’s a shortage of staff. Successful loan servicing companies are beefing up their staff on loan work-outs to satisfy demand. Remember, the bank’s bottom line is $. Taking a shortage unnecessarily on someone who can make the payments hurts them as much as making a forbearance agreement with someone who still won’t be able to pay.

[robyns_song]

It entirely depends on the loan servicer, but from my experience, the practice has always been to go through each borrower and examine their financials like already described.

No doubt that some people “slip through the cracks” but it’s more common for loans to just not get re-worked when there’s a shortage of staff. Successful loan servicing companies are beefing up their staff on loan work-outs to satisfy demand. Remember, the bank’s bottom line is $. Taking a shortage unnecessarily on someone who can make the payments hurts them as much as making a forbearance agreement with someone who still won’t be able to pay.

[robyns_song]

It entirely depends on the loan servicer, but from my experience, the practice has always been to go through each borrower and examine their financials like already described.

No doubt that some people “slip through the cracks” but it’s more common for loans to just not get re-worked when there’s a shortage of staff. Successful loan servicing companies are beefing up their staff on loan work-outs to satisfy demand. Remember, the bank’s bottom line is $. Taking a shortage unnecessarily on someone who can make the payments hurts them as much as making a forbearance agreement with someone who still won’t be able to pay.

[robyns_song]

It entirely depends on the loan servicer, but from my experience, the practice has always been to go through each borrower and examine their financials like already described.

No doubt that some people “slip through the cracks” but it’s more common for loans to just not get re-worked when there’s a shortage of staff. Successful loan servicing companies are beefing up their staff on loan work-outs to satisfy demand. Remember, the bank’s bottom line is $. Taking a shortage unnecessarily on someone who can make the payments hurts them as much as making a forbearance agreement with someone who still won’t be able to pay.

[robyns_song]

It entirely depends on the loan servicer, but from my experience, the practice has always been to go through each borrower and examine their financials like already described.

No doubt that some people “slip through the cracks” but it’s more common for loans to just not get re-worked when there’s a shortage of staff. Successful loan servicing companies are beefing up their staff on loan work-outs to satisfy demand. Remember, the bank’s bottom line is $. Taking a shortage unnecessarily on someone who can make the payments hurts them as much as making a forbearance agreement with someone who still won’t be able to pay.

[DaCounselor]

Ditto what SDR said. You are not likely to get a loan mod at this time without full documentation, so it will be difficult if not impossible to truly “fake out” the servicer/lender.

That being said, it is conceivable that we may see some changes in the future mod protocol if enough borrowers with ability decide to play chicken with their servicer/lender. As an example, consider a borrower who financed 100% of his $800K home, the home comps at $560K, and he has the ability to continue servicing his $800K mortgage. The borrower gives the servicer/lender an option – either lock me into a low fixed rate and/or write down my loan balance to the comp level, or I will go into default. What will the servicer/lender do if this type of proposition becomes commonplace? I submit that it very well may be in the financial interest of the lender to capitulate as opposed to taking on an REO.

Regarding 80/20 deals, there has already been cyber-chatter regarding those with ability to pay playing chicken with the piggyback lender by simply stopping payments and forcing the lender to react. If the piggyback lender has essentially an unsecured loan due to reduction of home value, why would they foreclose? The implication is that the lender will accept pennies on the dollar in a short-pay deal just to get something. Again, the pre-requisite is that the borrower is geared-up for a game of chicken, is prepared to go into default, and is even prepared to go into default on their first mortgage to create the threat of a complete wipe-out of the piggyback loan.

In the first example above, it will certainly require financial disclosures as the lender needs to confirm ability to pay. In the 80/20 situation, there is arguably no need for financial disclosure, much as the lender would like it, because the proposition is take it or leave it regardless of ability.

I expect many future examples regarding the intracacies of negotiations with servicers/lenders in this regard. We are already seeing templates for how to address particular situations and more of the same to come.

[DaCounselor]

Ditto what SDR said. You are not likely to get a loan mod at this time without full documentation, so it will be difficult if not impossible to truly “fake out” the servicer/lender.

That being said, it is conceivable that we may see some changes in the future mod protocol if enough borrowers with ability decide to play chicken with their servicer/lender. As an example, consider a borrower who financed 100% of his $800K home, the home comps at $560K, and he has the ability to continue servicing his $800K mortgage. The borrower gives the servicer/lender an option – either lock me into a low fixed rate and/or write down my loan balance to the comp level, or I will go into default. What will the servicer/lender do if this type of proposition becomes commonplace? I submit that it very well may be in the financial interest of the lender to capitulate as opposed to taking on an REO.

Regarding 80/20 deals, there has already been cyber-chatter regarding those with ability to pay playing chicken with the piggyback lender by simply stopping payments and forcing the lender to react. If the piggyback lender has essentially an unsecured loan due to reduction of home value, why would they foreclose? The implication is that the lender will accept pennies on the dollar in a short-pay deal just to get something. Again, the pre-requisite is that the borrower is geared-up for a game of chicken, is prepared to go into default, and is even prepared to go into default on their first mortgage to create the threat of a complete wipe-out of the piggyback loan.

In the first example above, it will certainly require financial disclosures as the lender needs to confirm ability to pay. In the 80/20 situation, there is arguably no need for financial disclosure, much as the lender would like it, because the proposition is take it or leave it regardless of ability.

I expect many future examples regarding the intracacies of negotiations with servicers/lenders in this regard. We are already seeing templates for how to address particular situations and more of the same to come.

[DaCounselor]

Ditto what SDR said. You are not likely to get a loan mod at this time without full documentation, so it will be difficult if not impossible to truly “fake out” the servicer/lender.

That being said, it is conceivable that we may see some changes in the future mod protocol if enough borrowers with ability decide to play chicken with their servicer/lender. As an example, consider a borrower who financed 100% of his $800K home, the home comps at $560K, and he has the ability to continue servicing his $800K mortgage. The borrower gives the servicer/lender an option – either lock me into a low fixed rate and/or write down my loan balance to the comp level, or I will go into default. What will the servicer/lender do if this type of proposition becomes commonplace? I submit that it very well may be in the financial interest of the lender to capitulate as opposed to taking on an REO.

Regarding 80/20 deals, there has already been cyber-chatter regarding those with ability to pay playing chicken with the piggyback lender by simply stopping payments and forcing the lender to react. If the piggyback lender has essentially an unsecured loan due to reduction of home value, why would they foreclose? The implication is that the lender will accept pennies on the dollar in a short-pay deal just to get something. Again, the pre-requisite is that the borrower is geared-up for a game of chicken, is prepared to go into default, and is even prepared to go into default on their first mortgage to create the threat of a complete wipe-out of the piggyback loan.

In the first example above, it will certainly require financial disclosures as the lender needs to confirm ability to pay. In the 80/20 situation, there is arguably no need for financial disclosure, much as the lender would like it, because the proposition is take it or leave it regardless of ability.

I expect many future examples regarding the intracacies of negotiations with servicers/lenders in this regard. We are already seeing templates for how to address particular situations and more of the same to come.

[DaCounselor]

Ditto what SDR said. You are not likely to get a loan mod at this time without full documentation, so it will be difficult if not impossible to truly “fake out” the servicer/lender.

That being said, it is conceivable that we may see some changes in the future mod protocol if enough borrowers with ability decide to play chicken with their servicer/lender. As an example, consider a borrower who financed 100% of his $800K home, the home comps at $560K, and he has the ability to continue servicing his $800K mortgage. The borrower gives the servicer/lender an option – either lock me into a low fixed rate and/or write down my loan balance to the comp level, or I will go into default. What will the servicer/lender do if this type of proposition becomes commonplace? I submit that it very well may be in the financial interest of the lender to capitulate as opposed to taking on an REO.

Regarding 80/20 deals, there has already been cyber-chatter regarding those with ability to pay playing chicken with the piggyback lender by simply stopping payments and forcing the lender to react. If the piggyback lender has essentially an unsecured loan due to reduction of home value, why would they foreclose? The implication is that the lender will accept pennies on the dollar in a short-pay deal just to get something. Again, the pre-requisite is that the borrower is geared-up for a game of chicken, is prepared to go into default, and is even prepared to go into default on their first mortgage to create the threat of a complete wipe-out of the piggyback loan.

In the first example above, it will certainly require financial disclosures as the lender needs to confirm ability to pay. In the 80/20 situation, there is arguably no need for financial disclosure, much as the lender would like it, because the proposition is take it or leave it regardless of ability.

I expect many future examples regarding the intracacies of negotiations with servicers/lenders in this regard. We are already seeing templates for how to address particular situations and more of the same to come.

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