The Real Estate Mango

Archive for December, 2009

Loan Modifications Can Have Major Perils….Read small print before signing….

Under the Home Affordable Modification Program called HAMP some very dangerous events can occur.

The banks have the ability to modify a loan with a three month trial period, during which time, the interest rate is adjusted to a low rate and is calculated on a fixed 30 year basis.   So far, so good…..then the banks say if you do well, make all the payments on time during the trial period, they will make the loan permanent.

EXCEPT…when you read the small print, you will find that you have waived important notification rights.  The bank can decide to auction the house during this period without notifying the owner.  This is a major problem in this program!

There have been 759,000 loan modifications begun  and only 31,382 have been converted to permanent new loans.

The homeowners see this loan modification program as a social assistance program.  NOT TRUE!!  The banks see it as a stall until they decide whether it is more profitable for them to sell the house rather than perpetuate the relationship with the current owner. 

Banks see the situation from a different vantage point.  The longer the owner makes a full payment, even if he is in pain, the more time passes until the bank can sell for a higher price in the marketplace when they foreclose.  Banks know that real estate is cyclical.  Prices go up in time.  Owners don’t always have that luxury.  They need help quickly expecially since unemployment changes their ability to pay.

Before you accept loan modification terms, read everything, ask every important question.  Until this program is revisited by the government to correct its’ pitfalls, you have to look out for your own interests.

Please call me anytime for more information.

Is Loan Modification A Myth….Wells Fargo Thinks So

Here is a tale of woe.   The story is true but the names and the city will remain unnamed.

Three years ago, a couple, we will call them, Mr and Mrs. Jones, bought a house, at a modest price, and financed it with 20% down payment.  Both Mr. and Mrs. Jones had jobs and they had no trouble paying the $1100 a month mortgage payment.

In March of 2009, Mr. Jones was laid off.  Mrs. Jones was furloughed from her job as a pilot.  They were expecting their first child.

Mr. Jones called Wells Fargo in April of 2009 to apply for a loan modification that had been written about in about every newspaper in the country.  Banks had received bail out money and the government had instructed them to modify loans to avoid foreclosures.  The people were waiting.

Mr. and Mrs. Jones applied for and received unemployment benefits.  All their information was given to Wells Fargo Bank.  They were told that the bank would be in touch.  After three months passed with no word from the bank, Mr. Jones called to inquire.  He was told that they did not qualify for the first program but that they should submit more information and the bank would see what other program would apply.  They were never told what each program was.  This happened again three months later.

Now, we are nine months down the line.  Mr. Jones called the bank and was told they wanted all the information again since it had become out of date and that they had no idea when they would be hearing from them.

While Mr. and Mrs. Jones are making the payments and are never late, the bank does nothing.  If they stop making the payments the bank will change the interest rate for five months and if they make these payments on time, the bank will consider remodification.  If they don’t modify the loan on a permanent basis, the Jones’ will owe the bank the difference between the original payment and the reduced payment.

THIS DOES NOT HELP PEOPLE!   THIS IS NOT AVOIDING FORECLOSURE!  The  banks must be compelled to comply with the wishes of the U.S. government.   Congress must enforce the conditions under which the banks received bail out money.  The road to hell was paved with good intentions.