Mortgage Note Modification
Not the Refinance
It Should Be
Modification of a Note that is tied to a mortgage is a viable solution for many people who find themselves in struggles to make current mortgage payments. You are not precluded necessarily, if you are not behind on payments.
Reasons for modification?
Adjustible interest rates are maturing
Income has been cut.
Appraised value is much less than Loan Value.
Banks want to collect interest.
Owners want adjustments to payments.
Banks do not want to shoulder the losses but they have little choice in today's economy. The losses are being suffered by both lender and borrower. One loss is like an economic hand grenade. Unfortunately, These grenades are going off at such a rate that everyone feels it.
The neighbors see their house values go down. The lender has to lose tens even hundreds of thousands of dollars and can not reinvest the interest that is received into other mortgages or interest bearing activities because of the fact they must cover the principle somehow. Bail out seems to be a quick solution but will ultimately hurt you and me. It seems inevitable.
Borrower's are hindered from buying cheaper homes because their credit is suddenly in need of repair. Not to mention a potential IRS problem if the IRS considers the difference in the original balance and the modified note a "debt forgiveness" then this could possibly end up being interpreted as income.
This currently happens with credit cards that are "settled", Many consultants believe that the IRS will be required to soften its position in this with regards to housing. Do not rely on it.
Our radar is watching for any signs of this being an issue.
Insurance people lose their residual from Homeowner's insurance.
The city loses revenue from not being able to bill for water, sewer and trash. Impact fees disappear because there is no building.
People move out because there is no job creation or capital to build and retrieve profits.
All manufacturers lower their prices, services discount their fees just to stay in the game of free enterprise. Some find
ways to gouge you because of your desperate need for help that you can't do by yourself without sacrificing other areas of work and time.
Too many are in a state of slow motion panic. Modification is certainly a method to save your home and remain in it but all too often people are not really qualified to pay back the loan even after modification. This is making the process harder to qualify.
When you modify you are changing one or more different terms you originally agreed too. One of the greatest changes one hopes for is the Reduction of Principle. Another is converting to a lower fixed rate. The other possible change is getting a longer term to pay the note back over 30, 40, or even 50 years.
The reality of these "fixes" is that the banks do not have much incentive to do them and they are overwhelmed with their loss mitigation demand by the current marketplace.
So time is not on the modifying borrowers side. Many start the process and it looks great but the lender can not handle the case in a reasonable amount of time.
Then often, a short sale is attempted but this can be worse than modifying. It is all timing.
Some banks and lenders purposely stall the process. Others are buried in a sea of paper, and are confused by changing bank policy and federal guidelines. Federal regualators are trying to save face by watching over the shoulder of your bankers and mortgage lenders.
If they do not document everything that they do the regulator can and will fine the lender.
So it is painful to be the bank or lender in today's current economy.
Does any of this mean anything to you? Well, a little or a lot, it does. You can fill in the scenario here with your own reasoning with this information about how bad it is out there and can be for everyone. We are all connected in this. This is not just an event that is happening to you.
This event that you are dealing with permeates the lives of thousands in Arizona. Especially, those who are waiting in line after you. Multiply that by hundreds of thousands accross the country.
Doing a modification will stress you to some degree because of these hurdles mentioned and others that may be unseen.
So why the lecture? You will need to muster as much patience and cool as you are capable of. The worst that could happen is you do not get approved and you must have plan B in place to deal with a possible need to keep paying the unmodified mortgage or work through a short sale or as a last resort allowing the property to go into foreclosure.
The federal Government is considering giving power to federal bankruptcy judges to force a lender to modify a note and Deed of Trust. If this happens the banks will be further out of control.
The lending industry does not like this idea but it would be done in the name of protection and for the sake of "the consumer". This action is deplorable in the eyes of free enterprise and capitalism. It is another step toward the nationalization of American Banks. It leaves the door open for corruption. We have all been made aware of these issues since the full disclosures against Fannie Mae and Freddie Mac.
This bankruptcy modification would be a very sweet deal for all if it was only allowed for the next three to five years while we are all in recovery and licking our wounds or lammenting the amputations LOL. ... Not really very funny right now.
This is a very serious problem. Conservation of our assets and H0PE is all we can do to engender a new and more safe economic environment.
It is good to Laugh out loud though. It restores vigor and resolve to keep things in perspective.
In ten years when we look back at all of this we will probably realize it was like a huge dust devil type storm. It blocked our view, we had to have our heads down for awhile but we always looked for the dissipation. Its coming.