I need a favor from all of my mortgage broker and home owner friends out there. I learn a lot from all of you in all of your emails and through the comments section of this blog and appreciate it very much. At present, I am doing deep additional research on mortgage modifications and need your input. I am working on a solution that may make this process very inexpensive on both the home owner and the bank.
As you know, I am a big proponent of mortgage modifications done the right way. I have swung completely over to this side of the fence as regulators, law makers and banks have rolled out their harmful, boiler-plate loan modification initiatives that leave many underwater, over-leveraged renters for life.
It is obvious that these loan modification plans have been born as a result of panic and the need to protect the bank’s balance sheets rather than doing what is beneficial for the home owner and broader housing market. Fannie/Freddie and FDIC ‘mod in a box’ examples below.
- Fannie/Freddie – Come Get Your Loan Mod & Pay For Life (81)
Posted on December 17, 2008 1:52 PM
- Mr Mortgage: Actual IndyMac (Exotic) Loan Modification (63)
Posted on December 3, 2008 2:13 PM
A mortgage mod done right is a ‘mortgage banking model’ mod where the borrower is fully re-underwritten using present income and debt levels, prudent 28/36 debt-to-income ratios and current market rates — similar to a cram-down.
This immediately de-levers the home owner enabling them to freely sell, refi, save money, shop etc. Typically a principal balance reduction is needed to bring these home owners in line, but it is the only permanent solution. It is also the only solution that can prevent the broader housing market from being a dead asset class with zombie homeowners for two decades.
- Mr Mortgage: My Case FOR Mortgage Principal Reductions (124)
Posted on December 14, 2008 1:49 PM
Given the push by regulators, law makers and banks into ‘modifications in a box’, I now have my doubts that private mortgage modification firms will have the types of successes we saw earlier in the year. Most modifications I am being told about coming out of loan mod firms around the nation are identical to the FDIC and Fannie/Freddie stories above.
These I do not endorse in many cases – specifically if they do nothing more than offer a term teaser-rate, extend the term or defer interest or principal. These do nothing more than kick the can down the road and in the case of large deferred interest or principal balances make the home owner a trapped, underwater, over-leveraged renter for years, if not life.
If the new style initiatives are widely accepted by lawmakers, banks and regulators, it is conceivable that many home owners will be able to do these on their own — rather than pay a loan mod or legal firm if they chose to go with a mod and not just walk away.
I would like to know what all of you have done or are doing with respect to loan mods. I would appreciate it if you were to write in to MrMortgageTruth@gmail.com or post to the comments section below your past and present experiences.
Specifically I would like to know:
1) Brokers - are you doing loan mods in-house or through a specialized firm?
- a) if outsourced, is it an attorney based or a mortgage banking model? Which firm?
- b) Approx volume & pull-through rates?
- c) are you and the home owners happy with the results?
- d) what could be done better?
- e) Friends or family experiences?
2) Home owners – have you done a loan mod in the past or are you currently in the process?
- a) If yes, with whom?
- b) Please share your experience, good or bad.
- c) Do you feel that if equipped with the a detailed break down of your personal situation and a variety of possible mortgage mod alternatives, that you could do this on your own?
- d) Friends or family experiences?
Remember, if you feel the information is sensitive, please email me directly at MrMortgageTruth@gmail.com
In addition to sharing my research results with you as always, I hope to provide a list in your state of legitimate mortgage modification firms that have a proven track record of positive results when doing loan mods the right way.
Thank You Very Much