Wow, I just became a HAMP statistic?? Now, what about HELOC

[StartinOver]

I'm one of the few. We've been approved for a modification trial period. After two attempts to get a modification which ended in rejection, the third attempt was successful. The first time, we were still current, but the writing was on the wall, so we applied and got rejected because we were not in imminent danger of defaulting.

So, I defaulted. (In between there, having taken a huge cut in pay about 5 months before the first attempt, I lost my job and we failed for the first time to make our mortgage payment.) We made our second attempt while I was still unemployed. But because the extensions on Unemployment were not approved we were rejected because unemployment wouldn't last as long as needed to qualify.

Now, with both of us re-employed, albeit at the lowest wages I can remember for the last 30 years, we were able to get a modification proposal out of them. Our 3 trial payments begin April 1.

There's an odd statement on the letter - it says "If you can't afford the trial payments but want to remain in your home, or you wish to surrender the home, please call us at ..."

What? (I don't have this letter in my hand, I'm away on business, hubs read it to me)... Has anyone else seen this? Does it mean that their might be room to negotiate further? Or do they have a REO rental business now?

We were preparing to file chapter 7, and maybe surrender the house and rushing to do it before a March 7 sheriff sale date. I spoke with the attorney and aside from suggesting that I make sure the foreclosure department knows we have a modification offer to ensure they have cancelled the sale, he's recommending that we move through the entire process with the trial payments and docs signed and all before we file. I don't think we have any reason to be afraid of a chapter 13, as we are well qualified for chapter 7 (and after being told I'm overqualified for jobs, it really rankles to be exactly qualified for... THIS... LOL).

So, we have a mod request in for the HELOC... which hasn't been paid since November.

Value (more or less approx 250K, or maybe less by now)

first mtg approx 220K

HELOC approx 62K

Should I have an appraisal and consider trying to lien strip the 2nd in a 13? Or is this too close a value set to do that with?

[StartinOver]

Anybody have any thoughts on the odd statement in the letter about not affording the trial payments but staying in the house?

Anybody have thoughts or experience regarding how much underwater on the first I'd need to be, in order to be successful stripping the 2nd?

Also, with respect to the HAMP - this letter doesn't include the "fine print" that will be on the final documents. Is it really safe to pay the 3 trial payments and just assume that the final terms of the loan are reasonable? I have no idea at this point, what they did to modify this - shouldn't I know before making these payments? And after we've made them, can they change their minds or present documents with different payments, which I can't afford?

[helpme2010]

When I did the 6 month forbearance plan, they started out with half the regular payments, then after that, the next 6 month period, they raised it $500 a month, then at the end they offered me another 6 month plan which actually went higher than the original loan amount, so I had to go bk. They add all those late fees and all that to the original loan, so you just really get further and further behind. If you can find a higher paying job, then maybe this is fine, otherwise, I think you are just buying more time to stay in your house.

I am attempting another loan mod, post-bk. I am hoping to buy some more time in the house until I find a job so I can rent a new place. I already have come to the conclusion that I will not own this house and did not include the house in chapter 7. So its all about staying until I find a job.

I am guessing they will offer you another forbearance plan, lets say 3 more months at a higher monthly payment.

I was always hoping for a permanent loan mod, but that never happened.

[StartinOver]

I don't think this is a forbearance - it's a trial modification with a payment that is 31% of our current gross income. That might be too high, given some of the student debt we have from husband's attempt at a career change. (30K in student loans for a year of culinary arts program, a number of issues resulted in only completing one year and discovering that he's not up to the physical demands of that job -his feet, legs and back gave him no end of trouble... and it didn't pay well enough, either. He went back into tech, but at the bottom of a new ladder because his tech skills were way behind, having taken that sojourn to the culinary.)

As to finding me a higher paying job, it's not an option at the moment. When I was unemployed and not able to find anything in the field I'd been working in (largely because just applying seems to require a college degree these days and at 50+ I've never finished and can't afford to now), I analyzed what in my life was truly important to me and changed careers to something that will be satisfying in the long term. It has a kind of monastic aspect to the first 3 years, in which low pay and intense on the job training are part of the thing because side by side mentoring is needed. But over the next 3 to 5 years, I expect at least a normal path of reviews, promotions and raises.

I am fully prepared now to walk away from this. Curious about their question if this is too much to afford and you want to stay in the house, still, will call and ask about it, I guess.

So was your mortgage discharged in your bankruptcy?

[ryan]

Your comment about the REO rental business might in fact be true. I have not personally seen it, but have heard from realtor friends about certain lenders in certain markets actually doing this. That is working out an arrangement for rental payments for a time. I would call them and specifically ask them that, don't assume they will bring it up...what do you have to lose?

[helpme2010]

I don't think this is a forbearance - it's a trial modification with a payment that is 31% of our current gross income. That might be too high, given some of the student debt we have from husband's attempt at a career change. (30K in student loans for a year of culinary arts program, a number of issues resulted in only completing one year and discovering that he's not up to the physical demands of that job -his feet, legs and back gave him no end of trouble... and it didn't pay well enough, either. He went back into tech, but at the bottom of a new ladder because his tech skills were way behind, having taken that sojourn to the culinary.)

As to finding me a higher paying job, it's not an option at the moment. When I was unemployed and not able to find anything in the field I'd been working in (largely because just applying seems to require a college degree these days and at 50+ I've never finished and can't afford to now), I analyzed what in my life was truly important to me and changed careers to something that will be satisfying in the long term. It has a kind of monastic aspect to the first 3 years, in which low pay and intense on the job training are part of the thing because side by side mentoring is needed. But over the next 3 to 5 years, I expect at least a normal path of reviews, promotions and raises.

I am fully prepared now to walk away from this. Curious about their question if this is too much to afford and you want to stay in the house, still, will call and ask about it, I guess.

So was your mortgage discharged in your bankruptcy?

Starting over, don't get upset about the degree. Funny thing or really unfunny thing is I had high paying jobs for 20 years without a degree. The last 10 years I have been in and out of work, with zero stability staying with a company (my companies either sold or were too small to afford to invest in my position or keep that position open). So I finally went back to school and finished my degree last year. This helped lead me to BK. I did not include my house in chapter 7, so they have foreclosed on me.

Finding a job is just as hard with the degree as without one. The degree does allow me to get access to more jobs, especially with the modern online applications that will likely kick you out for many positions if you don't have the degree. But still no calls with my fancy degree.

I am trying hard to find a job, then I will let the house go and rent a new place closer to work and family. But I may end up getting evicted from this house before I can find a job and that will make things much more difficult for me, especially in convincing someone to rent me a place without a job and with a bk on my record. Add to that my unemployment extension runs out in a couple months and I am probably at the end of the line because I am a 99er. Not sure if I will get another extension or not.

I can't tell you how much stress this is. I can't believe life can be so cruel to a human being that has worked very hard his entire life and done the right thing. I bought my home when I was very young and I was a hardcore and successful entrepreneur. What the hell happened???

[mom2crazies]

Congratulations. Our modification never worked out...hence, the bankruptcy.

The only thing that I can add is that after listening to Dave Ramsey and Suze Orman over the last several months and now being in FPU, the modifications are not set in stone. This means that they can decide after any so-called "trial period" that you are in fact, not approved (even if you have been making the payments on time) and then they can come back at you wanting the interest, fees, and difference between your mod payment and old payment in addition to your "old" payments, for whatever time the mod was in place, putting you in an even worse situation.

Personally, I will never trust any kind of finance company again. ESPECIALLY, a mortgage company.

[helpme2010]

Congratulations. Our modification never worked out...hence, the bankruptcy.

The only thing that I can add is that after listening to Dave Ramsey and Suze Orman over the last several months and now being in FPU, the modifications are not set in stone. This means that they can decide after any so-called "trial period" that you are in fact, not approved (even if you have been making the payments on time) and then they can come back at you wanting the interest, fees, and difference between your mod payment and old payment in addition to your "old" payments, for whatever time the mod was in place, putting you in an even worse situation.

Personally, I will never trust any kind of finance company again. ESPECIALLY, a mortgage company.

mom2crazies, I agree with your statement. This is why I ask posters when they are doing this, what their intentions are. You will only have to pay a larger lump sum after the trial period ends, which is what happened to me after my loan mods. They kept jacking up the rates and adding to the loan amount. But if your goal is to buy some more time in the home, such as 6 months or a year or so, then this is a great strategy.

Or for someone who may have lost their job, but suddenly got a great new job paying more money than the last job. Then of course you can pay those extra fees and this loan mod helped you during a temporary bad time in your life.

Other than that, you are likely going to be screwed eventually by the loan company.

[Pandora]

Anybody have any thoughts on the odd statement in the letter about not affording the trial payments but staying in the house?

Anybody have thoughts or experience regarding how much underwater on the first I'd need to be, in order to be successful stripping the 2nd?

Also, with respect to the HAMP - this letter doesn't include the "fine print" that will be on the final documents. Is it really safe to pay the 3 trial payments and just assume that the final terms of the loan are reasonable? I have no idea at this point, what they did to modify this - shouldn't I know before making these payments? And after we've made them, can they change their minds or present documents with different payments, which I can't afford?

To answer some of your questions/concerns:

Re: language in HAMP - its standard, and the "bite" is that they'd offer you a forbearance if you wanted to stay in your home due to a temporary reduction in income / bills. Its just standard verbage on the forms.

As to the actual HAMP program:

3 month trial can turn into 12+ months of trail payments; I've yet to see a HAMP trial payment go 3 months (ours was nearly 8 months). Re: the trial payments, you will make those until you're either approved or denied - if you stop, they can (and will) kick you out of the program regardless that HAMP states "only 3 trial payments", so make sure you can make those in full for more than 3 months. The actual terms of your trial should be in the trial paperwork, but it will not have any % numbers or anything else at how they came to the payment. If it's 31% of your income (excluding any PMI you may have), then thats what you pay for now. CAUTION: check your trial paperwork to ensure it is actually a HAMP trial period thats been approved and not something that states "you may qualify for a HAMP trial period...." but we'd like you to make XX payments for 3 months. I've seen both sets of paperwork and other than this one statement, they're identical in every other way.

If Approved for perm. mod:

First, Never assume the final terms will be reasonable (relativity applies as to what is "reasonable") - it's all a benefit to the bank vs. the nhomeowner in the long run. With that being said, if you are offered a permanent modification - the way HAMP works is they first waterfall the rate, if that doesnt work enough they can take a portion of the loan amount and turn it into a balloon payment due at XX timeframe (essentially this creates a "silent" 2nd mortgage, interest free the life of the term); still not enough to get you to 31%? Then they would extend the terms of the note out to a max of 40 years.

if all of the above has been applied yet the lender still cannot make it work - they deny you and proceed with foreclosure. The trick with any HAMP mod is first and foremost, is it more profitable for the lender to foreclose on you vs. modifying. It doesnt matter if you've made the 3 trial payments or not - HAMP has no law requirements to follow; its merely a guideline for lenders that took bail out money. Our trail payment was $25 less than what our current perm. mod was offered to us at, however this year our payment just went up another $38 a month due to escrow shortage. So was this "reasonable"? For us and our income / situation - yes it was, for the entire length of the now 40 year note *cringes*

As to if its affordable to you:

The thing you need to look at is past the 5 year mark when the waterfall rate starts to adjust. It will adjust at years 5, 6, 7 and 8 it will lock into whatever is prime as of the date your perm. mod is approved. Currently the rate is about 5.1% on a 30 year note. Keep in mind that as property values increase/decrease - your payment over the course of your entire HAMP mod will increase / decrease as well due to real estate taxes. If you cannot afford the house long term, then you need to look at the bigger picture, especially if you are already severely upsidedown.

Stripping the 2nd:

In order to strip a 2nd - you must file Ch. 13. You cannot strip a 2nd in a Ch. 7. For giggles, lets say you decided to go with a 13 to strip the 2nd: the value of your home must be less than what is owed to the 1st mortgage lender. So you're saying the value of your home is apprx. $250K, yet you only owe $220K to the 1st; that means you cannot strip the 2nd as there is equity. A certified appraisal (walk-through of property) is the best means to fight for a strip.

make sure you talk with quite a few attorney's before hiring one - and if you do decide to do a 13, make sure the attorney is well versed in 13's and lien stripping.

Good luck to you

[StartinOver]

Pandora,

Thank you for a thorough complete answer. Some of that information is familiar to me, but it's still nice to see it all in one place, where future readers can find it helpful as well.

The paperwork I received is as clear as mud. It sounds as if it's still working on qualifying me, (You are approved to enter into a trial period plan .... This is the first step toward qualifying for more affordable mortgage payments. ... After all trial payments are timely made and you have submitted all the required documents," but we submitted an entire package already and when I called to talk to them today, they said I am qualified and don't need to submit more documents. Another paper in here says something about "when you signed the Trial Plan," and I asked about that as I have not seen nor signed such a document. Was told that the government hasn't changed the text of the letters, so I am approved, and that's why I have trial payment coupons.

Umm... sure... right. I guess I need to talk to a HUD counselor about what I've got here.

The servicer for my first holds my HELOC and they informed me today that I'm approved for a modification and a modification package has been sent to me to sign/notarize and return, for that loan.

As to the values for lien stripping... The real estate market analysis might as well have said "we don't flippin' have any idea, we can't sell anything right now" because they gave a range from $205K - 250K. The 'balance' on the books which the loss miti guy told me was 207K but he said that's definitely wrong because the missed payments and fees, etc are not included.

The long term question for me is more that I have no cash reserves and we're filing BK to get rid of unsecured debt about 35K. That will leave us with a house and the responsibility to maintain it, 11 and 13 year old cars but no cash reserves and no credit for short term use, and a tight cash flow as well.

Well, I have a couple days to THINK about this and choose the sensible path.

[StartinOver]

Further update. The thinking is done... With both of us making the lowest hourly rate we've ever seen since our first jobs, and old cars and no cash reserves, we can't seem to make a budget that works. I made one that comes out to exactly as much going out as coming in, but it's a big fat fictional wish! The reality is that with no cash reserves and no funds going into short term savings, we are one car repair or home repair away from certain disaster every month. In the last 3 months, we have spent twice the monthly allotment on car maintenance and fuel. What on earth would we do if something on the house needed to be repaired.

This has always been more house than we actually needed (3 bedrooms, and we have no children) but there was a time when it was possible to live within our means in this house. Those days are gone.

Even though we haven't filed yet, I am thinking post-bankruptcy, now. My new plan will be to make a budget that puts short-term and retirement savings goals FIRST. We're 41 and 53 and we are way behind schedule on retirement savings because we've been so broke over the last decade. We'll make the rest of our life fit around that, and if it means living in a studio with no amenities, so be it. I am never going to let myself in for this kind of heartbreak again. This is where pride of ownership got me. I spent the last 6 years when the writing was on the wall, being boneheaded and willful about keeping it. We had the opportunity to sell it when the market was still good and we were already struggling a bit. But I was pigheaded and wouldn't let go. I would make such a lousy day-trader, LOL!

[mom2crazies]

Startinover - I suggest reading "Total Money Makeover" by Dave Ramsey. DH and I are using his methods and they have really worked for us. I have been (and am hopefully finishing it up) exactly where you are and have found a lot of good information. We have already begun making much better financial decisions, which means we are much happier people..

[IBroke]

Congratulations. Our modification never worked out...hence, the bankruptcy.

The only thing that I can add is that after listening to Dave Ramsey and Suze Orman over the last several months and now being in FPU, the modifications are not set in stone. This means that they can decide after any so-called "trial period" that you are in fact, not approved (even if you have been making the payments on time) and then they can come back at you wanting the interest, fees, and difference between your mod payment and old payment in addition to your "old" payments, for whatever time the mod was in place, putting you in an even worse situation.

In our case, they tried that AFTER the permanent modification was fully executed (signed by both parties). We took them to court and won.

The trial actually only took 3 months and everything worked out fine until we received a call, cancelling the mod. We said "no way, Jose.."