WARNING! ABOUT bank mods and ESPECIALLY PRINCIPAL REDUCTIONS!!

[DeadManCrawling]

I have not posted much for the last couple years, but this is important.

Chase, BoA, Citi, and others are now actually doing principal reductions, writing down your mortgage obligation to market value. This is a VERY new move and bears much scrutiny.

The story I read, which I will try to link, involved a Miami woman who had her Chase mortgage reduced from 300k to the market value of 150k or so. Sounds like a dream come true right?

Maybe not.

Her mortgage was likely one that had been securitized and thus possibly had a clouded title through the mess that is MERS. She might have been able to fight and have the WHOLE mortgage thrown out. THat is another story, bigger than I have time to post, and has its own problems, but it is worth checking out.

Also, she now could receive a 1099a or 1099c at the end of the year and the IRS will expect her to pay regular income tax on this 150k windfall.

In addition, the modification of the mortgage and the principal reduction MIGHT even clear the title and remove any legal action she might have pursued against Chase or any other lender involved.

These are all areas of the law that are vague and we are only beginning to see them tested in courts.

Moral if there is one: Be wary of banks claiming to be doing you a "favor", even if that favor looks like it reduces your mortgage by 50 percent.

And, remember, this woman was current on her mortgage. Chase had probably long ago received the original principal back because of the way amortization schedules screw the borrower.

http://www.zerohedge.com/article/banks-commence-wholesale-unsolicited-mortgage-forgiveness

http://www.nytimes.com/2011/07/03/business/03loans.html?_r=2&hp

[tobee43]

wow dmw....it was a confusing read for me. it seems likes it's only applicable to those with those ARM's and the banks were just bringing down the mortgage amounts to match the property values??

no fair is right tho, we had Chase and no help whatsoever. i know when we were working with Chase to modify one hand of Chase didn't know what the other was doing. first thing you're told is YOU must be behind in your payment 3 months before they would consider a loan mod. i mean, we didn't wake up one morning thinking today we will no longer pay our mortgage. Chase had set up these satellite offices through out our state and our closest one was over 2 hours from where we lived. i didn't want to just be a piece of paper and was trying so hard to save our home, so we went in face to face and was working with a special hired loan officer for the HAMP program. i brought in every single piece of paper required and personally handed it over, so there no paper mix up in our situation, no miscommunication, by us to them.

i began to get nervous not hearing back from them and i kept getting collection calls so i begin to pay again! 18 months into my loan mod, i'm still behind on the loan, but ON purpose ;because we were told our application would be booted out of the loan mod system! then one day 18 months later, still no word from the loan mod officer, calling daily, what does Chase do???? sends us a summons of their intent to foreclose and we have 30 days to answer such summons or they will proceed with the foreclosure process. great. i called the loan mod officer from CHASE and he says CHASE can't do that while we are in loan mod...REALLY? one hand did NOT know what the other was doing when HAMP first came out and today i believe it still the same way. the loan officer insisted CHASE can't do that....well, then what is in my hands? prior to me calling Chase, i called our atty and asked what we should do. there was one important point of contention to deal with for us, during that 18 month period we had now BOTH lost our jobs. so our ONLY hope was re- employment and a reduction on our mortgage. the atty said are you going to keep the house at this point. we couldn't, so the atty advised us to lock it and leave it.


i couldn't exactly do that, so i called the CHASE loan officer and told him we were leaving, he was screaming at me ..." i have tried so hard to get your loan mod done and now you're leaving?" i'm like what do you want us to do? i told him our atty said lock it and leave it, but i felt since i had been working with the CHASE guy for over 18 months, i should at least on a moral basis, let them know the house was being vacated. once again the CHASE guy said don't do it but then he still had no answers to our loan mod...

shoot had i known if i had an ARM i would have gotten our principle lowered like that, i would have refi'ed years earlier. darn! no, not really, we have no regrets that we left that house. it was time, not one that we exactly chose, but it all worked out. i don't know about the 1099A as i would think since the bank inidicated the contract that Ms. G. would have a good argument with the IRS...although, you're right...i don't which 1099 it would be because it's really a "gift". interesting.

everyone needs to be so careful when approaching and getting involved with any loan mod.

thanks for all the GREAT info!!! enjoyed it!

[OweTooMuch]

Hi DeadManWalking - Nice to see you posting again. Keep it up!