Is anyone having success with home loan modifications?

[onthebrink]

I have a friend who says he has a strong chance of getting his home loan modified based on a reduction of principle to current market rates. Hasn't happened yet, so remains to be seen but makes me hopeful that I might be able to do the same given that we live in the same neighborhood. He stopped paying his mortgage about nine months ago and offered to turn in his house keys and do a deed in lieu of foreclosure. They originally offered him a lower rate but he turned it down because it didn't make financial sense to stay in a home that was so far underwater.

I have, however, also heard of many other cases (in fact, the majority, from what I can tell) where the banks won't budge. I have a friend who who works with a non-profit dealing with lower-income housing, who seems to be very knowledgeable about the inner-workings of the banks. He told me that the banks have very little incentive to do loan modifications because even if the home is foreclosed, the FDIC guarantees the banks up to 90% of the property value.

I have been advised to stop paying the mortgage because this is the only way to get the mortgage companies attention.I too am willing to walk away if they can't reduce the principle. I am at this point looking at this as strictly a business decision. In my neighborhood, which is one of the nicer neighborhoods in the city I live, there are 35 homes listed as foreclosures in our zip code alone - who knows how many are in default?

Has anyone had success with home loan modifications? Specifically, with principle reductions? BTW, Chase has our first mortgage.

Thank you.

[momofthree]

Check out http://www.loansafe.org/forum/loan-modification/ It's a forum dedicated to loan mods. You'll find that principle reductions simply aren't happening. They may forebear principle, lower interest rates, or extend the term, but actual principle forgiveness is virtually unheard of. Doesn't mean it can't happen, just that it isn't likely.

We have a permanent HAMP mod, and trying to get that was a longer and more complex process than bankruptcy!

I wish you the best of luck!

[onthebrink]

Thank you, MONo3! Looks like the loan mod forum has a wealth of information - just like this one. I am so grateful for these forums. Being a part of this forum has taught me a lot and helped put things in perspective.

[espo1357]

I am under by 100k plus, and waiting for the hamp.

if then give out a 2 percent for five years, and then keep it under 5 percent for the life, etc. in short, if they give me a great deal on the interest rate, then wouldn't it make sense to stay in the home...

especailly since I would not have to plop 20-50k down for another home, and have to pay an interest rate closer to 6 percent?

please note that I am very content with my property (great neighborhood, etc). if the property was crap, then I would easily walk from a home that is under 100k...

Its getting late, and sorry for the ramblin....but, this is a good topic, and I would appreciate feedback.

[blockhead]

According to a big article in this weekend's NY Times, the loan mods don't work too well.
To be really effective they should write down principal outstanding but they avoid that like the plague

[DeadManCrawling]

When a bank lowers your principal, essentially bailing you and your house out, it is called moral hazard. They, so far, rarely do this. After all, then everyone will want it.

When we bail banks out, it is called wise planning.

There is very little chance they can continue on this path, though, and I suspect principal write-downs will become common over the next couple years. Probably back-stopped by the government, and us as taxpayers. Two administrations have shown an utter unwillingness to let large financial institutions fail, for the most part.

The stakes are higher than they were even in 08 and I can see write-downs being the next big thing. How to prevent this incredible "moral hazard" of homeowners ALL wanting the same deal, which would hurt the banks bottom lines terribly? Easy. Backdate it. So, if you were in documented financial trouble as of, say, December 2009, you may qualify. Everyone else, who HAS been getting by, tough as it might have been, too bad. Understand, they will say, it is for our good as a whole that some of the nation must pay.

It is always for your own good.

I don't think the cards can be held up much longer, but a large-scale write-down policy may become necessary, and could hold this mess we call an economy together for another year or two.

But so far, it is not a common practice.

[DeadManCrawling]

I'd also like to say:

We were offered a principal write-down of 70k on our house last November. We never received the paperwork though, and filed in December.

A real estate agent, hired by BoA, from a mod company called Platinum Solutions, actually showed up at our house. We spoke with her, she called BoA, and within ten minutes, were told that a 70k principal reduction and an interest rate of 2% would be our mod. The papers, supposedly to arrive within 30 days, never showed up.

But this at least shows that BoA was or is considering such things on a wider basis. How wide? No idea. Maybe just for certain areas, incomes, or percentage underwater. Doubtful anyone will ever make sense of it.