Advice on Home Loan Modification

[ConfusedinOC]

Wondering what you would do.

Last night I received an offer from Chase through FEDEX to modify my existing loan with a loan amount of $619,000 (Current value is $575,000) and a fixed rate of 4% for 38 years (I can pay it off early) at a payment of $2650. I have tried to modify in the past but was denied. This offer came out of the blue and just requires my signature and no documents to submit (paystubs, budget etc).

My current loan sucks. My loan is currently at 4% and have 26years left with a payment of $3150 but the rate can adjust on a monthly basis. It was as high as 9% in the past but due to the current economy it has gone down to 4%.

Seems like a great deal right? I can lock in the 4% with a payment that is $500 less. The thing is that I have not paid my credit cards ($150,000 debt) since Feb of this year and planned on filing BK Chapter 7. If I accept this offer my mortgage payment will drop by $500 and may push me into a Chapter 13.

I haven't decided what to do. Should I keep the current loan and file a CH 7 then run the risk of having the interest rate go up and loose the house? Or should I take the offer file CH 13 and live under the scrutiny of the Trustee for 5 years? What would you do?

[HHM]

You need to think long term. If this mortgage is a better deal, take it.

Even if you are in a chapter 13, that is only 5 years. This mortgage is 26-38 years.

Also, you DONT live under the scrutiny of the trustee for 5 years. I am not really sure why people think that is how it works. You set a budget up at the beginning of the plan, so long as you make your payments, you go on and live you life like normal.

[spearmint]

In a way, you are under scrutiny, I believe. If your income goes up, trustee wants it. Can't start a business and earn extra income - trustee wants it. You are in financial handcuffs while in Ch13.

[HHM]

In a way, you are under scrutiny, I believe. If your income goes up, trustee wants it. Can't start a business and earn extra income - trustee wants it. You are in financial handcuffs while in Ch13.

Sort of depends on the circumstances. Most people in chapter 13's are not going out and starting business (i.e. one of the requirements of chapter 13 is that the person already have stable, reliable income, which usually means a JOB).

Also, although "theoretically" it is possible for the trustee to increase the plan payment for more money, I have never actually heard of it happening. No one on this forum, to my knowledge, has reported it happening, and over the years of working around this industry, I cannot think of it every actually happening.

Once a plan is confirmed, your case goes off the chapter 13 trustees radar. They really don't care what happens so long as the debtor sends their payment. They are too busy with the current case load to care whether they can get an extra $100 per month out of someone who has been paying for 2 years. The cost benefit of going after increase income is not in the trustees favor, that is why it almost NEVER happens.

Finally, chapter 13 is not inherently a bad solution. It is the one solution that gives the debtor 100% control OVER HIS CREDITORS. Although you think you might be out of control of your finances in chapter 13; the opposite is true. Chapter 13 is all about putting you back in control, by creating a livable budget, paying 1 payment to the trustee and NO creditor can opt out, or say no. Chapter 13 puts the debtor BACK IN CONTROL. There is NO other option that does that.

[espo1357]

Sort of depends on the circumstances. Most people in chapter 13's are not going out and starting business (i.e. one of the requirements of chapter 13 is that the person already have stable, reliable income, which usually means a JOB).

Also, although "theoretically" it is possible for the trustee to increase the plan payment for more money, I have never actually heard of it happening. No one on this forum, to my knowledge, has reported it happening, and over the years of working around this industry, I cannot think of it every actually happening.

Once a plan is confirmed, your case goes off the chapter 13 trustees radar. They really don't care what happens so long as the debtor sends their payment. They are too busy with the current case load to care whether they can get an extra $100 per month out of someone who has been paying for 2 years. The cost benefit of going after increase income is not in the trustees favor, that is why it almost NEVER happens.

Finally, chapter 13 is not inherently a bad solution. It is the one solution that gives the debtor 100% control OVER HIS CREDITORS. Although you think you might be out of control of your finances in chapter 13; the opposite is true. Chapter 13 is all about putting you back in control, but creating a livable budget, paying 1 payment to the trustee and NO creditor can opt out, say no. Chapter 13 puts the debtor BACK IN CONTROL. There is NO other option that does that.

Great post.
That's why you are the best (hopefully justbroke and other greats are not reading)!

Sometimes I wonder why I filed, and its frustrating. But, then I think back to the time BEFORE I filed, and then I am back in the world of chaos.

In 5 short years, I will have my life back, and have a mortgage rate of 5% fixed, and be about even on my home. Not bad.

Most importantly, no more bad debt!

[espo1357]

Wondering what you would do.

Last night I received an offer from Chase through FEDEX to modify my existing loan with a loan amount of $619,000 (Current value is $575,000) and a fixed rate of 4% for 38 years (I can pay it off early) at a payment of $2650. I have tried to modify in the past but was denied. This offer came out of the blue and just requires my signature and no documents to submit (paystubs, budget etc).

My current loan sucks. My loan is currently at 4% and have 26years left with a payment of $3150 but the rate can adjust on a monthly basis. It was as high as 9% in the past but due to the current economy it has gone down to 4%.

Seems like a great deal right? I can lock in the 4% with a payment that is $500 less. The thing is that I have not paid my credit cards ($150,000 debt) since Feb of this year and planned on filing BK Chapter 7. If I accept this offer my mortgage payment will drop by $500 and may push me into a Chapter 13.

I haven't decided what to do. Should I keep the current loan and file a CH 7 then run the risk of having the interest rate go up and loose the house? Or should I take the offer file CH 13 and live under the scrutiny of the Trustee for 5 years? What would you do?

If you are always in a pinch to keep the house, then I would let it go, and file the 7 and be done with living like a credit clown. Its not fun.

I am sticking with my 13 because the payments are 31 percent of my gross, so its easy. That is a good rule of thumb, to pay about 25 to 35 percent of gross for housing.

Good luck. Let us know how you make out. We need to stick togehter on this forum and look out for each other!

[catleg]

I'd be tempted to lock in the 4% for 38 years. It's kind of a gigantic hedge against hyperinflation. :-)

The way I'd look at it is, if the mod exposes $500 a month, that's only for 60 months. The only gotcha is if you get an inheritance during that time.

If you're extra slick, you might file ch7 right after the mod and use the old number in your schedule J. As has been extensively pointed out to me in another thread, this is kind of a dubious strategy, but hey, it might work.

[espo1357]

I'd be tempted to lock in the 4% for 38 years. It's kind of a gigantic hedge against hyperinflation. :-)

The way I'd look at it is, if the mod exposes $500 a month, that's only for 60 months. The only gotcha is if you get an inheritance during that time.

If you're extra slick, you might file ch7 right after the mod and use the old number in your schedule J. As has been extensively pointed out to me in another thread, this is kind of a dubious strategy, but hey, it might work.

Ya, the HAMP is a sweetheart deal.
Got 2 percent for 5 years, then 3 percent year 6, 4 percent year 7, and then 5 percent for life.
But, the kicker is I won't have equity for ten years!

Plus is my house is super nice, neighborhood great, and I won't have to plop down another 40-60k for another one.

Trade off is what life is a lot about, in this life and the next.

[SMinGA]

One question to ask yourself: can you keep the mortgage up WHEN the interest/payment goes up? In the course of time, it WILL go up again. Assuming it won't seems like a dangerous move.

You have multiple options. Stay as is for now, file ch. 7 - and try for a mod again in the future. If it does not happen, you have the option of walking and getting rid of the house completely. Or taking the modification which may or may not free up enough $ monthly to make a 13 possible. Which may not be a bad thing?

[ConfusedinOC]

Update-

I was able to talk to my lawyer and he stated that the decrease in my monthly payment will still qualify me for a CH7. I went ahead and signed the loan mod and Fedex back to Chase.

If it came down to it I was willing to go with the loan mod even if it pushed me into a CH13. We have done so much to our home that it would have been beneficial to endure the CH13 for only 5 years and have a home loan that is 4% fixed with a payment that is 20% of our monthly income.

[ConfusedinOC]

catleg-

Can you direct me to the thread regarding using the old loan payment for CH7 expense?

[SMinGA]

The general idea seems to be to lie on your schedules, include the old payment and hope to get away with it. But since you have discussed the mod w/ your atty its not likely that you can. The attys are now held responsible for what they file, and would not be wise for an attorney to knowingly let you lie in an attempt to hide your true DMI.

On another topic:

When do you expect to file? You may want to wait for the mod to be finalized before filing. My mod paperwork has the following disclaimer:

This offer is contingent on upon BAC Home Loans Servicing LP receiving relief from the Automatic Stay for any bankruptcy proceeding in which the property referred to in the Loan Modification Agreement is included at the time of modification.

The 'time of modification' does not end until its signed and finalized on BAC's end. I do not intend to file til the end of the year - but if I filed now it could delay things as they would need to lift the stay... My understanding is delays would not be good, as if too much time passes they have to reassess income/etc. and basically start over.

catleg-

Can you direct me to the thread regarding using the old loan payment for CH7 expense?

[freeatlast98]

The general idea seems to be to lie on your schedules, include the old payment and hope to get away with it. But since you have discussed the mod w/ your atty its not likely that you can. The attys are now held responsible for what they file, and would not be wise for an attorney to knowingly let you lie in an attempt to hide your true DMI.

On another topic:

When do you expect to file? You may want to wait for the mod to be finalized before filing. My mod paperwork has the following disclaimer:

This offer is contingent on upon BAC Home Loans Servicing LP receiving relief from the Automatic Stay for any bankruptcy proceeding in which the property referred to in the Loan Modification Agreement is included at the time of modification.

The 'time of modification' does not end until its signed and finalized on BAC's end. I do not intend to file til the end of the year - but if I filed now it could delay things as they would need to lift the stay... My understanding is delays would not be good, as if too much time passes they have to reassess income/etc. and basically start over.

It is my understanding having a mod finalized by BAC is taking longer sometimes as long as ten months. Did they give you an approximation when your mod will became final? Just wondering if there is a better time line?

[SMinGA]

Mine is an inhouse mod - that seems to help speed things up as there is much more red tape with HAMP mods.

I was told a few weeks - that I may need to mail or call in my July 1st payment (can't make payments online til the mod is finalized) but by the August 1st payment for certain it should all be done. Just waiting on the investor to sign and Bank of America to update my account. I am not one for waiting patiently however, so will probably call in the next week or so to 'check in'.

It is my understanding having a mod finalized by BAC is taking longer sometimes as long as ten months. Did they give you an approximation when your mod will became final? Just wondering if there is a better time line?

[freeatlast98]

Mine is an inhouse mod - that seems to help speed things up as there is much more red tape with HAMP mods.

I was told a few weeks - that I may need to mail or call in my July 1st payment (can't make payments online til the mod is finalized) but by the August 1st payment for certain it should all be done. Just waiting on the investor to sign and Bank of America to update my account. I am not one for waiting patiently however, so will probably call in the next week or so to 'check in'.

If they are saying to mail or call in your payment for July 1st, is it the modified amount and if so, how much was your payment reduced? Was it based on the standard for HAMP, even though it's an in-house modification? Also, were you current on your mortgage because BAC would not even talk to me before I was late so.. I missed May's payment and I was thinking of not sending them June's payment either. I'm not sure how the missed payments will be figured in.