What can I do with my “Negative Amortization” Loan now?
We are still being haunted by these really tricky loan called “ Negative Amortization Loan”, whereby in good times nobody really has anything bad to say because when the property appreciates, its hiding the increasing balance due to deferred interest payments. But when the market is down and your balance is actually going up on a monthly basis, it’s a terrible feeling. Let me explain it differently, this “Negative Amortization Loan” or “1% Loan” or “Teaser Loan” as we called it before is a really bad loan. World Savings wrote a lot of these types of loan but use to require a minimum of 20% down for them. But when Wall Street started buying up these loans, they became wild and crazy and offered 10% down and even zero down loans with these types of mortgages.
Now, folks this is a loan that supposedly allows home borrowers to pay a minimum payments of 1% but actually is collecting about average 6% monthly. So, when you are given an options to pay a 1% rate compared to a 6% rate without really warning you of what will happen to the balance owe for the deferred payments. You and everyone else will probably pay the 1% right? I would if I am told that its my payments and who looks at your monthly balances and really tries to see the monthly deductions, right? Well, my friends this loan is “DEAD” and will never come back as long we there is a mortgage lender out there.
I think they should have put a BIG warning sign on your coupon that says, WARNING, THIS MINIMUM OPTION PAYMENT MAY ALLOW THE DEFFERED INTEREST BALANCE TO BE ADDED TO YOUR BALANCE FOR THIS MONTH. Just like they do on your cigarette boxes, your food labels and your fire hazardous toys…
So, now what do we do with them!
World Savings is no longer around and guess who owns all these loans now? Wachovia ( now owned by Wells Fargo) and if you have a Wachovia Loan of this sorts, are they modifying?
Actually my personal opinion since about a year ago is that these loans are no longer sellable in the secondary marketing, therefore these lenders will want to start to get rid of these loans either by modification or Short Sale.
If you have a “Neg AM Loan” and still are paying the minimum payment option, there is a clause in the note called “Recapture Option”, once your mortgage balance increases to between 110-125% ( depending on lenders ) over the original balance. The lender will recast your loan and adjust your payments based on current rates and fully amortizes it to start to pay down your principal balances.
If this loan was sold to homeowners who understood this types of loans, they were told that they could refinance this quick and get out of it. But they did not realize that the market was overheated already and was about to bust.
Southern California is suppose to only have between 68-90 thousand homeowners still toying with this type of loan. So, what are they doing with this.
MY ANSWER : WAITING!!!! Waiting for what? Waiting for a miracle, waiting for property values to go up again while they are paying these unrealistic payments. See my above notation about the “Recapture Options” its going to come back and bite you where it really hurts. Waiting for a Loan Mod, maybe I have seen lenders switching these loans to fully amortize fixed rate loans. You have to be able to afford the much higher payments though. Waiting for a short sale, maybe because I feel that lenders are very eager to sell this type of loan and they should approve the short sales a lot quicker for “Neg Am Loans”
If you happen to still be paying on this loan, call me and we will try to evaluate your situation and find out options.
A quick Q & A. I got an interesting call from a borrower who is still making their mortgage payments but tried to modify their home loan. Of course, they got declined and paid an attorney about 4K to help them. Now, after interviewing this borrower, I advised for them to stay at their property and continue to pay the mortgage. Here is their situation: current mortgage payment is about $ 2400.00 ( with Taxes ) per month, property of course is upside down about 100K, the borrower lives and works in the area and no distant driving required. Borrower also has parents living with them, total income is about 7K net and after paying all expenses on a monthly basis, they have about maybe 500-800 surplus funds. If they were to rent, they would be paying I guess between 1600-1800 per month. It’s a brand new home, maybe they also put some money into some upgrades and everyone is comfortable there.
I suggested for this borrower to stay because if they all move the savings that will have will go back to paying taxes if they loose the interest deduction. And the market in their area is getting stable. Assuming they will be approved for short sale and sells it for around current market of $ 250K, when they are ready to buy in about 3-5 years maybe the value of the property will be around $ 350K where its at now, will they get the same size property now and age, probably not. How much would they have saved for the down payment? Probably minimal or maybe equal to what would have been reduced on the principal if they continued the payments.
So, I hope you see where I am coming from, every situation is truly unique to your situation cannot be generalized. BTW, this homeowner above had mentioned that all his peers have Short Sale their property and that is one of the reason they want to do it. I hope my explanation is right, all I can do is give it my best judgement.
Thanks for the inquiries, please feel free to comment or inquire by phone or email. Call Ken Go of 1st Innovative Finance Group at 562-697-7028 or write to :kennethgo@verizon.net.
Tuesday, March 9, 2010
Monday, March 8, 2010
Loan Modification Success Stories Online.
I have tried to request for anyone of my readers to keep me informed on their Loan Modification Success Stories. However, I have maybe gotten two or three only of which I have posted on my articles. So, I thought of investigating online and seeing what is really out there for you.
Here are my findings online.
Saxon Mortgage Loan Modification: April 2009
God must be on my side. I called Saxon today, after calling practically everyday for the past 3 months, and was told my modification has been approved and that my new interest rate for the next five years would be fixed at 2%, down from 10%. That's a saving of over $900 a month off my house payment. I have no clue that my investor is but I'm thankful. My wife left me and slapped me with child support payments last year. I went from a two income household to a one income household and on top of that I was slapped with child support payments. Although I struggled financially each month, I still managed to keep my house payment current and was never late. I stopped paying my credit cards bills and cut any unnecessary expense just so I could make my house payment on time. It finally all paid off. Although my credit was ruined because I stopped paying the credit cards, with this new interest rate of 2% for my house, I will have 5 years of breathing room to get my finances and credit back in order.
Option One Loan Modification: June 2008
I just found this forum and I want to tell my story:My wife and I purchased our first home in January 2007. Everything was going well at first but I am a small church pastor and towards the end of 2007 the church had some financial problems which reverberated to my household. We became behind a couple of months on the payment and then set up a repayment plan. It didn't work and finally in February I received an intention to foreclose letter in February. I contacted the home retention and began the process for loan mod. The negotiator called me a couple of days after I contacted home retention and we got the ball rolling. The negotiator Jackie Duvall told me that I didn't have to pay anything on my mortgage until everything was done. So, I didn't worry about it. Just paid off some old debts and went on my merry little way. I recently started a managerial job that is really helping out. No worries at all that is until I received the letter about the name change a week ago. Now, this worried me so I contacted Jackie and she told me that it would not affect the loan mod. In fact, by the time I called her; they had received the title and were waiting on the approval. She called me on Friday and informed me that it had been approved and that I would get my package on Monday. This is how it changed:Original note: monthly payment of $1535, 2 year ARM starting at 9.550% increasing to 10.75% in 2009. No escrow in the original note which caused us to get behind on our taxes. By the time the loan mod started going into place, the back taxes were almost $7000!New note: monthly payment of $1700 with 7.5% interest, increasing to a fixed rate of 9.5% in five years. All back taxes, past due mortgage, and escrow account are included in the payment. With the new job and can afford the payments and everything is working out.
I might have not tried hard enough to look for more, but there are a lot of scams online when you try to research this topic. But with my quick research I did not see any from BOA, Chase nor Citi. Forget about Wells, I know that they are hard to deal with on Loan Modifications.
The Option One Modification approval is your cooker cutter type of borrowers that lenders really want to help. They had jobs and were able to fully qualify for their own loan when they initially took out the mortgage. But when the economy started tanking and that affected their income, their paying ability diminished and they had to make choices on which debts are to be left unpaid. Now, this is the part where they really will consider your Modification package is when the borrower found another job and now can afford the fully modified payments which included their impounds on taxes and insurances.
Folks please remember, more than 50-60% of callers are to me just clogging the phone lines to see if the banks can reduce their payments. I would do it myself if I know my payments will come down just because I want it to.
I had a senior client that called me just yesterday and she claims to be calling their lender everyday (she has a lot of time) to see if her loan modification application has been reviewed. Now, she lives in a million dollar area and she has about 600K in equity in the property, yes she has a hardship in her monthly expenses because she lives on her credit cards and a minimal SS check, but what is she expecting. The bank will of course tell her to sell her home and live off of her equity.
But she was approved for a modification, would more people not qualified call and try to lower their payments, of course. I would be first in line.
Remember, banks now have gotten this program down so well that you cannot take advantages of them, maybe two years ago but not now. Your home value decreasing is not a banks problem, your debts being too high is not their problem, your two Mercedes or BMW payments is not their problem, excessive debts is the major reason why you cant make your payments.
So, look into your financing and decide on which obligation to prioritize. I few things that I wanted to tell you, I just got a call from a caller stating that her wages was garnished due to her credit cards not being paid. That’s a first that I have heard off. I also got a call from someone stating her second mortgage is directly paid by her employer and she could not stop it because its in the contract, her employer would not even allow the payments not made.
Banks have enforced their regulations and smarted up. They are prepared for all your non payments, foreclosures, short sales and BK’s believe it or not.
Most important rule when applying for a Loan Modification, qualify for “Hardship” at the same time qualify for the “Payments”.
Please continue your support by sending me questions, inquiries to Kenneth Go of 1st Innovative Finance at 562-508-7048 or write to: Kennethgo@verizon.net.
I have tried to request for anyone of my readers to keep me informed on their Loan Modification Success Stories. However, I have maybe gotten two or three only of which I have posted on my articles. So, I thought of investigating online and seeing what is really out there for you.
Here are my findings online.
Saxon Mortgage Loan Modification: April 2009
God must be on my side. I called Saxon today, after calling practically everyday for the past 3 months, and was told my modification has been approved and that my new interest rate for the next five years would be fixed at 2%, down from 10%. That's a saving of over $900 a month off my house payment. I have no clue that my investor is but I'm thankful. My wife left me and slapped me with child support payments last year. I went from a two income household to a one income household and on top of that I was slapped with child support payments. Although I struggled financially each month, I still managed to keep my house payment current and was never late. I stopped paying my credit cards bills and cut any unnecessary expense just so I could make my house payment on time. It finally all paid off. Although my credit was ruined because I stopped paying the credit cards, with this new interest rate of 2% for my house, I will have 5 years of breathing room to get my finances and credit back in order.
Option One Loan Modification: June 2008
I just found this forum and I want to tell my story:My wife and I purchased our first home in January 2007. Everything was going well at first but I am a small church pastor and towards the end of 2007 the church had some financial problems which reverberated to my household. We became behind a couple of months on the payment and then set up a repayment plan. It didn't work and finally in February I received an intention to foreclose letter in February. I contacted the home retention and began the process for loan mod. The negotiator called me a couple of days after I contacted home retention and we got the ball rolling. The negotiator Jackie Duvall told me that I didn't have to pay anything on my mortgage until everything was done. So, I didn't worry about it. Just paid off some old debts and went on my merry little way. I recently started a managerial job that is really helping out. No worries at all that is until I received the letter about the name change a week ago. Now, this worried me so I contacted Jackie and she told me that it would not affect the loan mod. In fact, by the time I called her; they had received the title and were waiting on the approval. She called me on Friday and informed me that it had been approved and that I would get my package on Monday. This is how it changed:Original note: monthly payment of $1535, 2 year ARM starting at 9.550% increasing to 10.75% in 2009. No escrow in the original note which caused us to get behind on our taxes. By the time the loan mod started going into place, the back taxes were almost $7000!New note: monthly payment of $1700 with 7.5% interest, increasing to a fixed rate of 9.5% in five years. All back taxes, past due mortgage, and escrow account are included in the payment. With the new job and can afford the payments and everything is working out.
I might have not tried hard enough to look for more, but there are a lot of scams online when you try to research this topic. But with my quick research I did not see any from BOA, Chase nor Citi. Forget about Wells, I know that they are hard to deal with on Loan Modifications.
The Option One Modification approval is your cooker cutter type of borrowers that lenders really want to help. They had jobs and were able to fully qualify for their own loan when they initially took out the mortgage. But when the economy started tanking and that affected their income, their paying ability diminished and they had to make choices on which debts are to be left unpaid. Now, this is the part where they really will consider your Modification package is when the borrower found another job and now can afford the fully modified payments which included their impounds on taxes and insurances.
Folks please remember, more than 50-60% of callers are to me just clogging the phone lines to see if the banks can reduce their payments. I would do it myself if I know my payments will come down just because I want it to.
I had a senior client that called me just yesterday and she claims to be calling their lender everyday (she has a lot of time) to see if her loan modification application has been reviewed. Now, she lives in a million dollar area and she has about 600K in equity in the property, yes she has a hardship in her monthly expenses because she lives on her credit cards and a minimal SS check, but what is she expecting. The bank will of course tell her to sell her home and live off of her equity.
But she was approved for a modification, would more people not qualified call and try to lower their payments, of course. I would be first in line.
Remember, banks now have gotten this program down so well that you cannot take advantages of them, maybe two years ago but not now. Your home value decreasing is not a banks problem, your debts being too high is not their problem, your two Mercedes or BMW payments is not their problem, excessive debts is the major reason why you cant make your payments.
So, look into your financing and decide on which obligation to prioritize. I few things that I wanted to tell you, I just got a call from a caller stating that her wages was garnished due to her credit cards not being paid. That’s a first that I have heard off. I also got a call from someone stating her second mortgage is directly paid by her employer and she could not stop it because its in the contract, her employer would not even allow the payments not made.
Banks have enforced their regulations and smarted up. They are prepared for all your non payments, foreclosures, short sales and BK’s believe it or not.
Most important rule when applying for a Loan Modification, qualify for “Hardship” at the same time qualify for the “Payments”.
Please continue your support by sending me questions, inquiries to Kenneth Go of 1st Innovative Finance at 562-508-7048 or write to: Kennethgo@verizon.net.
Monday, October 5, 2009
Is Short Sale Your Solution to Delinquest Mortgages?
Is Short Sale your Solution to Delinquent Mortgages?
California Real Estate Market is flooded with Short Sale properties. Appreciation is stalled, and homeowners whose mortgages are adjusting to higher interest rates are worried that they can't keep up.
Foreclosures and short sales are dominating the Real estate listings in California and probably most part of the nation. DataQuick reports that last quarter the number of default notices (NoDs) sent to California homeowners increased to its highest level in nearly 10 years. This flood of delinquencies is causing short sales to become more popular as a solution for homeowners who need to get out of their properties as painlessly as possible.
A short sale is the same as a displacement issue. It's when the homeowner cannot afford to make the payments on his loan due to circumstances like job loss, death in the family, excessive debts, family emergencies, rising interest rates and many more.. But based on what I have seen I believe that most people that went into foreclosures and short sales were due to the “Sub-Prime” mortgages that they cannot afford in the first place that they were lead into.
When homeowners decide that they can no longer stay in the home and have tried all avenues to save their homes we would normally try to suggest for a short sale rather than having the home go through a foreclosure. These days, lenders, wanting to avoid costly foreclosures, are more inclined to accept a short sale in which the loan balance exceeds the market value of the house.
The short sale path ends by agreement with the lender that [the lender] will approve the sale of the property to a buyer and it results to the sellers release of liability in most cases. We will also request for lenders to note the account on the credit report as either “Settled Account” or “Paid in Full for less than the Full Balance”. Which I believe is better than a “Foreclosure” being reported on your credit.
Since homeowners know they will be moving they will need to find a new place to live. You have to find money for that. How are you going to find money for that? Well you're not going to be making payments on your mortgage any more so you would take that windfall and you apply that to the preservation of your family future.
It's also important to understand that you could face a 1099 in the future -- meaning you could be taxed down the road on the sale of your home due to the lender's suffering a loss of principal of $600 or more. I would suggest then for you to consult with your CPA on how to balance the gains that the IRS is supposedly seeing this transaction as. I believe that you CPA will see this as a loss and it then will be a wash. Consult with your CPA for further clarification.
If you property goes to a foreclosure, additional fees will be accumulated and later reported by the lender to the IRS as losses.
The benefits of the short sale are numerous. The homeowner isn't going to be disgruntled and tear the property up; he's going to maintain it for a certain amount of time. The benefits of the short sale are the Realtor is going to receive a commission and you will know when you will have to leave when the escrow closes and not continue to be scared or wondering when the bank will come knocking on your door.
You have to find an experience agent who have done this before, they have to be experience in negotiating, identifying the person to negotiate with the short sale lender and then to dialogue with that lender and compel [the lender] to agree with the short sale. Ask to see documents provided by the banks on previous short sale approval, call for references to see if the previous transactions have been smooth and painless specially for the sellers.
If you are attempting to do a short sale, recognize you'll likely need expert help. The short sale process is not an easy path, even for experts. Guidelines for lenders are constantly changing and now its been more difficult to do short sales specially if you have two different lenders involve in the sale. Key is probably to know who your actual investors are for your loan.
[The loan servicers] have to have some common ground to dialogue with your agent. They often have instructions to not settle for less than a certain amount are given to the loan servicers. That's when the chase begins. Whether intentionally or unintentionally, getting to the right people to discuss the possibility of a short sale, seems to be a challenge to which even the professionals say there is no easy answer.
However, once an agreement is reached, the short sale can be the best opportunity to get out of a very bad situation with the least amount of harm for all involved.
For a free consultation, please call Ken Go at 1st Innovative Finance Group at (562) 508-7048 or write to Kennethgo@verizon.net.
California Real Estate Market is flooded with Short Sale properties. Appreciation is stalled, and homeowners whose mortgages are adjusting to higher interest rates are worried that they can't keep up.
Foreclosures and short sales are dominating the Real estate listings in California and probably most part of the nation. DataQuick reports that last quarter the number of default notices (NoDs) sent to California homeowners increased to its highest level in nearly 10 years. This flood of delinquencies is causing short sales to become more popular as a solution for homeowners who need to get out of their properties as painlessly as possible.
A short sale is the same as a displacement issue. It's when the homeowner cannot afford to make the payments on his loan due to circumstances like job loss, death in the family, excessive debts, family emergencies, rising interest rates and many more.. But based on what I have seen I believe that most people that went into foreclosures and short sales were due to the “Sub-Prime” mortgages that they cannot afford in the first place that they were lead into.
When homeowners decide that they can no longer stay in the home and have tried all avenues to save their homes we would normally try to suggest for a short sale rather than having the home go through a foreclosure. These days, lenders, wanting to avoid costly foreclosures, are more inclined to accept a short sale in which the loan balance exceeds the market value of the house.
The short sale path ends by agreement with the lender that [the lender] will approve the sale of the property to a buyer and it results to the sellers release of liability in most cases. We will also request for lenders to note the account on the credit report as either “Settled Account” or “Paid in Full for less than the Full Balance”. Which I believe is better than a “Foreclosure” being reported on your credit.
Since homeowners know they will be moving they will need to find a new place to live. You have to find money for that. How are you going to find money for that? Well you're not going to be making payments on your mortgage any more so you would take that windfall and you apply that to the preservation of your family future.
It's also important to understand that you could face a 1099 in the future -- meaning you could be taxed down the road on the sale of your home due to the lender's suffering a loss of principal of $600 or more. I would suggest then for you to consult with your CPA on how to balance the gains that the IRS is supposedly seeing this transaction as. I believe that you CPA will see this as a loss and it then will be a wash. Consult with your CPA for further clarification.
If you property goes to a foreclosure, additional fees will be accumulated and later reported by the lender to the IRS as losses.
The benefits of the short sale are numerous. The homeowner isn't going to be disgruntled and tear the property up; he's going to maintain it for a certain amount of time. The benefits of the short sale are the Realtor is going to receive a commission and you will know when you will have to leave when the escrow closes and not continue to be scared or wondering when the bank will come knocking on your door.
You have to find an experience agent who have done this before, they have to be experience in negotiating, identifying the person to negotiate with the short sale lender and then to dialogue with that lender and compel [the lender] to agree with the short sale. Ask to see documents provided by the banks on previous short sale approval, call for references to see if the previous transactions have been smooth and painless specially for the sellers.
If you are attempting to do a short sale, recognize you'll likely need expert help. The short sale process is not an easy path, even for experts. Guidelines for lenders are constantly changing and now its been more difficult to do short sales specially if you have two different lenders involve in the sale. Key is probably to know who your actual investors are for your loan.
[The loan servicers] have to have some common ground to dialogue with your agent. They often have instructions to not settle for less than a certain amount are given to the loan servicers. That's when the chase begins. Whether intentionally or unintentionally, getting to the right people to discuss the possibility of a short sale, seems to be a challenge to which even the professionals say there is no easy answer.
However, once an agreement is reached, the short sale can be the best opportunity to get out of a very bad situation with the least amount of harm for all involved.
For a free consultation, please call Ken Go at 1st Innovative Finance Group at (562) 508-7048 or write to Kennethgo@verizon.net.
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