Loan Modifications With Principal Reductions Exist?
August 3, 2010 / /
http://kevinandfred.com/power-hour/loan-mod/
Today’s episode is about loan modifications. Fred and Kevin are wondering if loan modifications exist with principal loan reductions. We’d like to hear from you!
HOW TO CLOSE AT LEAST 3 DEALS IN THE NEXT 90 DAYS
Get instant access to our online masterclass to learn the simple steps.
HOW TO CLOSE AT LEAST 3 DEALS IN YOUR NEXT 90 DAYS
Get instant access to our online masterclass to learn the simple steps.
About the Authors
Kevin Kauffman & Fred Weaver
Kevin and Fred the founders of Group 46:10. Over the last 10 years Kevin and Fred, and their team have closed tens of millions in real estate all over the country and have created some of the best training for agents in the market. Kevin and Fred are also highly sought after teachers whose work has helped agents all over the country build their own next level real estate business.
I’m shocked as well. ;/
I have a friend who received a letter from Chase offering a $90K principal reduction and conversion from an ARM to fixed, and they had never even missed a payment. We confirmed that the letter was legit, so they went through the process and in less than three weeks it was complete (no trial plan necessary). I was shocked, since that’s totally uncharacteristic of Chase.
Nothing is ever what it seems!
Go checkout http://www.ctslink.com owned by Wells Fargo. After you sign up for an account, you can pull the series reports for the MBS Residential Funds and on there remittance report to the SEC, it shows the amount of forgiveness for each loan in the fund. Which is, you guessed it ZERO!!! I have yet to see one bank/fund that has forgiven any principle. I’m just that nerdy (I will read the tax code, just for the fun of it) and I have read through at least a 100 of these remittance reports. While there may be some type of accounting loophole they are instituting here, it appears sadly that the American homeowner has been duped into believing they can get a principle reduction. The evidence speaks for itself, and it’s not happening.
I have never seen a principal reduction. I have known some to believe they have had a “loan modified” only to find that the real truth of the matter is that it was a refinance.
There have been a very select few who have achieved some level of modification success, but only because their payment servicer held the note.
In my experience, loan modifications consist of a lowered interest rate and thus a lowered payment (principal remains the same). It’s about making the home affordable for owners in the face of a financial hardship. The value of the home doesn’t really play into the equation unless the house is going to market in the near future. With lower interest rate modifications, the bank doesn’t lose any principal by doing this. They only agree to receive less in interest by lowering the rate and making the payments affordable. After six payments at the modified rate, the loan is again considered a performing asset and the bank can free the loss preserves. From an accounting perspective, this is a more favorable resolution for the bank rather than forgiving principal.
Many of my SS clients have attempted “loan modification” prior to the Short Sale. Not one of them ever received a principal reduction. As a matter of fact, after the loan mod, they are more upside-down than they were before because of all the fees and interest added on to the back end of the loan.
Hey Guys,
The first loan mod I ever helped with was for my Parents. They had a neg-am loan with a rate that was going to reset in months (from the time of contact). Their loan had been sold 4-5 times with it ending up at HomEQ. We were able to get them a modification that wiped out $90k off their balance ($270k to $180k) and fixed their rate at 6%. This was last spring (March 2009, I believe). This was before I had ever heard of loan modifications. Since then, I have personally worked on 30+ loan mods and worked with a company that completed 300+ loan mods. During that time, I saw only 1 loan get a principal reduction and that was only a $30k difference when the owner was $100k+ upside down.
Shocked face!!!!! I just spit my iced tea all over my laptop… I heart you guys…Really!
lol..We love you too!
Great topic guys! Permanent principal write downs are like big foot sightings. I have heard they exist, but the source is a carney-type person who is extremely suspect. Not going to happen…