Has anyone completed a principle reduction on your home?

[anunez]

I have heard of allot of banks doing modifications to their interest rates. But even lowering my rate would not be an incentive for me to stay at my home. Has anyone negotiated a reduction in the principle balance with their lender in the state of California? If so how did you do it and what tips do you recommend. Thanks.

 

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[GLC65]

I know of a guy that just started a business and all he does is do workouts with lenders. He is not an attorney and he seems like he knows what he is doing. I met with him yesterday and it was amazing hearing what he has accomplished. He negotiates the rate down from 9% to 5% or lower and has even lowered the principal amount. He charges a flat rate initially and makes his money with the closing costs on the refinance.

 

[phlgirl]

I got an email today from an investor who is touting a new FHA program, which is being streamlined in many of the larger banks. The summary provided, by the investor, was as folows:

After doing further investigation through Fannie Mae and the FHA, I’ve come across several interesting programs. First is Fannie Mae’s “Keys to Recovery” program in which they will refinance you at up to 120% of current market value. That’s OK for markets that have only fallen 20%, but Florida property has been falling much further than that. The second and perhaps more interesting program is the FHA’s “HOPE for Homeowners” that was recently introduced. In effect, it allows people to refinance their homes at market value (even with bad credit) if they bought it before 1/1/08, they live in it, it’s worth less than $550K, and they have the ability to pay. HUD provides incentives to both the new lender for providing the loan and the old lender who will be taking a loss. This is the first I’ve heard of a rational program to help people with underwater, owner-occupied property. www.fha.gov has more details.


Still not sure how I feel about this product but it is what it is. Knowledge is power, right?

There is a fairly comprephensive 15 minute overview of the 'H4H' program available on the FHA website.

HOPE for Homeowners Overview Presentation

My guess is that the people working the 'loan modification' angle are educating themselves on the formulas/qualifications that allow programs like these to process quickly - then charging the homeowner, who doesn't have the time, know-how or patience. Not a bad strategy. The FHA has approved this program into 2011 (so far).

 

[hakrjak]

I've had atleast 5 friends try to get their loans modified, and after calling the "Work Out" departments of various banks (Mainly Countrywide) -- they end up leaving their contact info and never get a return phone call. Seems like the banks just are not interested. I'll bet it would be different if any of my friends were 6 months behind....

Cheers,

- Hakrjak

 

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[andviv]

One bank told me I needed to be 50 days behind in order to start talking about a loan mod.

Principle reduction was available for primary residences in some cases.

They won't negotiate if you are not behind (that's what they told me and what I've seen happening).

A guy I know got his principle reduction done when he got divorced and was late 60 days.

 

[phlgirl]

Hey Andviv -

I have heard similar feedback from some family and friends who are trying to accomplish a loan modification; however, I also have two friends who were able to successfully negotiate a resolution before ever going behind in payments (loan mod. or deed in lieu).

I am still learning but, from what I have seen so far, I liken the process to that of a short sale - you need to be talking to the Right person and saying the Right things, otherwise, you will never get anything accomplished. Calling customer service, or even Loss Mitigation these days, unfortunately, will often get you no where.

Lots of people have tried to negotiate a short sale (myself included), only to find that the process is extremely frustrating, requires the right contacts and lots of paperwork. However, everyone knows (or has heard of) an expert who does nothing but short sales and makes a fanstastic living doing it. We learned quickly that it is easier to pass short sale opportunies off to our resident expert (and take a cut) - they know the forumlas, have the contacts and skills to get the deal done.

Looks like DK has partnered up with a 'Loan Modification' company who claim to have mastered this process. They claim they can do it before you have gone behind in payments (no impact to credit). They do say that over 90% of the modifications have NO effect on principal. The banks would prefer to go to a 0-3% interest rate, before forgiving a portion of the principal.

Pretty interesting stuff.

Free Mortgage Loan Modification Consultation - Home Loan Mortgage Modification

 

[GLC65]

I got an email today from an investor who is touting a new FHA program, which is being streamlined in many of the larger banks. The summary provided, by the investor, was as folows:

After doing further investigation through Fannie Mae and the FHA, I’ve come across several interesting programs. First is Fannie Mae’s “Keys to Recovery†program in which they will refinance you at up to 120% of current market value. That’s OK for markets that have only fallen 20%, but Florida property has been falling much further than that. The second and perhaps more interesting program is the FHA’s “HOPE for Homeowners†that was recently introduced. In effect, it allows people to refinance their homes at market value (even with bad credit) if they bought it before 1/1/08, they live in it, it’s worth less than $550K, and they have the ability to pay. HUD provides incentives to both the new lender for providing the loan and the old lender who will be taking a loss. This is the first I’ve heard of a rational program to help people with underwater, owner-occupied property. www.fha.gov has more details.


Still not sure how I feel about this product but it is what it is. Knowledge is power, right?

There is a fairly comprephensive 15 minute overview of the 'H4H' program available on the FHA website.

HOPE for Homeowners Overview Presentation

My guess is that the people working the 'loan modification' angle are educating themselves on the formulas/qualifications that allow programs like these to process quickly - then charging the homeowner, who doesn't have the time, know-how or patience. Not a bad strategy. The FHA has approved this program into 2011 (so far).

I don`t think it is that easy. A lot of stipulations on both programs from what I have heard. FHA loans have a maximum loan limit of $271K and both programs want you to buy private mortgage insurance up front for some five or more years. I am really talking out of my a$$ and my statements are bits and pieces I have heard so please do not take it as a FACT.

 

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[GLC65]

One bank told me I needed to be 50 days behind in order to start talking about a loan mod.

Principle reduction was available for primary residences in some cases.

They won't negotiate if you are not behind (that's what they told me and what I've seen happening).

A guy I know got his principle reduction done when he got divorced and was late 60 days.

That is not too difficult to do. Stop paying and get behind for 50 days, I guess. This system really sucks, doesn`t it? It does not make sense to me. Shouldn`t you call and tell the banks a potential problem before it becomes a problem? They want you to ruin your credit so you are stuck with them and ruins your credit.

 

[phlgirl]

I don`t think it is that easy. A lot of stipulations on both programs from what I have heard. FHA loans have a maximum loan limit of $271K and both programs want you to buy private mortgage insurance up front for some five or more years. I am really talking out of my a$$ and my statements are bits and pieces I have heard so please do not take it as a FACT.

I never said it was easy.

In fact, I really hope it IS NOT easy.

On the FHA site, they do say that the loan limit is 550k (I can only speak for this H4H program).

 

[GLC65]

I never said it was easy.

In fact, I really hope it IS NOT easy.

On the FHA site, they do say that the loan limit is 550k (I can only speak for this H4H program).

Do you think my bank will work out a $6 Million HELOC which I have it at prime plus one?

 

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[phlgirl]

Do you think my bank will work out a $6 Million HELOC which I have it at prime plus one?

LOL

No clue.... but best of luck! :smxB:

 

[GLC65]

LOL

No clue.... but best of luck! :smxB:

If I were to approach them, they will FREAK out. I got this $6 Million line of credit from a real small two branch bank and if I default it will devastate them. Still waiting for them to piss me off somehow. JK. They are good people and due to me, they now set a cap of prime plus one with a 6% cap.

 

[hatterasguy]

If I were to approach them, they will FREAK out. I got this $6 Million line of credit from a real small two branch bank and if I default it will devastate them. Still waiting for them to piss me off somehow. JK. They are good people and due to me, they now set a cap of prime plus one with a 6% cap.

Yeah I know people who have done that. Usualy the more the banks lent you, the more they are willing to work with you...

A $60k loan and its GFY, a $6M loan and all of a sudden they want to talk...

Back in the 80's my uncle had a similer loan, and just stopped paying on it...for like 10 months...the bank got very interested in working with him all of a sudden.

 

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[randallg99]

After doing further investigation through Fannie Mae and the FHA, I’ve come across several interesting programs. First is Fannie Mae’s “Keys to Recovery†program in which they will refinance you at up to 120% of current market value. That’s OK for markets that have only fallen 20%, but Florida property has been falling much further than that. The second and perhaps more interesting program is the FHA’s “HOPE for Homeowners†that was recently introduced. In effect, it allows people to refinance their homes at market value (even with bad credit) if they bought it before 1/1/08, they live in it, it’s worth less than $550K, and they have the ability to pay. HUD provides incentives to both the new lender for providing the loan and the old lender who will be taking a loss. This is the first I’ve heard of a rational program to help people with underwater, owner-occupied property. www.fha.gov has more details.

this is great stuff. Thanks....

I also read this article this morning regarding the 4 ownership property rule:
(I am making a few calls today... my rates are fixed at 6-7% for 30 year on the 4 unit properties but man, that would be a beaut if I can get them into the low 5's!!!!)
Great subject here... thanks to all contributing....

Fannie Mae to Drop Four Financed Property Rule!by John Adams

In August of 2008, Fannie Mae announced the implementation of a restriction on loans for rental property. Known as Fannie Mae Letter 08-22, it stated that investors would be cut off after their credit report revealed any four or more "financed properties." Lenders stopped taking applications from investors almost immediately after that announcement.

Prior to this change, Fannie had in place a "ten financed property" rule, but the lending industry often provided ways around that limit by offering portfolio loans that were underwritten to Fannie Mae standards. These portfolio loans vanished simultaneously with FNMA's announcement.

The devastating effect of this change has been to sideline almost all veteran home investors at a time when the nation's supply of bank-owned homes is strangling our real estate market. In Atlanta alone, it is estimated that there are over 8,000 bank owned homes clogging the market, making it impossible for the market to begin any type of recovery.

However, editors at the Georgia Real Estate Report have learned that internal meetings at Fannie Mae have revealed that FNMA intends to eliminate the "four financed property" restriction on lenders, and revert to the "ten property limit." According to this same source, the change will be announced "within a few weeks."

This information was revealed Thursday, February 5, but could not be confirmed by FNMA spokespersons in Atlanta.

If this change occurs, and it appears that it will, this could spell the beginning of the end for the abysmal performance of real estate during the current economic environment.

It is unknown whether or not lenders may once again offer "portfolio" loans that are underwritten to Fannie guidelines once this change occurs, but it seems logical. Remember that investor loans have always carried some premium both in rate and points, making them more attractive to lenders than traditional loans. It stands to reason that if these investor loans are "full doc" and require a reasonable down payment, they can be easily as safe as an owner-occupant loan.

© 2008 The Georgia Real Estate Report. All rights reserved.
Distributed by John Adams. Call 404-373-6000 for reprint requests.

 

[randallg99]

as great as some of these modifications are, the reality is that the loose regulations are the reason the financial sector (aka world economy) is in such disarray...

more good news if you're buying or an investor: (but bad news if you want this carnage to stop, since this'll only prolong the inevitable)

Fannie Mae to Loosen Rules for Home-Loan Refinancing (Update2)
Email | Print | A A A

By Jody Shenn

Feb. 5 (Bloomberg) -- Fannie Mae, the mortgage-finance company under U.S. government control, will loosen rules for homeowners seeking to lower their loan payments by refinancing.

Fannie Mae will drop some credit-score requirements, reduce income-documentation standards and waive the need for appraisals in some cases, according to a notice yesterday to lenders posted on the Washington-based company’s Web site. The changes apply to loans that the company owns or guarantees.

The company, which accounts for more than 40 percent of the $12 trillion in U.S. residential mortgage debt, is seeking to break a “logjam” in refinancing and allow more homeowners to take advantage of near-record low interest rates, according to Brian Faith, a Fannie Mae spokesman. The increased flexibility for consumers isn’t large enough to significantly harm mortgage- bond investors and mortgage insurers, analysts said.

more here:

Bloomberg.com: News

 

[randallg99]

I've had atleast 5 friends try to get their loans modified, and after calling the "Work Out" departments of various banks (Mainly Countrywide) -- they end up leaving their contact info and never get a return phone call. Seems like the banks just are not interested. I'll bet it would be different if any of my friends were 6 months behind....

Cheers,

- Hakrjak

CFC's asset control department is VERY backed up and short handed.... tell your friends to keep trying for upper management.

 

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[phlgirl]

Hey Randall -

Just a heads up - that FHA H4H program only applies to owner occupied properties (so far).

I am with you, in that I would love to refi the investment properties down a few points. Do you get the impression that they are going to open things up that much? At this stage, refinancing an investment property has become next to impossible - particularly for us stated income folks.

GREAT news about the 'Four Property Rule' being dropped. In my opinion, that is a step in the right direction. Keep the lending rules tight but allow those who are consistantly performing on multiple loans keep growing!!

Thanks for posting the articles.