Do you think your lender loves you?  Well maybe this blog entry will help you understand the reality around Loan Modifications.  In November 2008 I wrote a blog on Sheila Bair, the Head of the FDIC, and that fact that she had stated on CNBC that they had taken over Indy Mac and were large and in charge in their governance over the failed institution.  As a matter of fact she said explicitly that Indy Mac had a program that was very fair for Loan Modifications.  They based the new payments for modification purposes on 38% debt to income.  Mrs. Bair was utterly disgusted at the state of Loan Modifications on the part of all lenders at the time and implied that with the FDIC in charge they had a great program.

 

Well, so much for cable television interviews.  Her interview was excellent and what she said got my attention.  We actually decided to help select individuals with Indy Mac with Loan Modifications.  I would like to tell you about a recent experience on the part of one of our clients.

 

The client had a job and had tried for three months with Indy Mac to obtain a loan modification to no avail.  We decided to give it a try because he was gainfully employed and the numbers just made sense for a Loan Modification to avoid foreclosure and keep this homeowner in the home.  After all his primary objective was to stay in the home and the loan program was the nastiest of all, a negative amortizing arm.  This type of loan make the lenders look like predators so we felt this would be the added incentive to make this work for our client.

 

We started out with our standard proposal and demand letters as negotiators and licensed attorneys.  The one thing we added to the equation was the optional backstop of a short sale if our client was not completely satisfied with the terms of the Loan Modification.  Our demand letters demonstrated our clients desire to stay in the home and also exposed the risk of a $200,000 loss that we were prepared to put right up the pipes of Indy Mac with a Short Sale if they did not treat our client fairly.

 

Four months went by and Indy Mac was in a complete state of chaos.  Hey Sheila, who the hell did you put in charge of that zoo anyway?  Did you bring back the CEO with messed up teeth that ran the company completely into the ground?  I wasn’t sure but my client had had enough after four months.  We decided it was time to switch gears and go with the Short Sale.

 

At this interval we collectively had given up hope of any prospects of a successful loan modification even though our client was a dead ringer for the program as described on national cable television (11-18-08) by Sheila Bair, Head of the FDIC.  We put the property on the market and obtain a contact within ten days.  We then immediately submitted our short sale proposal.  Now what do you think happened?

 

Within thirty days as we are steamrolling along at putting the $200,000 loss to the Einstein at Indy my client gets a letter in the mail.  Low and behold it’s an approval for his Loan Modification.  The terms were spot on.  The client was elated.  This was the first trust letter.  The second trust letter we later discovered got lost at Indy but was on its way.  My client decided that he wanted to cancel the short sale.  He was very happy with the terms and he really wanted to keep the house.  For me and my team that was a win.  What else can you ask for in this real estate crisis other than a very happy customer?

 

We cancelled the short sale and the client mailed his May payment in to the Great Halls of Indy Mac.   Remember the terms were very fair and the client had this agreement in writing from Indy Mac.  Indy Mac cashed his check just like they should.  Are you ready for what happened next?  Indy Mac sent him another letter.  I am going to cut and paste the email from my client so you can see it in his words:

 

Email subject line:  Loan modification denied!!!!

 

George,I’m officially freaking out now!

I thought the modification on the first loan was going to take place but I received a letter tonight saying that “Based on the information submitted in my financial package, the present status of my loan and/or other specific criteria regarding your loan, we cannot accommodate your request for a loan modification.” Of course they cashed the $1,200.00 check that I sent them, but denied my loan.

What do I do now? All of my roommates have moved out and I was planning on staying here for the long term.

Please advise…

 

 

I received this email about 9 pm last Thursday.  The client was flipping out.  I started to laugh because it was kind of funny.  I emailed him that we would work it out in the morning with the hopes that after thirty days with an approval I am sure it must just be a mistake.  It turns out there was no mistake.  My client and I laughed together.  After he was done ranting that cursing like a sailor it was just funny how nuts things are with these lenders. 

 

The story has a great ending.  We started the short sale back up and the homeowner’s is very content.  He is done with Indy Mac and he now has the mindset that the only fair approach for him is the short sale.

 

You make the call on the Short Sale.  I have always taken the position that Loan Modifications were for beggars and solutions that revolved around Short Sales were for winners.  Investigate our 2 hour video free trial at www.thenegotiatedsolution.com and investigate the short sale solution for yourself.  Heaven or Hell on earth is a personal choice. 

 

Blogging from the front line of the housing crisis.

 

GHunter

Submitted on Monday, June 8th, 2009 at 9:13 pm