will a lender modify my home loan even if im not in default?
Posted in Renting & Real Estate on 03/10/2010 01:29 pm by admin
JUICER asked:
I have 2 properties in florida. one is investment and the other is second home. I have not defaulted on any of my loans and both me and my wife have credit scores of 760 and above. I am spending more than i earn right now to maintain these mortgages and fear that if the one with a payoption arm recasts i will go into foreclosure. can i modify even though i am not in default as of right now? there is no equity in the home the mortgage is now more than the home is worth. what are my options? what are the repercussions for homowners who just stop paying their mortgages? can they foreclose on my primary if i stop paying my investment home? please advise.
COREY
I have 2 properties in florida. one is investment and the other is second home. I have not defaulted on any of my loans and both me and my wife have credit scores of 760 and above. I am spending more than i earn right now to maintain these mortgages and fear that if the one with a payoption arm recasts i will go into foreclosure. can i modify even though i am not in default as of right now? there is no equity in the home the mortgage is now more than the home is worth. what are my options? what are the repercussions for homowners who just stop paying their mortgages? can they foreclose on my primary if i stop paying my investment home? please advise.
COREY
03/11/2010 at 9:50 pm
ROGER
I would assume that they carry their own mortgages. If that is the case, the one you stop paying is the one they foreclose on. As long as they aren’t financed together, then no, they wouldn’t foreclose on your primary if you didn’t pay your investment mortgage.
If I were in your situation, I would call the mortgage company and explain the situation. They may offer to help lower your rate with a refinance especially if there is no equity. If there is no equity- they lose!
Without being in default, you wouldn’t qualify for most programs aimed at the housing market issues and if you did default now, you probably still wouldn’t qualify. I would do whatever necessary to keep the credit score you have.
Can you rent the investment home? With all of the foreclosures, rental property could be lucrative. Good Luck!
03/14/2010 at 9:06 pm
ISRAEL
They can not foreclose on the house that you are not in default on. The mortgage company can put a lien on you for the difference between what you owe and what they sell the house for. I am not saying they will but they can.
03/18/2010 at 2:02 am
LEWIS
I would talk to my banker any thing is possible sometimes banker are willing to take a little loss to avoid a bigger loss further down the road.
03/21/2010 at 6:29 am
HOWARD
Usually lenders will not consider modifications to loans that are not in default. This is because they have no motivation to do so. If you are making payments as agreed they see no problems. They don’t care if you are killing yourself to make those payments (nor should they).
Your biggest problem is one you made when you signed the mortgage papers agreeing to take out a payment option arm. If you have ever paid an amount less than the interest, all you were ever doing is deferring the date at which you were going to have a significant problem.
Since there is negative equity and since you can’t afford even the option ARM payment you are hosed at some point. You will either have to keep making minimum payments that you can’t afford until the loan resets and you really can’t afford it or you will have to let it fall to a short sale or foreclosure now. You might be better off doing it now to avoid accumulating other debt before you lose this house because that might put the others into jeopardy. Even if a lender agreed to a modification of the payment amount or the interest rate would it help enough long term? Be honest with yourself. Find out exactly what you’d have to ask for to make it a viable loan for you. If a huge interest rate discount or a huge hit to the loan balance is what is required, they aren’t going to be very interested.
The banks will have even less sympathy for you because these are second and investment properties. Most modifications are made on primary residences.
Consider your credit scores history – they won’t survive what you have to do.
Your options are primarily short sale and foreclosure. Modification most likely won’t work (although you can ask). The repercussions of not paying are mostly foreclosure. They take the home, auction it off and put the proceeds of the auction against the balance that you owe (which will be higher than your current loan balance because of penalties, legal fees, etc.). This is a large loss for the lender. They would probably prefer a short sale which generally costs them less and is less damaging to your credit (although your credit will be shot for several years anyway).
good luck!