Loan Modifications and Workouts

Loan Modification or Workout-  Sounds like a great idea, doesn't it?  In MY experience, you have to be in default on your loan in order to get this approved.  In other words, behind in your payments.  Here's how it works (or doesn't):

  1.)  You are approaching the 3 or 5 year adjustment period on your home loan.  You thought this would NEVER happen, because the loan agent assured you that you could "refi" in a few years and get into a better loan.  Who didn't fall for this one?

  2.)  You are a good citizen of strong morale character and do not want to get behind in your payments, who does?  So you call the lender to try to "Work it out".  They say no because you are current on your payments.

  3.)  You decide to call a "Workout Company" that is willing to get the modification on your behalf, but find out you have to pay THEM $3000 to attempt. 
        (Editors Note:  DON'T PAY ANYONE TO DO THIS FOR YOU!!!!)    

  4.)  By now, you are totally frustrated and just want to give in.  Am I close here?   So, you stop paying your mortgage, which I do NOT recommend, by the way...

  5.)  Now after day 16 of the month you stop paying, the lender wants to talk to you, how refreshing.  Your stomach is in knots as you see your credit score plummet 150-200 points and you refuse to talk to the lender.

  6.)  You calm down after a few months and are ready to start the process all over with the lender.  You now have to furnish the lender the following documents:
       
         a.)  Hardship letter explaining why you need the workout or loan
               modification.   
         b.)  2 months bank statements and pay stubs
         c.)  Last 2 years taxes and current Profit and Loss if self employed
         d.)  Financial Statement, listing all monthly expenses and income 

  7.)  You are approved for the workout...YEAH!!  (Don't get too excited, you have to come with a down payment which is the amount of money you are in arrears and the payment is only a couple of hundred dollars below the NEWLY ADJUSTED mortgage payment (after the 3/1 or 5/1 ARM changed)). 

  8.)  So, now what?  Walk away or try selling in a Short Sale?  Yes, California is an "Anti-deficiency judgment" state...but only on owner occupied homes that the loan was used SOLEY for the PURCHASE of said home.  No REFIs, or 2nds, or 3rds...  If you bought that boat or RV or investment property with a Home Equity Line of Credit, you don't qualify for the opportunity to just walk away!

  9.)  It is ALWAYS better to work with the bank to get the loan modification.

 10.)  If you are unable to obtain a workout with the bank, short sell your home and get the WRITTEN APPROVAL that you are released from the lien.  You may be liable for income earned (difference between sale proceeds and loan amount) and be given a 1099, but it is a lot better than owing the entire amount and being sued for the judgment.

 11.)  If you are in this situation, PLEASE do not pay for these services, as I offer them for free and am VERY EXPERIENCED in the process.  If I perform a LOAN MODIFICATION or WORKOUT, what do I expect in return?  NOTHING.  A referral to a prospective buyer or seller would be nice, but certainly not expected.

Disclaimer:  I am a real estate professional and do not give legal or accounting advice (I am NOT an attorney or CPA).  I HIGHLY recommend consulting an attorney or CPA if you are in a situation mentioned here. 

Thank you!! 

Scott Thiel
530-701-6674
www.CMe2BuyRE.com