Principal Reductions on Home Loans

I just got a Loan Modification and they actually raised my principal balance. I thought they were suppossed to lower them?? We also got hit with a 126,000 $ balloon payment. Our interest rate was lowered, but I don't understand how this is helping us in the long run. We will never be able to sell this house and after 30 years we will have to take out another mortgage for the 126 thousand. I thought the money the government gave the lenders was going to help?????

Kelly Maiellano

Well that is totally screwed up! What a joke. I am REALLY sorry to hear about this Kelly. Think about getting some real help in this and seeing if you can't get a principal reduction. Think the "Corporation of You" — it isn't personal, just good business.

–Richard

We did not know that we could negotiate this Loan Modification. We already signed the papers. Now they want us to get a loan counselor, shouldn't they have told us to do that in the beginning?

Kelly, so sorry to hear this. I would follow Richard's advice. Get an audit and re-submit. Philadelphia Foreclosure Protection Services Solutions has gotten many HAMP based loan mods done since the program went into effect. We have gotten substantial reductions in monthly payments (after lengthy trail periods, the last being 5 months, not 3) and even interest, but not one mod reduced principle. And I don’t see this happening without getting the loan analyzed with a loan audit. If you want to reduce principle, get an audit.

I have no firsthand experience with loan mods or trial periods. I've seen articles that suggest lenders and the government have written agreements between them that make it more profitable for the lender to string the homeowner along than to actually complete the modification but the media will not pursue those allegations to locate that documentation. If the loan is over ten years old and carries insurance or an agreement by the government that the lender will not take a big loss I can see where the bulk of the interest has already been paid upfront and the insurance/bailout will provide the majority of the balance due on the loan.

In my opinion, the smart thing for an upside down homeowner to do would depend on the financial circumstances of the homeowner. Is it the primary or secondary residence that is upside down or underwater? Is it the only residence? Are the homeowners living space requirements something that can be downsized easily, are they double income no kids or blue collar workers with six or more children at home, a small business operating out of the house by choice or need, or some variation or combination of which makes it more sensible to sell (or short sale) the second home to get out from under a jumbo loan and live in the other or another smaller home, as the case may require?

Every situation is going to be different, unless you are doing a large enough number of modifications for patterns to emerge based on some set criteria when data collection is started, and even then there will be variations from the norm. There is no "EASY" button for a blanket 'walk, play or give up the keys' in this situation. Each owners circumstances will have to be examined and charted with likely outcomes or consequences, that is, if you are truly providing a customized service to each client.

I have a relative I have been trying to help modify her loan for the last 8 months- and it has been a nightmare! B of A (may they get what they deserve!) kept telling us they had her applications and they were reviewing her application- when we contacted Fannie Mae originally they said she fit all the parameters- we submitted in early Sept 2009 and on Dec 30 2010 she got a letter saying B of A was reviewing her info and were sorry for the delay - they would contact her w/in 20 bus days- nothing- so in Feb we called and B of A claimed they "had nothing in their computers that showed any applications" They were rude said they didn't care WHAT we had in writing- spoke to a supervisor etc-nothing- finally after several days of being rerouted and hours of calls we were told to resubmit financial info over the phone because what she originally submitted wasn't valid anymore- she did and B of A told her "they had nothing to offer her" when we pressed for a reason why they told us they "didn't know- could be she made too much or too little or any other reason" and that they " did not owe her," nor were they "under any obligation" to tell her why she did not qualify- (she had lost her very lucrative job- and had been unemployed for almost a year) Now she has turned to a company who will not be paid unless the loan is modified and she agrees to the modification terms but they too seem to be stalled and are being very vague, etc- she has a baby and due to all the stress, lost another pregnancy so she is understandably feeling depressed and anxious- I don't understand why the government gave all those billions of tax payers dollars to the bank and came up with the Making Homes Affordable programs if they were not going to also have a watchdog agency or some place that would monitor what the banks and financial institutions were doing with all that money? Why don't the banks have to tell the consumer why they were rejected? isn't there any recourse for people like my relative?

hey richard,

my company, aqurit bpo, llc processes bk's for atty's across the usa…and i have yet to see a principal reduction on a loan, unless it was done in a ch 13. but, the us supreme court has ruled that you cant cramdown your principal residence mortgage.

also, when all these loans were sold off as mortgage backed secuities (mbs), they were sold by freddiemac and fanniemae to securitized trusts who under their trust guidelines cannot reduce the principal as it voids their tax advantages given by the irs.

lastly, my experience in following the courts, both state and federal, as well as the bk courts, is that there is no principal reduction from the filing of an action based on predatory lending or respa violations.

so, i'm confused…how do you do principal reductions when they cant be done?

rick

Please run my question buy an expert. If I'm successful with a principle reduction Mod. then Can I do a reverse mortgage at the age of 62, later this year?

Hey Rich French,

Thanks for your comment. Let's see what Richard's reply.

Dear Richard,

Thank you so much for all the information you've provided for us. I truely appreciate for what you do. Your expertees and knowledge combined with the people you introduce to us are of great help to my family.

After I learned the Forensic audit Mr. Oliver CHanning and his partner Dionna. I contacted them and asked for help. At the beginning they replied my email, at the point where we supposed to set time and sit down together to audit my document, I couldn't get in touch with them. Emails were not been returned, office phone number's are not been answered. They also told me at the beginning of the email that have few attorneys they work with whom they could refer to me.

My lender give me the final Home affordable Mortgage after one whole year on a payment plan. I knew that's not something I could afford, that's why I stopped paying last month. Therefore I really need to work with someone before my lender send me the notice of default.

Do you by any chance know any attorney in CA whom I could work with. I do hope that I could work with Mr. Oliver Channing and his team, if there is a way that I can get in touch with them. I don't know anyone else, nor would I trust anyone else to work on my case. After seeing how others suffer when they don't get the right people to work with them.

I had hope and enthiusiasm after listening to ther seminars, However, I'm in the lost valley again after I could get in touch with them. Please help me out!!!

Thanks a lot!

HI Allicen,

I've been in the modification/loss mitigation industry for 5 years helping hundreds of homeowner's. My take on what happened to your relative is that you unknowingly did not follow up from the first submittal of your documents. One of the keys to this whole process is FOLLOW UP. The modification/loss mitigation/home retention departments will usually NEVER call you. It is highly unlikely. I think I have had 2 phone calls in my 5 years of doing this. When you do not follow up and make sure the documents are uploaded in there system then how do you know they received them. You do not know. Everytime you submit one single document to the bank you need to call within 24/48 hours to make sure it is uploaded in their system. This whole process is so very complex. If you just forget to make one phone call or forget to sign one document, it can screw up the whole process. I have seen homes go to sale because of this oversight. It is so unfortunate. This process of getting a homeowner in review for a modification is so crucial. Once it has been pre-approved you still have to keep updating the financials. Modification Reviews take on average now adays up to 6 months. In your case it was 8 months and nothing was accomplished. If you are needing advice or you just want me to evaluate your hardship I would be happy to go over it all with you.

Rhonda Poshka
1-877-818-5908
Consultant for William O'Toole Law Offices

Hi Richard,
I am in the process of working on a loan modification with B of A. I have called and given the financials over the phone, income and expenses, the person I spoke to the first time, said it was locked due to a prior mod that was being done, and did not qualify, he then said he would unlock it and asked for the income again, and again said the borrower did not qualify for the making home affordable, but that he would submit it, asked me to call back in a couple of days, which I did, I spoke to the most rudest person their at B of A that acted like he owned the bank. Telling me that they did not qualify, that there is nothing to offer the borrower, except to pay at least half of the past due amount and the other half would be added to their regular payment, I told him that the reason we submitted paperwork for a loan mod was to help the borrower not to raise the payment. I also asked him if the loan could be spread out to a 40 year term from a 30 year term to help the borrower get approved, he said that B of A does not do that. He said that the DTI needs to be at 31%/43% and the borrower is over the 43%. So I called again and now it is in review for a traditional loan modification, which will probably be a higher payment and fixed for only 5 years. Can you or anyone else tell me what I can do at this point.

thank you

Maria