When exploring your options/alternatives to foreclosure, the most common option first considered is a loan modification. I received a short sale listing referral from my broker the other day, and my first question to him was if the clients had attempted to modify their loan. His response was no, but he then bluntly stated that he hasn't met anyone yet who has had success with getting their loan modified to a payment they could truly afford. I had to agree with him.
The percentage of approved modifications vs. applications is extremely low. And only about 1/2 of those who are pre-approved and enter into a trial payment plan actually obtain final approval. Statistics also back up his statement, unfortunately, and the reality is that most who enter into a modification end up defaulting on their loan again about 80% of the time.
With all that being said, I thought that I would share my own personal "success" with obtaining a Home Affordable Modification on our primary residence. We just received the final docs today, and, though a bit hesitant, we will most likely sign off and hope for the best. We did this WITHOUT the help of a modification professional. Though I am a licensed Realtor, I have never received any formal training regarding loan modifications or the Making Home Affordable program.
It was definitely trial and error at first....our application was denied several times. But, each time I learned what needed to be corrected and re-submitted. We are self employed, which means we submit a Profit & Loss statement in lieu of paycheck stubs. Most of the challenges I experienced had to do with particulars on our Profit and Loss statement and what they were looking for with our Debt to Income Ratio. It actually only took about 6-7 months from start to finish, and the reps at CitiMortgage were rather pleasant, knowledgeable, and easy to work with.
Here's the Scoop on our current situation:
• We have a 5/1 Interest Only Adjustable Rate 30 YR Mortgage (ARM) with CitiMortgage on the first. Our rate is scheduled to have its first reset in November of 2011 (we will have owned for 5 years).
• Our Interest rate is currently at 5.375%.
• Our payment is currently $1760 per month including principal, interest, taxes & insurance (PITI payment).
• We currently owe $353,116 on our first mortgage. This includes all past due payments, late fees, etc. that accrued during the modification period.
• We currently owe about $50,000 on our second mortgage.
• We originally paid $375,000 for our home and financed in a $45,000 pool. At the time, our home appraised for over $500,000. We put about 10% down when we purchased ($42,000), and have since invested about $40k in additional backyard improvements.
• The current market value of our home is about $225,000. Oh yeah. We are about $175k upside down.
We have only pursued a modification on our FIRST mortgage. Under the Home Affordable Modification program, the mod must be complete on the first mortgage prior to pursuing a modification on the second mortgage.
The terms we have been offered are as follows:
|
Years
|
Interest Rate
|
Interest Rate Change Date
|
Monthly Principal & Interest Pmt Amount
|
Estimated Monthly Escrow Payment Amount
|
Total Monthly Payment
|
Payment Begins On
|
Number of Monthly Payments
|
|
|
1-5
|
2.00%
|
05/01/2010
|
$1061.99
|
$230.03, May Adjust Periodically
|
$1292.02, May Adjust Periodically
|
06/01/2010
|
60
|
|
|
6
|
3.00%
|
05/01/2015
|
$1233.79
|
May Adjust Periodically
|
May Adjust Periodically
|
06/01/2015
|
12
|
|
|
7
|
4.00%
|
05/01/2016
|
$1415.13
|
May Adjust Periodically
|
May Adjust Periodically
|
06/01/2016
|
12
|
|
|
8 - Term
|
5.00%
|
05/01/2017
|
$1604.54
|
May Adjust Periodically
|
May Adjust Periodically
|
06/01/2017
|
396
|
|
So, years 8-40, our monthly payment will actually be slightly above what we were paying prior to the modification, but it will be a Principal & Interest payment, and it will be fixed.
Ultimately, I am relieved that we will have a lower payment our first seven years, and that we now have a fixed payment for the remainder. It is certainly an improvement from our current situation. We are extremely fortunate to be one of the few who have been offered a reasonable modification.
As an owner/agent, it is very different when you are on the other side. I can't help but wonder, though, if this is the right course for us to take? We have not made the best financial decisions in the past, and it's time to start making the right ones!
Looking at the numbers, I can't help but feel that modifying our loan is more of an emotional decision and still a risky financial decision. According to the payment schedule, we will not have paid down our principal down to today's current market value until 2033. We are "stuck" in our home for a very long time. We will not be able to sell our home and break even for 15-20 years, unless the market seriously turns.
Fortunately, on the other hand, we don't want to sell. This is where we want to raise our family for many years to come. Hopefully, by 2033, the value will have appreciated!?
We love our home. We don't want to move. But our credit is trashed now and if we are going to "make a move" (i.e. short sell), now would be the time. We managed to successfully short sell our other three properties. So, this is it. We really, really need to be on the path to financial recovery and hopefully, eventually, debt free financial freedom!
So, fellow ActiveRainers, take the emotion out of it and advise me, please!
|
REal Estate Needs. REal Life Solutions
|
Do NOT be foreclosed on! Avoid foreclosure. The Bank Pays us to Short Sell your Home.
Want to find out more? www.shortsalemyphoenixhome.com
Jessica Sulliman & Randy Curnutt
602-677-7977
www.ShortSaleMyPhoenixHome.com
www.SunshineSpecialists.com
www.jessicasshortsales.com
About the Author...
This article was provided by Jessica Sulliman, a Nationally recognized Realtor and Certified Short Sale & REO Specialist. Jessica can be reached via e-mail at jessica.sulliman@ashbyrealty.com by cell phone or text message at 602-677-7977. Jessica has helped thousands of people buy and sell their home. For Arizona real estate and homes see www.sunshinespecialists.com or www.jessicasshortsales.com. For more info regarding short selling your home, please visit www.shortsalemyphoenixhome.com.
Specializing in the following Metro Phoenix areas in Arizona: Queen Creek, Gilbert, Chandler, Mesa, Scottsdale, Apache Junction, Gold Canyon, Tempe, Florence, San Tan Valley, Coolidge, Casa Grande, Eloy, Maricopa, Ahwatukee.
Check out my blog: http://jsulliman.activerain.com
