Thursday, July 23, 2009

Loan modification denied; now what?

Today I received a letter from my bank denying my request for a loan modification. The reason given:

"This request would be outside of your investor guidelines."

When I called to ask who actually owns my loan, who is this investor with guidelines I didn't meet, they couldn't tell me but gave me an address to write to and inquire. I was also connected to the Loss Mitigation department, and they said they could look at my information to see if there was anything they can do. I have to resubmit the exact same information that I already sent to the loan modification people.

I am a good risk, I guess. Although my house is deeply underwater ($150,000 or so) I am making the payments, including extra principal payments, and I have steady income and no other debt (40% of my gross income for shelter is all the debt I can handle!). Maybe they figure that they shouldn't lower my rate since I'll keep making payments at the current rate. The conversion date of my mortgage from interest only to principal and interest is too far away for their short term thinking.

What do I do? Wait for my home value to stop sinking and return to its original value plus the 6% realtor's fee (don't forget, you don't break even on selling a house if you don't sell it for it's purchase price plus realtor fees)? Do I send my mortgage servicer jingle mail? I'm not sure what I want to do. I need to learn more about the system so I can figure out how to work it. Mortgage companies are in business to take care of themselves, not me, and I need to figure out how to get them to believe that taking care of me is taking care of themselves.

In the meantime, I am planning to send the requested information to Loss Mitigation. When I make phone calls to the bank, I write down the date of every contact and what the call covered. I stopped the automatic payments for my mortgage. This means I will have to remember to make the payments every month but I think I can handle that. I also decided to stop making extra principal payments for now. I'll set the money aside so I can continue if I change my mind. I'm glad I decided to hold on to my income tax refund instead of using it to pay principal!


  1. One reason your house lost value is because other irresponsible people stopped making their payments. And you would do the same to others? Ironic.

    And this deliberation comes right after complaining about your sister spending money on her wedding. Forgive me, but you sound very hypocritical and self-righteous; her error is minor at best and foreclosing on your house would destructive to many, many others.

  2. Many homeowners are losing their homes because of the current economic crisis. The best way they can do is to apply for a loan modification to lessen the burden of paying high amounts of their monthly debts. Good thing there are lots of companies nowadays that can help them to modify their existing loans.

  3. I'm not condemning you, this is just how I view it. No one guarentees when you buy a house that it will 1) hold value or 2) go up in value.
    You contracted to pay the price you did at the rate you did. Do I think it sucks? Absolutely. Do I think that means people are entitled to a modification or are right to walk away? No.

    And though anon stated in a less then nice way, it does have a ripple effect. Sure buyers can get a good deal but it does drop property values in general that takes a long time to recover. It does make it harder for people to get loans because lenders have lost so much money. In essence the more people who do it the longer recovery takes.

    It's nice to fantasize and everyone does it. I just hopethats not the route you wind up taking. Doing the right thing is often the hardest thing.

    Best of luck.

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