Hey Guys,
I have an investment property in Queens NY, $480K loan balance, that’s taking money out of my pocket ($1000/month), I’m looking to short sale it and not default and ruin my credit. Indymac bank keeps giving me the run around on a modification since May of this year. I’m current, but can’t continue to make the payments.
Are those basically my 2 options? Appreciate any guidance. Thanks in advance.
Jay
It’s tough to do a loan modification unless you are 3 payments behind on your mortgage. They won’t even send the paperwork to the loss mitigation dept. until they see your behind on the payments. If you have equity in the property you may want to look into refinancing and doing an interest only loan. The payments on an interest only loan of $480k at 5% would be $2k a month plus taxes.
Are you upside down on value? Do you have a true hardship? On investment property, it’s going to be very tough to get a short sale without both answers being a strong, “Yes”.
Would LOVE for someone to tell me I’m wrong!
What type of property? Are you upside down? Is the interest rate extreme?
Can you raise rents… Is the 1000 neg after tax deprecations considerations? adjust your dependents… Can you sell it to your tenant/a tenant on a wrap… Owners tend to pay more per month then tenants… Can you advertise it as a quick 1031 for someone falling out of escrow and needing to position their cash fast.
I am upside down on the property. It’s valued about $425K and $480K owed on the loan. The bank sent me modification paperwork, but it’s been about 7 months of the run-around and still no answer. They just keep saying it’s in “Review.” I do have a Hardship, partial loss of income, non-paying tenant.
I have an 80/20 loan, rates are pretty high. 7.25% of the 80% loan and 10.25% on the 20% loan.
Is anyone seeing modifications out there for people that are technically “current”? Indymac says yes, I don’t believe them.
I would like to help you with your situation but there are two different issues with this post.
#1. You are saying that you want to do a short sale.
#2. You stated that the lender is not calling you about your modification.
I think if we justify speaking merely about the loan modification and you want to do a short sale then doing the loan modification may be pointless and a waste of time and the banks resources and they will be more likely ask you to contribute if you do end up doing a short sale vs. getting off scott-free if you had just gone the short sale route to begin with. Again as this being an investment property they may still ask you to contribute depending on the size of their loss, if there is MI (mortgage insurance) or if they feel you have no hardship.
In every situation there is a way to present your case. I do this everyday for people that were never behind in their mortgages and sometimes have 90k+ in the bank with currently stable jobs.
Now, At Indymac I am surprised that they even let you apply for a loan modification as this is a rental property. I work with them all the time and I do have a contact in a special department that does do loan modification on investement properties but the company as a whole has a policy where they always tell you that this is not an option. I know that I even work with upper management in a department called Corporate Customer Experience department and they too will advise you that a loan modificaiton is not an option for an investment property. Rounding back around they do have a small department that does do loan moidifcations on rental properties but up until recently they did not even allow loan modifications to be done on homes that were not delinquent. We can now do loan modification on homes that are not behind but could be. About the rates you currently have they are definitely high and most likely can be worked with.
Going towards the short sale side of things… You do not need to be behind. Don’t believe the hype around having to be delinquent on your mortgage. It is all about how you build your hardship.
We process these types of deals (both loan modifications and short sales) for our clients on a regular basis with no costs up front. Anyone who will charge for these services in many cases can be a scam so be careful.
A foreclosure is certainly worse for your credit than a short sale, but your credit will also certainly take a big hit with a short sale. Some argue a short sale is nearly as bad.
Thought about a Deed in Lieu?
I would first try the Deed in Lieu. Simply giving the house back and walking away with credit intact is the easiest way, however a short sale may be your best option if Indy doesn’t entertain the deed in lieu.
I work with an attorney and team of experts that do these type of loan modifications all the time. There is no money involved. I would be happy take over your property if we can get a reasonable modification for you. Win-win!
If there are any other investors out there in this same situation and would like to get out from under properties that have negative equity and/or you are taking a loss monthly, please feel free to contact me.