If there is a bridge loan on a property and it comes due. What happens. Will it usually be tied to the first home only or will it affect both houses? The houses are in different towns.
When the bridge loan comes due and borrower can’t pay, then lender has the right to foreclose on the collateral property. If both properties were used as collateral, then lender can foreclose on both in order to collect the oustanding obligation. It doesn’t matter which town the property is in as long as the bridge lender has a lien recorded there.
Is the bridge loan with a hard money lender? You can negotiate for an extension of the loan - heck you can do that even with a conventional lender these days.
An extension was given once with one offer that did not close. Asked for a second extension, but they said no. Got a second offer, but buyer could not get financing. Bridge loan was up in Aug. No forclosure started yet. Bank says they want to work with homeowner.
homeowner is not in a position to re-finance and keep it for a rental. According to the bridge loan they could not rent it out so they have been trying to keep up all payments on both houses, plus utilities, taxes, etc.
Market has taken a dive and they owe more than it is worth on first house and would possibly owe more than the second house is worth also. Having trouble getting anybody in the door now to look, let alone to make an offer on the first house. They would like to keep the second house if at all possible.
So HO got 1 bridge loans using 2 different properties as collateral? Unusual for a conventional lender.
You could have homeowner apply for a “special forbearance” on each property. The forbearance would allow a smaller amount to be paid for a period of time, like 6 to 8 months. It would include the interest and some amount of arrears. At the end of the forbearance period, the lender would require either a refi or disposition of the property through a regular sale or short sale.
The request has to be sent in writing to the lenders and include financial statements and supporting documents (bank statements, 2 years of tax returns, pay stubs, etc.) The advantage to writing for a forbearance is that if the lender says no, they may write back saying they will consider a short sale - which would mean a more rapid approval process.
If they ask for a special forbearance on both properties will they lose their original % rate on 2nd property. They were paying two payments. Intrest only on the first home and a regular house payment on the second loan at like a 5.4% rate. They don’t want to mess up the deal on the second. With the bridge loan probably showing as late on their credit I doubt they could still get that interest rate today.
I will tell you that you give good advice. You are the first one to even throw out that option as a possibility. Most people say they may have to go to bankruptcy if the bank won’t work with them
It depends. If the lender on the second house gives them forbearance, they may require a re-fi at the end of the forbearance period, in which case they would have to pay whatever interest they can qualify for at that point. However, they may still be able to keep their original loan if for instance, they are able to pay down the principal with a large chunk of cash. Some lenders may be amenable to reinstating a loan with say 3% of principal paid down.
A lot can change in the next few months, so homeowners that really want to keep their home should concentrate on getting a compromise from the bank to keep them in good standing on the loan and worry about interest rates and re-fi’s later. The rule of thumb, going forward in this credit market is to bring the principal amount down - so that means earning more cash and saving it during the time the banks are willing to give you forbearance.
One couple that is doing something very smart is budgeting their lives as if one of them lost their job. So, they are finding a way to live on one income, while still making 2. The money from the 2nd income all goes into paying down debt and mortgage. This was an old concept from the 60’s where one spouse’s income was set aside for retirement instead of being spent on living expenses. Sounds strange now, but still makes sense to do.
One way to ensure the banks will work with you is to send things to them in writing. That means hardship letters and supporting documentation. Send by return reciept mail or get fax confirmations. Also, don’t be afraid to “escalate” your request to a supervisor or copy the president of the company on your letters. Keep a careful log of all phone conversations and try to get bank’s responses in writing whenever possible.
Good luck!
Thanks. Both the bridge loan and the new home are with the same lender. They have their original paperwork.They have a home equity loan app. There is a letter saying the first loan is paid in full. They have the copy of the mortgage marked “paid”. They have the letter that says: attached are the following, Home equity loan agreement. They have a copy of a TFS equity loan #. With the first lien to lienholder for the approximate balance owed. The balance is the balance that was of the first Mortgage. There is an open-end mortgage with a conveyance being the first property as the secured debt.
They also have their loan app. for the new house. which lists the first house as an asset with a lien on it. They got the equity out of the first house for the DP on the new house. The truth in lending statement for the new house states that the security interest is the new property.