I work in the financial industry and my first and second mortgage rates are about to skyrocket according the companies. I will be losing money on the property as I was barely breaking even before. I do not want to lose my job by doing a short sale or foreclosure can anyone recommend anything that might work? Thanks in advance.
The bigger the investment property the more likely the bank will modify the loan. The more money owed the more likely they will adjust.
Can you show low/no equity in the project due to a market change? Local vacancy rate dip, etc?
I know two multifamily owners with practically no equity in the project that were able to successfully renegotiate the interest rates. One was 72 units. Another was 222 units.
Frankly, you’re gonna have to be ready to play hard ball with these people. You’ll find that they don’t care what you’re problem is… So, you’re likely going to have to “make” them care. That could mean deliberately missing a payment… or be severely late… which will get their attention.
I’m not sure how to respond to your employment being tied to the financing, but I’m getting that your job is tied to your credit, and you are personally liable for the loan. Well, reality is reality. If the project is going down, and taking you with it, what choice do you have here, except to go for broke in securing a loan mod?
All things being equal …the old saying that, “He who cares least wins” would be the mantra of the day for you. On paper, if it suits you, it’s better to make sure the bank knows you “care less” than they do. After all, who’s actually apt to lose more? The bank, or you? I would say the bank, but you would know better.
I feel your pain.
I have been doing a lot of research that missing a payment will not do anything to help with a loan mod is this not true I have heard that it just hurts your credit.
The Loan Modification process has several stages. It depends on what stage you are in. If you are at the beginning, you cannot afford to miss a payment as they will cancel the process. If you have alreday made it through and the loan has been modified, then they will usually give you a 30 day window to work with for your payments. Call them and ask.
They are not willing to work with me at all. They said maybe if you miss a payment they might work with me but in googling I found that they usually dont work with you anyway… I have a first and second and the second mortgage interest rate is 11% :shocked
It depends on the lender. The smaller the lender, the more responsive. That’s always been the case. If you’re dealing with BOA, GMAC, etc., you may end up having to default before you get the attention of the lender…
There are several variables involved with this approach. The bank gives the loan servicer the right to tack on a bunch of “up your butt” fees if you actually go into default.
I’m not an expert with these situations, but I’m around those who are, so take it for what it’s worth.
How much equity, by percentage, do you have in the property?
What type of property is it? Duplex, house, apartments, or what??
First is with HR block second with 11% is with some little company that used to be option one. I owe $200k on the house and it came back at around $135K
Well, apart from what the lender has told you thus far, your chances are good at either getting a short sale, or better, simply modifying the mortgage interest.
If you’ve got the patience… I would consider immediately accelerating the repayment of the loan (immediately, as in whenever you know where you are with the bank), by making bi-weekly payments. That is, you divide the total payment in half, and pay the first half on the first and the second half on the fifteenth.
Then, if you want to get crazy, you could pay one extra principal payment at the end of the year (or make a 1/12 of a principal payment each month) and apply it to the principal balance.
Most banks understand what you’re trying to accomplish and will either set it up for you, or you simply do it on your own. As long as the full payment comes in before the deadline of the 15th (or 10th?) the bank will apply the payments as instructed.
What’s the reason again?
Well, do that for about 60 months, and watch the principal drop like a rock. In no time, you’ll be above water, and the portion of your payments will increasingly apply to the principal. It’s sort of the equivalent to a 12-13/yr mortgage without being forced to maintain the accelerated payoff schedule.
Meantime, I would work as hard as possible to get the interest rate adjusted. BTW, whomever owns that second, is screwed.
Could you skip payments on the second? If so, maybe there’s a friend who could make an offer on the 2nd mortgage for cash at like 10% of the balance. This is NOT an unusual strategy for mortgage note buyers. Chances are the 2nd has been sold. Even better news.
Just a couple of ideas. I’m not sure you can protect your credit with any of these approaches in the short term.
That’s all I’ve got.
I actually have a friend that would be willing to buy the second at a fraction of the amount how would I go about doing that.
about your strategy I am an idiot and did an interest only mortgage so would your strategy still apply?
I work in the financial industry so my credit is very important and cant have a short sale or anything …
BTW I told manager on duty that I was on my way to file a chapter 7 ( i think that is the one were the second mortgage company is screwed and gets nothing) and he told me that they dont care and will take the loss . Any other ideas the ones you gave me so far are great thanks so much.
Well, everybody tells the banks they’re filing bankruptcy! I can believe that didn’t phase him one bit. Usually that just means a delay of about 2 months, but rarely means anything in the end. Meantime, still, you’re most likely not talking with a mover and shaker at the bank even yet.
He’s the lackey that handles pre-foreclosure “threats.” :banghead
There’s several layers of bureaucracy. You’ve just touched the surface. To make matters worse, the bank probably doesn’t own the loan anymore.
Meanwhile, can you pay principal and interest if the 2nd were gone?
If so, then start planning on removing the 2nd. Your friend should beat everyone to the punch by contacting the 2nd TD holder and see if they’re interested in selling it for a discount. They might be, for like 90% of the balance …or they won’t be at all.
Then… stop paying the 2nd. Wait a month. Your friend will contact the 2nd holder again (or the 2nd holder might call your friend). They’ll get very interested in talking when they discover there’s no equity, and they have a chance at recovering 10% (or less?) of the balance on the loan. They’ve already collected a large part of the principal back over the course of the payments made already… FWIW.
If removing the 2nd has no bearing on your ability to pay principal and interest on the first… then it’s time to pack things up (meaning letting the property go), while pursuing a loan modification. This means you stop paying on the 1st and 2nd TD’s.
Your credit is being damaged, so it’s time to pocket the rent money. Have a trusted friend option the property for five years for a price that equals the loan balances, and give him a lease with the ability to sub-lease. Assign the rents to him. Put the rents in a savings account (without your name on it). After the foreclosure, short sale, or successful loan modification, get the rent money back, cancel the option and lease with the friend (stipulated in the agreement that you have the right to do). Put your renter on a three year lease, if possible.
If the worst happens and the bank forecloses, the short sale negotiations will have prolonged the process for likely 18 months, or more. If the property is being properly maintained the bank is very likely to be slow at doing anything. And of course the bank knows full well, that delaying an answer on your short sale or loan modification is trashing your credit even more… And they love that.
At the same time, the banks have a guy that checks on their defaulted inventory, and if nothing bad is happening to it, it’ll remain on their back burner for a trustee sale …especially since a foreclosure forces the bank to redefine the actual, paper equity they have in this property …and they don’t want to do that …soon.
So, continue to weigh your options, and see if attempting to buy out the 2nd is doable, or worthwhile in the first place. BTW, your friend “can’t” know you, or have an official arrangement with you, if he is to be successful getting that loan discounted. If the bank senses, or becomes suspicious that your friend is doing you a favor, they could get in trouble by negotiating with your friend or LOSE their jobs …despite being anxious to salvage something out of a dead deal. So…
These are complicated and detail ridden options to consider, however, your own job is on the line here, and because the government interfered with the real estate market on an unbelievable scale and upended your investment business… I would do everything legal to salvage the situation otherwise.
That’s all I’ve got on this. You’re actually in a good position, since the bank has more to lose than you do, except for the job thing.
Isn’t this one credit issue explainable? Does everyone in the financial sector, who has lost their house automatically lose their jobs? That seems extreme to me, but I really don’t know your employment market whatsoever.
Sorry for the long post, but there’s a lot of variables at play here…
Would you be willing to talk to me on the phone about this or through aol aim or something? I really appreciate it alot thanks so much. BTW does my friend just call the bank and ask to talk about buying the loan how does he go about this… Wouldn’t them find it weird he wanted to buy that loan and that property? So please let me know I really really appreciate this so much.
Wow, that is a scary situation. It really pisses me off that employers actually judge people based on their credit score. I mean…seriously. People make mistakes, have big medical bills, divorces happen … and all those things destroy credit. And the fact it may effect your enjoyability to me is just nuts.
Good luck with the whole situation. I don’t have much advice for you since it sounds like you have already discussed all your options, except to say in a worst case scenario you might let the building go and just don’t tell your employer. Hopefully they won’t find out about it.
On your question… Yes, your friend just calls the bank and asks who handles mortgage payoffs. Then go up the food chain, until you get to the actual person who makes decisions. This is NOT necessarily simple and fast, and whom you get to talk with depends on the disposition of the loan. Otherwise everyone in default would be trying this.
There’s no “file” on this loan yet, since it’s current. Your friend may have nobody to talk with until a default occurs… Furthermore, in some instances that I’m aware of, the 2nds won’t talk about discounts until the 1st TD is about to go to trustee sale. That would be a sucky thing, because the fees and costs tacked on to a 1st mortgage default are astronomical.
Frankly, the 2nd is most likely willing to discount their position when both the 1st and 2nd are in default and a trustee sale is scheduled.
I’m outlining this alternative, because your situation is not just about damaging your credit, but also losing your employment.
Why would you lose your job by doing a short sale or foreclosure? Even if your employer holds the 1st and 2nd I don’t see you getting fired. Nonetheless you should create some backup plans for employment.
Call the bank immediately and ask about loan mods. Be persistent, you will run into walls but you can’t give up if you want it to happen. Recognize when the right time to do a short sale or foreclose is. Do not spend a penny of your savings on a drowning ship, seriously, not a penny. If the investment cannot carry it own weight then it is dead weight. Making the decision to lose all your savings and rack up debt by following a sinking ship is very unwise. I hope this helps. Best of luck!!
I am actually looking forward to Shortsales or either second mortgage but, after hearing this conversation here I am a bit afraid as, I have huge family and dont want to get into this situation. :rolleyes