[lookinghard]

I've been looking at this site for several months as I was going through my process. A naturally paranoid person, I decided to wait until I had my results before I posted. I had as complex a situation as any I've seen here and more than most, and got excellent results on both my first and second. First; the background. My wife and I got a construction loan to build our house in the Sacramento area at the end of 2005. The loan was for $1.5 Mil with Indymac Bank, and was a stated income loan with a "take out" built in. I am self-employed as a mortgage broker, and my wife is self-employed/part owner of a corporation as a dentist. We also have several rental properties and two other businesses with partners, so our taxes are quite complex. At that time we had very strong income and felt confident we'd be stretching but within our means.
A bit over a year later we'd finished construction and our loan rolled over to a 7/1 ARM with an interest-only payment of about $7950. We paid taxes and insurance separately. By that time in 2007 it had become obvious my business was on a significant downturn. My 2006 income was about 45% of my 2005 income. Thinking it would be a short-term downturn like I'd seen in the past during my fifteen years in the business we took a second with National City for an additional $350K to complete the finishing details on the house and for capital for some of our other business ventures.
Fast-forward a year and by spring of 2008 I’d concluded we were in an unsustainable situation. Our other business interests were down severely, my mortgage business had continued to stall, vacancies were up in the rentals and we were digging hard into our savings to keep rolling. I could see something had to change or we would be entirely drained of our savings and losing our main house and possibly more of our properties. Facing that likelihood I decided to take risky action prior to that point. I decided to stop payment starting with the August 2008 payment on both the first and second mortgages on our primary residence. I also reviewed our rentals and figured we needed to get rid of our three worst negatives on those properties. I stopped making those mortgage payments and listed all three rental properties as short sales. I had contacted both Indymac and National City to see if they would do a modification or reduced payoff of the second (while I still had some savings left) and was told by both there was nothing they would do, but that I should continue to check back. I filled out the online financial info page with Indymac, checked back after the payments were 30 days late and was told that the investor (Lehman) wouldn’t allow a modification.
I had them look at the numbers and was told our income was far too high to get a modification anyways. One wrong thing they’d told me, however, is that they said to put the monthly gross rents in as income and then list the mortgage payments separately in the bills. That obviously made our total income look very high, even though the net out of the rentals was negative. In typical mortgage underwriting we’d use the net of gross rents times .75 minus payments, either as a bill if negative or as income if positive. I was also told that I needed to use the net income for my wife’s paystub, even though she is technically a W2 employee of their corporation. I reworked the numbers the way I figured a real underwriter would calculate things, backing out the three pending sale rentals, and resubmitted. I called back after the 60 day mark, as that’s what the FDIC write up indicated was the magic timeframe. This time I was told that we didn’t make enough and that we had a huge negative rather than the minor surplus I’d figured. I reviewed all the numbers again, making some minor adjustments, and waited. I figured I’d take one more run at it and if it still didn’t work I’d list the house as a short sale. At the 95 day late mark I called again. I went through all the numbers with the Indymac rep, she put me on hold, then came back and said I was approved for a modification! She said I’d need to send in a payment of about $5600 within ten days, and another by the same time the next month. She indicated the system showed that to be my new payment amount. She then said they’d mail out a modification package which I should complete and return as soon as possible and the remaining process might take another two to three months. I sent off the first check and settled back to wait for the modification package.
At that time I also contacted National City to see if they would take less to pay off my second. I gave them the same income and bill figures I’d given Indymac, and offered 10% as a settlement. They assigned a negotiator who was very pleasant to deal with. She said she thought the offer was much too low but that she would go over it with management. I had enough left in savings to cover an amount around there, but not much more. A few weeks went by with some further requests for information from them. Finally she said they would do a full release for $81,000, about 23% of the balance. I had about half that, using pretty much all of my remaining savings, so was thinking I was done with that prospect. Talking it over with family though I was able to borrow the difference. After getting email confirmation that it would do a full release of the lien I held my breath and wired off the amount.
Meanwhile the Indymac package had arrived, been filled out and mailed back. I followed up with the reps there on a weekly basis. For over two months there was no news, but then I got a phone call saying the modification was confirmed as approved. The payment would be higher than initially indicated, coming in at an amortized payment of about $7,000 per month with a 3.5% rate for the first five years, 4.25% for the sixth year, then 5.25% for the next 22 years. They had put the five missed payments (to the initial approval) on the balance. I thought it was a great deal, and though still a high payment with the second out of the picture it was doable in the long run.
Finally as of the end of February I had written confirmation back that my second was paid off and that the modification was complete. As a bit of a bonus Indymac directly applied all of the money I’d sent in to the principal and my first payment wasn’t due until May 1^st when I was really expecting April 1^st. One of the three short-sale rental properties has closed. The other two are still pending (both with Countrywide, a royal pain in the !@%?!!) but one way or another will be resolved by summer. To conclude, it can be done, the people you speak with don’t always know what the heck they’re saying, but if you’re consistent you can end up in a better position. Good luck.