Denied, didn't pass NPV. Any options to appeal?

[winslow]

Hi. I was just denied for a mortgage modification (not re-fi) for having "too much equity." I was able to put a lot down (loaned from family members) to make the payments manageable, but my co-op fees have increased by 28% since I moved in and we've had a bunch of expensive assessments, so I'm no longer able to afford my place (my salary's stable but tiny). Sure, according to the bank I would still be able to sell (and probably lose what we put down), but I'm living in the Washington Heights area of New York, above Harlem, which is as affordable as it gets--I couldn't afford any other apartment, even in Brooklyn or Queens. Do I have any options for trying to appeal? HUD or another department at Chase? I guess I'll try for a regular refinance, but the closing costs are prohibitive, considering I'm down to less than $1000 in checking/savings. What's my strategy from here?

I thought the point of this program was to help people stay in their homes, not kick them out if they decide it's cheap to foreclose on you!

Thank you for any advice.

[imlars]

Originally Posted by winslow

Hi. I was just denied for a mortgage modification (not re-fi) for having "too much equity." I was able to put a lot down (loaned from family members) to make the payments manageable, but my co-op fees have increased by 28% since I moved in and we've had a bunch of expensive assessments, so I'm no longer able to afford my place (my salary's stable but tiny). Sure, according to the bank I would still be able to sell (and probably lose what we put down), but I'm living in the Washington Heights area of New York, above Harlem, which is as affordable as it gets--I couldn't afford any other apartment, even in Brooklyn or Queens. Do I have any options for trying to appeal? HUD or another department at Chase? I guess I'll try for a regular refinance, but the closing costs are prohibitive, considering I'm down to less than $1000 in checking/savings. What's my strategy from here?

I thought the point of this program was to help people stay in their homes, not kick them out if they decide it's cheap to foreclose on you!

Thank you for any advice.

You can start all over from the beginning and resubmit a request for a modification. Why can't you refi?
You have to think like a lender. If someone has access to a large amount of cash for a down payment they don't need a modification, they just want one. This is not like putting a large down payment on a home to get lower monthly payment. You need to convince them that you cannot afford the loan as it is and that they will lose money by not working with you. You need to tweak the numbers to fit into the guidelines for a modification. You don't want a large surplus, nor a large deficit. Come as close to breaking even as you can, but make it believable as they often will require proof.
Unfortunately you need to realize that you signed a legally binding contract with the lender when you signed your mortgage papers. If you default on that contract the lender is not legally bound to do anything to help you as you have broken the agreement by defaulting.
You can't hide equity in your home, but you can fail to disclose other equity, such as cash from family members. Never disclose that you have more than one full mortgage payment to contribute toward a modification unless you are in excess of 6 months down on your mortgage. Once you go over that 6 months the lender may require up to 30-50% of the delinquent amount as a down payment, depending on what the hardship is. If they used the NPV was this an attempt at the MHA?

[snapple candy]

imlars,
Unfortunately because you do have equity, the bank wont really have any loss and therefore are not motivated to offer you a modification. Those co-op fees sound like they put you over. You are in a tough spot. If you can qualify for a refi, you are probably better off going that route. You also may want to reapply and run it up the flag again to see where it takes you.

[cachase]

winslow - how long did they take after your mod application to give you his decission? If you go for the refinance HARP - home afforability refinance program check if you qualify for that.

[julier883]

I will be in the same shoe, but I still applied yesterday. My hope is to convince Chase to work with me by providing me with an in-house modification. We borrowed large sums from family members towards the downpayments as well, so have "equity" in the house.

[winslow]

imlars: trust me, I don't have access to any sum of money other than my measly checking account. I can try for a refi, though I can't afford the closing costs and the current interest rates still wouldn't get me to something I could afford. You and snapplecandy are right that the bank won't lose any money by foreclosing on me and that is why I was denied. I assumed it was the NPV calculation that they did but I actually don't know. I've just spoken with them on the phone and they said I was denied for having too much equity. Believe me, I'm grateful for having equity, but what good does it do me when I'm already in the cheapest neighborhood in the city? It's not like I can sell and downsize. There's nothing else I can afford in this city.

cachase: It took just under 6 months to get an answer (if you're still waiting, I wish you luck!). HARP isn't an option for me as that's only for people who are underwater.

julier883: good luck! You might end up in the same pickle I'm in, but there aren't supposed to be equity limits for the mortgage mod, only for the refi program. If you're denied, contact your local HUD office. Mine has already responded to me, and I only emailed today. If they tell me that I don't qualify, I'll believe them, but the banks are obviously going to act out of self interest and have only approved 12% of those who've applied and the percentage who are eligible for them is much, much higher. I'd rather hear from a government agency that I'm ineligible, because the banks are using too many covert reasons to deny people.

[cachase]

HARP program qualifies upto 125% LTV if your loan is funded by Fannie or fredie.

[julier883]

winslow, please keep me posted of the response you recieve

[flagirl4444]

You shouldn't have to pay the closing costs out of pocket. They can add that to the loan.

[darkdays]

Originally Posted by winslow

Hi. I was just denied for a mortgage modification (not re-fi) for having "too much equity." I was able to put a lot down (loaned from family members) to make the payments manageable, but my co-op fees have increased by 28% since I moved in and we've had a bunch of expensive assessments, so I'm no longer able to afford my place (my salary's stable but tiny). Sure, according to the bank I would still be able to sell (and probably lose what we put down), but I'm living in the Washington Heights area of New York, above Harlem, which is as affordable as it gets--I couldn't afford any other apartment, even in Brooklyn or Queens. Do I have any options for trying to appeal? HUD or another department at Chase? I guess I'll try for a regular refinance, but the closing costs are prohibitive, considering I'm down to less than $1000 in checking/savings. What's my strategy from here?

I thought the point of this program was to help people stay in their homes, not kick them out if they decide it's cheap to foreclose on you!

Thank you for any advice.

I wouldn't give up on a mod yet. Did you try the "mod in a box" npv test? I have equity too and there is no disqualification based on equity. You can put your house on the market and it won't sell for 2 years digging you further in the hole so your equity doesn't help you. call your lender again and see if they still give you that reason. It could have been a rep who just said that but may not be the reason you were denied but was just something the rep said to give you an idea on what to do since you were denied. You said your income is small but would you be able to pay 31% of your income for a payment and would that payment make sense in relation to your loan?

[Marie T]

darkdays...I think equity does matter because if the bank does the NPV and there is enough equity that it looks like they can sell it in foreclosure and come out better than doing a modification, they will go the foreclosure route. You can play with the "mod in the Box" using different values on the house to see if it passes the NPV test but that is tough since we will never know all the variables the bank is using ...we are still guessing. There is a line on there too (I think ...haven't done it in awhile) where you put property taxes, insurance and maybe HOA fees so maybe putting in the co-op fees would help too.

[darkdays]

Originally Posted by Marie T

darkdays...I think equity does matter because if the bank does the NPV and there is enough equity that it looks like they can sell it in foreclosure and come out better than doing a modification, they will go the foreclosure route. You can play with the "mod in the Box" using different values on the house to see if it passes the NPV test but that is tough since we will never know all the variables the bank is using ...we are still guessing. There is a line on there too (I think ...haven't done it in awhile) where you put property taxes, insurance and maybe HOA fees so maybe putting in the co-op fees would help too.

I am not saying equity doesn't matter, I'm saying it does not necessarily equal npv fail. There are alot of factors in there not just how much is the equity. I think you are correct with regard to the prop taxes and insurance playing a factor. It also has to do with how long it will take to complete foreclosure in your state and the REO discount percentage, etc. Using all the worst scenarios, npv is pass with a mod value of only $2,000. which I am sure is not what the investor wants to hear but if I play with the numbers using better case scenarios (such as reducing my re-default likelihood from 40% to 20%) that $2,000 number jumps to 25%. Bottom line, all I am saying is if having equity in the house were automatically a deal breaker there would be no circumstances under which you could get a npv = pass no matter how you play with the values and it would be a HAMP guideline to just automatically reduce the number of applications. The HAMP guideline of single family homes being up to $729K brings in mortgages with equity otherwise, payments on a $720K loan would have been very high. I put 30% down on my house and now my so called equity is less than 10%. If I had to sell today, there would be no equity in this market. npv also calculates how long it will take the bank to carry the house and property taxes, insurance and hoa fees on my house for 6 months will delete that equity so the bank won't be better off foreclosing but they are not that bright anyway.

[briknope]

I agree with Marie T. If you have equity, why wouldn't they foreclose? I hope some people don't lose sight of the fact that banks are not nice people and they are not in the business to help people. They want to get paid either the hard way or the easy way.

[darkdays]

Originally Posted by briknope

I agree with Marie T. If you have equity, why wouldn't they foreclose? I hope some people don't lose sight of the fact that banks are not nice people and they are not in the business to help people. They want to get paid either the hard way or the easy way.

This is the last I will post on this subject but I think trying to scare people who might have equity in their homes is unfair. It doesn't come down to a simple question of whether there is equity in your home or not because the analogy is that of the stock market. You have stock that on paper is worth $25 a share; you try to sell it but there are NO BUYERS. You can sell it if you need to find a buyer for $5 a share but you WILL NOT get the "paper" value of $25 a share. Same with a house-- on paper the house is worth $100 and your mortgage is $75. You have so called equity of $25, right? Well, once the bank has to sell at a 20% reduction because the bank doesn't want to wait the 1 year it will take to sell the house (NPV number not mine) and carry property taxes and maintenance for 6 monthsbecause it is taking 1 year for homes to sell what does the bank have left over other than poor business sense and a greater loss? $100 at 20% reduction = $80 minus property taxes, insurance and maintenance. In my case, the property taxes, insurance and HOA fees are going to run the bank $1,000 a month so my so called equity which is down to $50K will be absorbed and hit the negatives when the 20% deduction occurs and they have to carry my house every month. In a good real estate market it would make sense for the banks but when my lender is carrying 3,000 homes on their web site and THOUSANDS more of them on their attorneys websites, they should figure out how to help themselves.

[MyHAMP]

Originally Posted by darkdays

This is the last I will post on this subject but I think trying to scare people who might have equity in their homes is unfair. It doesn't come down to a simple question of whether there is equity in your home or not because the analogy is that of the stock market. You have stock that on paper is worth $25 a share; you try to sell it but there are NO BUYERS. You can sell it if you need to find a buyer for $5 a share but you WILL NOT get the "paper" value of $25 a share. Same with a house-- on paper the house is worth $100 and your mortgage is $75. You have so called equity of $25, right? Well, once the bank has to sell at a 20% reduction because the bank doesn't want to wait the 1 year it will take to sell the house (NPV number not mine) and carry property taxes and maintenance for 6 monthsbecause it is taking 1 year for homes to sell what does the bank have left over other than poor business sense and a greater loss? $100 at 20% reduction = $80 minus property taxes, insurance and maintenance. In my case, the property taxes, insurance and HOA fees are going to run the bank $1,000 a month so my so called equity which is down to $50K will be absorbed and hit the negatives when the 20% deduction occurs and they have to carry my house every month. In a good real estate market it would make sense for the banks but when my lender is carrying 3,000 homes on their web site and THOUSANDS more of them on their attorneys websites, they should figure out how to help themselves.

Absolutely right. Another thing to consider: How long does it take to actually find a new buyer, at what price and how much is the maintenance cost for that period and what does the realtor charge?

A foreclosure doesn't mean the lender gets the assumed value of the property to re-invest at the same day the house is foreclosed. That can take months - sometimes years.

[briknope]

If the said home has equity then it would most likely go up for auction about 3 months after the foreclosure is filed. If the bidding goes for more than what is owed, then the owner gets a check and the bank gets the principal owed. One would have to assume a home with equity would easily auction off for more than what is owed on it. And if not, then the lender gets most of it and writes off the rest OR sues the borrower for the deficiency.

Possibly it differs state by state here and there.

[MyHAMP]

Originally Posted by briknope

If the said home has equity then it would most likely go up for auction about 3 months after the foreclosure is filed. If the bidding goes for more than what is owed, then the owner gets a check and the bank gets the principal owed. One would have to assume a home with equity would easily auction off for more than what is owed on it.

I certainly wouldn't make that a general assumption - not in the current market-situation and not unless there is A LOT OF EQUITY.
I would also be careful when assuming that a house with equity sells very fast. Again, not necessarily true in today's market.
So how do we define "equity"? That could be $100K or $1K...so taking "equity" or "no equity" as the dealbreaker for the NPV CAN be very misleading. I guess that's what darkdays meant.

We also have to keep in mind that the value that has been assumed to determine the amount of equity prior to a foreclosure won't be the amount the lender gets when the property is going up for auction. How much of that equity (if any) is going to "survive" set auction is also hard to tell.

The NPV is very complex: The question isn't simply "has it equity now?" - it's more of "how much will be left after a foreclosure/auction and when will the money be available to re-invest?".

Originally Posted by briknope

And if not, then the lender gets most of it and writes off the rest OR sues the borrower for the deficiency.

Which brings us back to the NPV. Writing off or suing certainly doesn't favor a foreclosure when it comes to the NPV. If somebody lost his/her home due to a foreclosure, it's very unlikely the lender will get money from suing.