Are MHA loan mods non-recourse?

marielle · 11-17-2009, 03:46 PM

My fiance just received his loan mod documents from BofA. It is the standard form 3157 from Fannie Mae:

https://www.efanniemae.com/sf/formsd...e/pdf/3157.pdf

But at the bottom of section 3.C., there is this statement that is not in form 3157 but tucked into his doc (all in caps):

Quote:

THIS LOAN IS PAYABLE IN FULL AT MATURITY. YOU MUST REPAY THE ENTIRE PRINCIPAL BALANCE OF THE
LOAN AND UNPAID INTEREST THEN DUE. THE LENDER IS UNDER NO OBLIGATION TO REFINANCE THE LOAN AT
THAT TIME YOU WILL THEREFORE, BE REQUIRED TO MAKE PAYMENT OUT OF OTHER ASSETS THAT YOU MAY
OWN OR YOU WILL HAVE TO FTND A LENDER, WHICH MAY BE THE LENDER YOU HAVE THIS LOAN WTTH.
WILLING TO LEND YOU THE MONEY. IF YOU REFINANCE THIS LOAN AT MATURITY, YOU MAY HAVE TO PAY
SOME OR ALL OF THE CLOSING COSTS NORMALLY ASSOCIATED WITH A NEW LOAN EVEN IF YOU OBTAIN
REFINANCING FROM THE SAME LENDER.

The maturity date is 28 years from now so this makes no sense. He is very worried that the bank wants to turn his loan modification into a recourse loan--meaning they could take his other assets if he defaults again, and he is very likely to default again because he is under water by 200K and growing every day and his job will probably require him to move in the next couple of years.

Does anyone have any clues to what is going on here? Thanks

jakelabry · 11-17-2009, 06:56 PM

Sounds to me like there is a balloon payment at the end of this. Was there any forbearance of principle?

caldwellb02 · 11-17-2009, 06:59 PM

Did he sign the docs yet?

marielle · 11-18-2009, 12:18 PM

He has not signed the docs yet and there was no forbearance of principle. He still owes 200k more than the property is worth.

He consulted with a RE attorney yesterday and the loan is still non-recourse so I expect him to sign the docs soon.

I figured out that the statement all in caps is a balloon note which doesn't apply to his mortgage. I don't know why BofA would insert that into the 3157. If he follows the payment schedule, it will be paid up at the end of 28 years so it doesn't make sense. There is no balance at maturity.