CW Loan Modification

[tandm]

We also hired a loan modification group headed by an attorney. After calling into cw in the summer several times when we were still paying on time and getting nowhere, we decided this approach would work best for us. We are (hold your breath) upside down anywhere from $500,000 to $700,000. Our loan is for 1.1 million and when we got the loan, we had 20% equity in the house (1.4). Now there is no equity and the house is valued anywhere from $650,000 on the low and maybe $850,000 on the high.

For us, and I think for many people, these changing times require a new paradigm in thinking on home ownership. In the recent past, you owned your home and never ever thought about not making the payment. Why -- because there was so much at stake. Your credit, your reputation, your investment in your house. And you had an obligation that you'd made to yourself, your family and the bank to pay that debt back.

But now, if you find yourself seriously upside down in a loan, you have to wrap your head around the concept that you're really just paying incredibly high rent to the bank to live in a house that you can't leave because you can't sell it and pay off your loan. So you can choose to continue to live under these trapped circumstances or you can bridge out and investigate other options. Which is what we are all doing on this blog.

If you go to cw on your own, you can see from the blogs here that cw leads you around in circles day after day, month after month. It's obviously tremendously frustrating to do it on your own. If you're up for that, then by all means go for it. But think about it. Why is the bank going to listen to you so long as you continue to make your payments and they get their money? Why do they care that you're plowing through your savings and credit, etc., to keep up with your payments? Why do they care that you can't pay for your health insurance or car insurance so you can make their payments? You can tell the bank there's hardship, but they're getting their money.

The sad truth is that your case will not be considered seriously until you are seriously behind on your payments. Sure, they may offer a loan modification that puts your missed payments to the back of your loan and a little reduction in your interest rate after 6 months. But was that what you were really hoping for? Is that what you gave up your good credit rating, chased after them every day, had countless sleepless nights for?

Ourselves, we looked at our circumstances and realized we do not want to stay in our house, no matter what. The bank has some responsibility here too. It's a great deal for them if we stay in a home with a loan for 1.1 and make the payments despite the fact that it's worth (on a good day), say $800,000. That is a terrific deal for the bank. If only we would all just do that, it would be great for the banks.

But that doesn't work so well for our family. We could rent a place for $3500 and use the remainder ($3000) for, say, saving for our retirement since we just lost over $200,000 in equity on our house and are stuck here - forever. Or, we can stop making the payments (which we did), hire a group who does this every day, all day and are at least less in the dark than we are when dealing with these banks (which we did). Now, I just call once a week and get an update. Yes, things are as slow as molasses, but I'm not sitting on the phone for hours on end to find out my loan has gone nowhere. We are in the 12/1 program and do have a person assigned to the loan. Our financials, submitted by the group we hired, had to be resubmitted and updated to the 12/1 department as enough time had passed that cw wanted an update. We were in the office of the president before but our representative at the law firm wanted to get us into the 12/1 hope thing with cw. What will probably happen is we'll get an offer in a month or so. If the offer stinks, we'll refuse. Will cw come back with something better? That remains to be seen. Maybe they will as they prepare to sell the house at auction. We are nowhere near that, though. We have not been foreclosed on yet (and we are at 120 days past due).

As I understand it, if you stop making the payments, you should put some of the money aside because if cw comes back with an offer to our liking, than there will need to be some good faith deposit money to put down on the new loan.

Yes, your credit will suffer. You have to decide what is more important. Your good credit and staying in your home at all costs OR lose your good credit but be able to leave the house if the offer is just not good enough. Can you rent for less? That's probably the biggest question to ask yourself. If you can't, you want to stay in your house.

You do stack the odds in your favor that you'll get a better offer from the bank if you don't pay, though. If the bank believes you can legitimately afford the house, especially at a significantly improved interest rate or with a reduction in principal, it's really not in the bank's interest to let you walk without, in the end, offering it to you.

Ever hear of the game of chicken? Hope this helps.

[Papa4]

Tandm,
Your situation is very similar to mine. My wife and I owe 1.1 mil on a house once valued at 1.4m. Our $3,000 a month negative amoratization payments are due to go into the $7,000s later this year. The house would probably sell for 900k. I work 10 hours a day, 6 days a week. I can manage our current payment but not much more.
Though we have had our house for 20 years, the home of our dreams, my wife is willing to walk, as a last resort. In a cold analysis, that is the way to go. Stop making payments, save money while dragging out the foreclosure process and go rent a house for $2000 in our case. Why have a debt of 1.1m on a house that is only worth 900k and slipping down? Well, we have never not paid a debt and we really like the house.
If cw was willing to go 4% for 30 or better yet 40 years we could manage that. Everything I hear says no principle reduction.
Your take on the attornies is probably good. A hard working, honest attorney would do better than me trying for the first time, with little time to follow up on the whole process.
Hopefully, with the new president and the growing number of properties people can't afford being given back to the banks they will be getting more willing to negotiate.
Don't blink.

[tandm]

The loan mod group we are working with said that cw is still not doing principal reductions yet. My husband and I are anticipating an initial offer from cw that will probably have little appeal. But we are prepared to go, if you will, the distance Yes, sock the money away as cw takes FOREVER to get their act together. Why should we continue to pay while they take months to make a loan modification offer? Ultimately, if cw makes an offer that has our payment close to what we can rent, we'll definitely consider staying, even if there was no principal reduction. But that would have to mean a great interest rate to allow us to play catch up. Basicallly, if we can see light at the end of the tunnel - maybe in 10 years we conceivably would NOT be upside down and maybe have a little equity, again, we'd probably take the offer. But to get that offer may take us close to a showdown with the bank. Having an attorney's office with you through that puts us at an advantage we would not have if we did it alone.

The bank is looking at each situation from a business perspective. What is in the bank's best interests? We all should do the same.

[Moe Bedard]

The member who you were helping in the other thread had asked......
tandm,

What mod company are you using?? What made you to choose them over others??

Thank you

[tandm]

If you are considering choosing one, check the better business bureau to see what kind of rating they have. I would also recommend going with a well known one as opposed to some fly-by-night organization. Google them and see what others might have to say about them.

Unfortunately, these firms do cost money and many of them do want a significant deal of money up front. It seems that some people have also fared well with this NACA - which I assume costs nothing and is some sort of charitable organization, but you can only own one property going through them.

If you have to do it yourself, you may find yourself with little guidance and getting the run around in a big way. A website such as this is very helpful as you can read what others are experiencing and get the more professional advice of some of the people who blog on here and/or run this website. But I only can imagine the work that it took for some of the people who've done it themselves to receive the loan modifications they did. With an outside, reputable firm, you won't have to work so hard, you'll have more guidance, protection from what you might do or say to the bank, hand-holding, etc. - and you'll pay for it.

But even those of us who hire firms to help are still somewhat in the dark - look at me - I'm looking at this site to see what others might have received and/or have to say about their experience.

[sbas2k]

I am in a similar situation as well. I bought by house for 660k, my sister is in escrow for the same exact floorplan next door at 320k. I am in a pay option arm that is not due to reset until Nov 2010. I had perfect credit up until Nov 08 when I decided to stop making payments. At the time I could afford to make the payments however I am going through a divorce and although if I really tried I could possibly make the payments while paying spousal support now, I decided to walk. I felt I was making payments which in essence was an extremely high rental rate of $3500 per month when I could rent my exact same house in the same neighborhood for half that amount. The only negative I see is the huge credit hit and not having the tax writeoff but now I won't have my huge payment either. I just don't see a point in making payments on something that will never regain it's value at least for another 15 years. I'll just buy something else in a few years and probably gain equity much quicker.

I am waiting to see what Countrywide does in their Dec. 1st program for all pay option arm holders but the only way I will take any offer is if they reduce the principal. Otherwise as much as I love my house, I will walk. For others that don't have the luxury of walking good luck. As for me, I just don't see the point in keeping my home.

[CW California]

Originally Posted by tandm

If you are considering choosing one, check the better business bureau to see what kind of rating they have. I would also recommend going with a well known one as opposed to some fly-by-night organization. Google them and see what others might have to say about them.

Unfortunately, these firms do cost money and many of them do want a significant deal of money up front. It seems that some people have also fared well with this NACA - which I assume costs nothing and is some sort of charitable organization, but you can only own one property going through them.

If you have to do it yourself, you may find yourself with little guidance and getting the run around in a big way. A website such as this is very helpful as you can read what others are experiencing and get the more professional advice of some of the people who blog on here and/or run this website. But I only can imagine the work that it took for some of the people who've done it themselves to receive the loan modifications they did. With an outside, reputable firm, you won't have to work so hard, you'll have more guidance, protection from what you might do or say to the bank, hand-holding, etc. - and you'll pay for it.

But even those of us who hire firms to help are still somewhat in the dark - look at me - I'm looking at this site to see what others might have received and/or have to say about their experience.

Hey tandm
Did you ever post the first offer CW made? If not can you share with us what it was?

[tandm]

Their first offer was 3.875 for 2 years - interest only option, then 2 years at 4.875 - interest only and finally beginning in year 5 - principal and interest at 5% fixed for 30 years. They will not go to 40 years - they say it is not in the guidelines for BONY on our loan - whatever that means. Our current interest rate is 5.875% with an interest only option for about 3 more years. So I think they just decided to drop it by a few points and hope we'd jump at it, thus keeping the loan active and the principal where they want it (1.1m).

I think I'll hear tomorrow whether there is a better offer or if they are sticking to this one. My negotiator left a message yesterday so I'll probably hear from her again Friday.

And that's not to say we don't think it's a good offer - we would have paid for something like this in a refinance a few years ago. But we are so upside down - as we see it, we need to get to a payment similar to what we could rent (and adding in an amount we've determined to be similar to cash value on tax write-offs) for the next several years. Then wait it out and see what happens with the market. We have a few ideas so... we really have looked at our situation from every angle and we just aren't where we need to be yet. Thanks for asking.

[CW California]

tandm
that sounds like a pretty good offer. Your loan balance is too high for the Making Home affordable isn't it? I'd love an offer like that. Just enough to get me thru the next few years and until my business comes back up. BTW I'm in Long Beach. Not far from OC.........