Thanks for replying. After I posted, I did more research. It turns out that the program is basically a failure, and lenders are not really doing them.
The reasons are: 1. As you stated, the possible tax liability on the borrower, 2. The 2nd mortgage holders, in almost all cases, are taking a hit of 80 to 100% in debt forgiveness and there is absolutely no incentives for them to do so. There is a payout to that lender from the US Treasury, but it is not usually for the whole amount of the shortfall. It is also not mandatory that they participate, so why would they. 3. Part of the guidline of the program is a "recapture" if you sell the property within 5 years and realize a profit. Part of that profit would go to FHA...nothing goes back to the lender who took the original hit. I don't really care about the 5 year thing, because I too am not going anywhere, but you never know what else life is going to throw at you. I don't think it will happen, but what if the market ticks back up significantly?
I'm afraid I can't offer any encouragement when it comes to a mod. with GMAC. They are either completely incompetant or they are really not interested in doing them.
I submitted my first application on 6/30/09, I called after 4 weeks and was told that they take 60 days to review...so I waited. Called back after 60 days and was told that it was still being reviewed. Called back a week later and was told that (coincidentally) the day of my last call, I was denied. Seems that they used my WEEKLY income instead of my MONTHLY income (even though they had paystubs and tax returns.). After fighting with the CS rep for 30 minutes, she told me that I had to fax everything again, with a cover sheet that states that it is being re-sent because of income correction, and within 15 days, I would hear from them. I called after 15 days and was told that I was once again denied, this time because, even though I have a shortfall of almost $400 per month, they feel that I can still make the payments.
I was raging mad, so I sent an email to Peggy Slattery at GMAC (I'll list all her info below) and received a response within 24 hours. She got me to a loss mitigation specialist and he is submitting everything to the investor. He was not really encouraging.
In the meantime, I did more reseach on Chapter 13 Bankruptcy. I don't want to do this, but I may not have a choice since my lenders are not willing to help. In a CH. 13, if the ENTIRE balance owed on the 2nd is OVER the value of the property, it can be "cramed down" and it becomes unsecured and therefore dischargeable. The important thing is it must be the ENTIRE balance, or else you can't do it, because the courts have held that if any portion of the balance is still under the value, the entire balance is considered secured and therefore falls under the "antimodification" law and the courts can't touch it. Ex. 1st mortgage balance is $175,000.00, 2nd mortgage balance is $44,000.00, the property value is $174,000, the entire bal. of the 2nd is over the value and therefore not secured by any equity.
This, by the way, applies only to primary residence. Congress, in their infinite wisdom, applied the anitmod law to primary residences, but it has been overturned on appeal in almost every state, but is must be the whole amount is over the value. If this is an investment property, you can cram down anything over the value and it becomes unsecured. AMAZING!!!
Anyway, thanks again for responding and here is the info for Peggy Slattery. If you don't hear anything on your mod, send her an email.
Peggy.slattery@gmacrescap.com
Peggy Slattery
Director
Legal & Bankruptcy Loss Mitigation
GMACRescap
Tel - (214) 874-6996
Fax #: 1-866-535-9471
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