Qualifications for modification

[gmorgan]

I attempted to get a loan modification via Wells Fargo
and the application was cancelled because I didn't send
in my documents after 30 days. I did not know about
this and neither did any of the first four
representatives I talked to. #5 let me know about this.

Now, I'm starting the application from scratch and I
would like to know if I am a good candidate or not.

I'll re-FAX my documents every 14 days from now on
with the latest pay stubs.

For a conventional refinance ( which I'm can't do
because of loss of income ) I know what makes a
good candidate.

For a Loan Modification, I have no idea.
more/less income? more/less expenses? What's a "good"
ratio for income/expenses/house value/mortgage balance?

Here are my vitals:
-------------------------------------------------------
Married -- husband (age 50) and wife (age 52).

My income- from $50k to $15k -- monthly take-home $1,000
her income from $90k to $20k -- monthly take-home $1,300

House bought in June, 2007 for $515k now worth $410k.
Primary loan balance $310k fixed 6.5% pymt = $2,100/mo.
HELOC loan balance - $120k ---------- pymt = .. 450/mo.
Property taxes are - $550/mo for TOTAL PYMT of $3,100.

That is, the house is under water by $20k, but in
order to sell it, we would have to come up with about
$50k in order for it not to be a reposession or short.
Since we have the assets, we are not a canditate.

Our IRA assets that we are making early withdrawals
from ( 10% penalty and taxable ) are $400k.
We also have taxable investment balances of $100k.

Monthly expenses ( food, cable, phone, insurance, etc )
total $2,200 per month.

No debt of any kind other than the mortgage.

In summary, monthly expenses of- $5,300
........... monthly take-home of $2,300
-------------------------------------------------------
Would we be likely to qualify?

Do we have too much money? Maybe I should have taken
on some car payments and big screen TV payments, etc.

I don't know what makes us a more attractive candidate.
Should we be in arrears on some payments?

When I fill out the application, should I claim less
money for expenses such as food, insurance, internet
so that our expenses appear lower to the lender?

The rep I talked to said that my IRA withdrawals
of $2,000 or $3,000 per month count as income. I have
to pay 10% penalty and taxes, so any IRA assets I have
to throw at the house really only count 50%.

Even though it's underwater, we can sell and bail
if we have to. I my wife will leave me if we do.
(- Not kidding -)

We can continue to pay the mortgage indefinitely, but at
the expense of any hope of retirement. Therefore, if no
loan modification, I'm selling the house in Jan/Feb.

If we got a loan mod, with a 1.5% rate, our payments
would go from $3,100 to $2,100. I could swing that.

I hope that I won't have to be in this position forever.
I'm an electrical engineer who used to make pretty
decent money. At age 50, there is not much use for me
in the engineering field, but I can still do better
than the $15/hour x 20hrs/week I'm getting now.

Is it worth it to pursue it? We have a wonderful house.
I don't want to move into a roach-infested cheap
apartment which I will have to do.

[imlars]

Originally Posted by gmorgan

I attempted to get a loan modification via Wells Fargo
and the application was cancelled because I didn't send
in my documents after 30 days. I did not know about
this and neither did any of the first four
representatives I talked to. #5 let me know about this.

Now, I'm starting the application from scratch and I
would like to know if I am a good candidate or not.

I'll re-FAX my documents every 14 days from now on
with the latest pay stubs.

For a conventional refinance ( which I'm can't do
because of loss of income ) I know what makes a
good candidate.

For a Loan Modification, I have no idea.
more/less income? more/less expenses? What's a "good"
ratio for income/expenses/house value/mortgage balance?

Here are my vitals:
-------------------------------------------------------
Married -- husband (age 50) and wife (age 52).

My income- from $50k to $15k -- monthly take-home $1,000
her income from $90k to $20k -- monthly take-home $1,300

House bought in June, 2007 for $515k now worth $410k.
Primary loan balance $310k fixed 6.5% pymt = $2,100/mo.
HELOC loan balance - $120k ---------- pymt = .. 450/mo.
Property taxes are - $550/mo for TOTAL PYMT of $3,100.

That is, the house is under water by $20k, but in
order to sell it, we would have to come up with about
$50k in order for it not to be a reposession or short.
Since we have the assets, we are not a canditate.

Our IRA assets that we are making early withdrawals
from ( 10% penalty and taxable ) are $400k.
We also have taxable investment balances of $100k.

Monthly expenses ( food, cable, phone, insurance, etc )
total $2,200 per month.

No debt of any kind other than the mortgage.

In summary, monthly expenses of- $5,300
........... monthly take-home of $2,300
-------------------------------------------------------
Would we be likely to qualify?

Do we have too much money? Maybe I should have taken
on some car payments and big screen TV payments, etc.

I don't know what makes us a more attractive candidate.
Should we be in arrears on some payments?

When I fill out the application, should I claim less
money for expenses such as food, insurance, internet
so that our expenses appear lower to the lender?

The rep I talked to said that my IRA withdrawals
of $2,000 or $3,000 per month count as income. I have
to pay 10% penalty and taxes, so any IRA assets I have
to throw at the house really only count 50%.

Even though it's underwater, we can sell and bail
if we have to. I my wife will leave me if we do.
(- Not kidding -)

We can continue to pay the mortgage indefinitely, but at
the expense of any hope of retirement. Therefore, if no
loan modification, I'm selling the house in Jan/Feb.

If we got a loan mod, with a 1.5% rate, our payments
would go from $3,100 to $2,100. I could swing that.

I hope that I won't have to be in this position forever.
I'm an electrical engineer who used to make pretty
decent money. At age 50, there is not much use for me
in the engineering field, but I can still do better
than the $15/hour x 20hrs/week I'm getting now.

Is it worth it to pursue it? We have a wonderful house.
I don't want to move into a roach-infested cheap
apartment which I will have to do.

The lender uses your GROSS INCOME not your net. Only the government plans go as low as 2%, you are not going to get a 1.5% anywhere!
A $3000 per month deficit? The way your numbers look you just cannot afford the home. Since you are underwater let the HELOC go as there is not any equity in the home for them to foreclose on and the loan is essentially an unsecured debt at this time. If you only take home $2300 per month between the two of you, how can you afford $2100 for your PITI? That leaves you with $200 per month for food, utilities, insurance, gas etc...

[davephx]

Have 100k of non 401K money so that will probably disqualify immediately not to mention the $400K in 401k that they do not consider.

So with that kind of investment/retirement funds available they can handle the deficit for zillions of years.

But for HAMP the 100K is a issue if not qualified plan since this is part of cash required to disclose and may be reflected from income on prior tax return.

[gmorgan]

Originally Posted by imlars

Only the government plans go as low as 2%,
you are not going to get a 1.5% anywhere!

I was just throwing that out there.

Originally Posted by imlars

A $3000 per month deficit?
The way your numbers look you just cannot afford the home. ...

That is why we are signing up to go on welfare.
That's what the government loan mod is, actually.

Originally Posted by imlars

Since you are underwater let the HELOC go ...

If we had two new cars + payments and electronics + payments
and furniture + payments, etc and no assets, this would be a
good way to go, but since we have assets, we can be sued.
This doesn't sound like a good idea.

Originally Posted by imlars

... how can you afford $2100 for your PITI? ...

The same way that we have been for over a year.
We take money out of investments and use it.

Originally Posted by davephx

Have 100k of non 401K money so that will probably disqualify immediately
...

That's what I assumed.

I also assumed that since I had that money, I could get a conventional
refinance, but Wells Fargo is not interested due to lack of income.

It looks like we should just pay to get out of the house.

[MyHAMP]

Originally Posted by gmorgan

That is why we are signing up to go on welfare.
That's what the government loan mod is, actually.

Hmm, I don't know many people applying for welfare who have taxable investment balances of $100k...

[imlars]

Originally Posted by MyHAMP

Hmm, I don't know many people applying for welfare who have taxable investment balances of $100k...

You aren't going to get welfare with that kind of money in investments.
It just goes to show that you don't have to be smart to have investment income.

[lennox]

You've saved well to have 400K in your IRA. You've also invested well by having 100K in investment income.

With that kind of invested income, you should talk to a Certified Financial Planner. They can help you decide how to best use your retirement funds.

IMHO....I don't think it is a good idea to use your retirement funds to pay for a house that is unaffordable and upside down in value. Sometimes they're aren't a lot of options...and we have to work with the only or ugly options that we have. In your case, it could very well be selling your house; or drying up your retirement funds to pay for your house. One thing about this market....even if you sell your house for a lot less than its original value, you can purchase a new home for a lot less than its original value. Maybe you can borrow against your IRA...maybe you can take some out for a down payment on a smaller house. These are the things that a CFP will be able to help you with.

From everything I've read, seen or any knowledge I have of HAMP...I feel pretty certain you wouldn't be able to get a modification.

It's a tough situation to loose a good job and end up taking any old job. You have some things going for you though. You were smart to save for your retirement and invest well. Given that....if I were you..the next step would be to meet with a Certified Financial Planner. Get one from a reputable company or corporation. Make sure they're Certified...Get their credentials. If you don't like the first one you meet with...Meet with another. But definately....get in touch with one.

T

[davephx]

Originally Posted by lennox

you should talk to a Certified Financial Planner.

Ah... raising my hand sheepishly. I am one of those with 25+ years experience from a CPA background. But I got into my own mess based on what was originally sound decisions.

You can't borrow from an IRA. They have a $400K 401k Plan where you can borrow up to 50% or in their case the lower limit of $50,000.

The IRA/401K is exempt in bankruptcy so its worth trying to save. Just depends on how much may have to deplete to save home and if its worth it or not.

[gmorgan]

Originally Posted by imlars

You aren't going to get welfare with that kind of money in investments.

Again, it would have been better not to save money, but to
have been overextended on credit.

I guess that we all agree that getting a loan modification is
going on welfare.

Originally Posted by imlars

It just goes to show that you don't have to be smart to have investment income.

So, what you are saying is that
I'm not smart? That I'm stupid?

Actually, there is a difference between being stupid and being ingnorant.

I posted here because I was trying to be informed.
I am ignorant.

Apparently you are not smart enough to know the difference.

It seems to me that when people withhold over 25% of their income
and know how to invest their money, they are the smart ones.

No, you cannot accumulate that much in retirement savings without
being smart. My wife and I did that in ten years.

Again, apparently you are not smart enough to understand that.

Getting back to the ignorant part:

My Wells Fargo loan agent directed me to get a loan modification.

After spending almost two months processing a normal refinance plan,
he came back to me and said that he couldnn't do anything for me
with my current income.

He said that he has many friends who have done this and we were
a perfect candidate. The Wells Fargo system denied me the refinance
knowing full well what our assets were. The Wells Fargo agent steered
me into a refinance knowing full well what our assets were.

Originally Posted by lennox

... you should talk to a Certified Financial Planner.
They can help you decide how to best use your retirement funds.

That I do not need.

I probably have more investment knowledge than most FP's.

Originally Posted by lennox

... I don't think it is a good idea to use your retirement funds to pay for a house ...

You are quite correct.
That is why I'm ending it if getting a loan mod is not possible.

I used the funds to buy some time.

It's not a total cluster, however. The IRA money - a rollover from a
401k - went in while I was in the 31% tax bracket. I'm taking it out
at 10% + 15% marginal rate *after* having earned quite a bit since
it was put there.

Originally Posted by lennox

... You were smart to save for your retirement and invest well. ...

Yeah, b-b-but, imlars said you didn't have
to be smart to save and invest.

What if it's just dumb luck? I'm so confused.

Originally Posted by davephx

... You can't borrow from an IRA. ...

That's correct.

Originally Posted by davephx

... They have a $400K 401k Plan ...

No. These are rollover IRAs - formerly they were 401ks.

Originally Posted by davephx

... where you can borrow up to 50% or in their case the lower limit of $50,000....

This is only true if you are still
working where the 401k is offerred. Even if you leave money
in a 401k, you cannot borrow from it once you are no longer
employed at the place where the 401k is offerred.

Originally Posted by davephx

... The IRA/401K is ... worth trying to save. ...

Right. I have no intention of paying for my home with it.

The $100k is likely a goner.

House value $410k. Mortgage balance $430. Selling cost if no repairs
are needed, maybe another $35k, so we can get out for $55k.

I know that I don't want to spend my IRA for long, but at least I had
a cushion. I didn't have to resort to stopping payments and buying
time going through a foreclosure. My credit rating will be mostly intact
and I can afford to get into a decent apartment.

Two months ago I knew nothing about a loan modification. Two weeks
ago, I knew only what my Wells Fargo agent and the people I talked to
on the telephone were telling me.

I'm still ignorant, but clearly not stupid. I also know the difference.

I do recognize stupid when I see it.

[MyHAMP]

Originally Posted by gmorgan

I guess that we all agree that getting a loan modification is
going on welfare.

I don't think so. In my opinion, the BANKS went on welfare by accepting bail-out money. Keep in mind that not every modification is a HAMP...

And even under HAMP, you have to pass a NPV-test. In that case, the lender/investor is still making money BY MODIFYING the loan, so I don't think they are handing out presents. The incentives paid under HAMP are often just a "bonus" to the servicers/investors. Only in a very few cases, they are the deciding factor between passed and failed NPV.

[davephx]

gmorgan - Agree with you on your comments and problem it being a rollover IRA instead of 401K so can't take loans and if under 59.5 stuck with the 10% penalty.

Obviously smart... doing good planning but has to know what dealing with related to potential or not of modification

[imlars]

To think that you would qualify for any type of social service when you have investment monies is what I was referring to as stupid. It's doubtful that the lender will see those kind of assets and believe you need a modification either.
Kudos to you for being able to save towards retirement. But now you can't afford your mortgage.
Loan modifications are not welfare, you are not being given anything for free. You are still paying the lender what you owe, but at a lttle more reasonable rate and term.
When you signed your mortgage contract you signed a legally binding contract. By defaulting on your loan you have broken that agreement. The lender does not have a legal obligation to do anything for you.

[davephx]

Technically I believe you could have $1 million in an IRA or 401K and qualify for HAMP. Its the large amount of non retirement cash that is the problem.

The asset forms that I have seen specifically say to exclude them.. again as I recall but someone can correct me if wrong.

[gmorgan]

Originally Posted by imlars

When you signed your mortgage contract you signed
a legally binding contract. By defaulting on your loan you have
broken that agreement.

I don't know why you think that I did, but I am current on the
payments and have no intention of defaulting. I can sell the
house, satisfy the terms of the loan, the real estate brokers,
and everyone else.

Originally Posted by imlars

The lender does not have a legal obligation to do anything for you.

No. They do not.

I would think that they would want to minimize their risk, however.
They don't know that I won't walk. Lots of people are and are better
off for doing so.

As has been pointed out, they cannot touch my IRA money.

I could just live where I am, deplete the taxable money and then
walk. I could use it to buy a couple new cars, and other stuff
then live there until the police say you have to go.

Also, the country does not need another home on the market.
It's going to have one in another month or so. It's too bad.

[lennox]

You certainly don't have anything to lose by applying for HAMP. I am no expert....not even slightly. Going through the HAMP guidelines though, I think your income in comparison to your large mortgage would reduce your chances for qualifying for HAMP much more so than having retirement assets.

If you think about it, drawing regular payments from your IRA to supplement your income, is no different then if a person is collecting a regular paycheck from a fixed pension fund. It's just that since you're under 59, you're stuck with that 10% penalty. And you've mentioned you don't want to draw on your retirement funds to pay for a house.

You're kind of between a rock and hard place. I imagine the bank would accept regular withdrawls from your IRA as income and bring your income up enough to qualify.

I think you are making a very smart decision to sell and keep your retirement funds. I have taken so much money from my retirement to keep this house and it makes me sick to think about it.

We are applying for HAMP and we too have a decent cash reserve. In our case, my husband has cancer. It is cured He has a very good job. But there were complications that cause him to miss days or weeks at a time off work. He has no sick pay. So I tried hard to make my case in my HAMP letter that our cash reserve is simply no different than if he had short term disability.

We're not behind on our mortage. But it's a toxic mortgage. We have an option 1 with a giant recast next year. Our payments will increase by at least a $1000.00. It would be insanity for us to use any of cash reserves and put them into this house, when in 2011, it would be impossible for us to keep the house. If they deny us because of the funds; then we won't modify and we'll do a short sale, or walk and we'll have to rent.

Personally, if I could snap my fingers and make my wish come true; it would be that we are moved out of our very large house with our very large mortgage into a small house with a nice affordable mortgage. I envy you, because it seems you and your wife are in a position to do.