HELOC Loan Mod...What's Realistic?

[LetsMakeADeal]

I'm going through restructing of my debt myself in hopes of avoiding bankruptcy. So far the credit cards are willing to come down to about 30% on the dollar. My 1st mortgage will let me know in another week or so if they will make adjustments.

But the hardest one to deal with is the 2nd (HELOC) because it is secured. In talking to a bankruptcy attorney he said if our house is worth less (it is by about $40 or $50k), he can turn that HELOC into an unsecured loan. But that would be going through bankruptcy which we want to try and avoid.

So since we have no equity in our home, my business has limited me to $500 a month for the past 6 months and going forward...(w/my wife we are about $300 in debt each month) with $88k on our HELOC (7or 7.7%) what are some realistic options to lower the principle (is that even an option) or extending a low interest rate?

Considering the pecking order...why is the HELOC the most difficult since they are the ones most apt to lose out?

Thanks for this great website resource!

[LetsMakeADeal]

Oh...added note...we are currently almost two months behind on the HELOC and the 1st told us not to make payments to them for three months...so we are about to miss our first payment on the 1st.

[Moe Bedard]

Hi LetsMakeADeal,


Welcome to the forum and thank you for joining...........


The modification would depend on the investor and what they would be willing to do......

Who is the servicer?
What state are you in?

[LetsMakeADeal]

Compass bank...

Phoenix, Arizona. Thanks for the quick reply btw...

[HopingtoFind]

LetsMakeADeal... You're correct in your observations, HELOCs are for some reason the most difficult to deal with as far as modification is concerned.

We have several HELOCs that we were trying to modify and have succeeded in modifying one so far, ours is with BofA. They lowered our payment by 75%... we didn' have to be late..

I have also heard lenders agreeing to accept cents on the dollar for HELOCs/2nds when the property is upside down and the 1st is about to foreclose...

My suggestion is to decide if you would like modification or you're ok to risk bad credit/collections/bk in order to have a possibility of reduction in principle.

[LetsMakeADeal]

Originally Posted by HopingtoFind

My suggestion is to decide if you would like modification or you're ok to risk bad credit/collections/bk in order to have a possibility of reduction in principle.

A little confused by that, but I think I know what you are saying. My goal..(I don't care about bad credit, collection calls) is...
1. Not to file bankruptcy.
2. Reduce my 2nd. principle.
3. Reduce my 2nd. payment & (interest).
4. Not to lose my house or have a lien or anything...

How can I accomplish # 2 and # 3 or # 3 at the least and to what level? It doesn't help having $500+ interest and not being able to pay down the principle.

[LetsMakeADeal]

OH...Hoping...thanks for your thoughts!

[HopingtoFind]

You're welcome...

Significant reductions in principle on your 2nd from what I understand are rare... I think in order to accomplish #2 on your list you should be willing to walk away from your 2nd and risk it being charged off and possibility of declaring a bk should they come after you... You might not lose your house, because if you're upside down most likely they will just charge off instead of foreclosing...

You are not risking much by attempting #3 on you list and I think it is entirely doable. Our payments, as I mentioned where cut by 75% for 2 years. Interest rate went to 0% and we are paying principle only but it is only for 2 years then it goes back to original terms.

[LetsMakeADeal]

HOPING that is the most helpful thing I have found in two weeks of research. Thank you. It's weird my first two three calls they keep telling me about a floorrate and they say they have nothing else. I am fairly certain I haven't found the right department yet. lol

Do you (anyone) know that if we truly are (I'll find out) upside down with out house, at what point we could file for bk should they come after us? I mean if they submit a forclosure note we can do it after that? Lastly...a chargeoff won't be very devistating to us at this point and if they aren't willing to budge on our payments...maybe our only route.

[HopingtoFind]

You're very welcome...glad I could help.

There is a section in this forum that deals with 2nd and bk... you might want to check it out:

Mortgage Bankruptcy - Loan Modification Forum - Loan Safe