Modification of investment properties by credit unions

[jasonsmith123]

I own an investment property with 6.875% interest rate. So far, I have always been on time in making the payments. However, I have a negative cashflow of about $600 and I cannot afford it anymore. The financing is done by a credit union. I was wondering if you can share you experiences about loan modification of investments by credit unions.

They are offering the same loan with 5.875%. However, even with that
rate, I will not be able to break even. Please help.

[Dan Bailey]

jasonsmith
Glad you found the forum and posted. If they made that offer of modification, it may be all they can do. The modification is up to the investor (dont know if the credit union is the investor ?) Plus, with it not being your primary residense, it's even harder.
*** or Moe will be by as soon as they can, they may be able to offer you more advice/direction to take with the credit union.

[classicgk]

Hi Jason, I have a rental property with a local credit union. Because we had several other rental properties also upside down we scheduled a meeting with them and asked them for suggestions.

I submitted a multipronged plan that included refinancing credit card debt long term, reducing interest rates and extending term. They have promised a speedy reply.

They said at our meeting: We don't want the property back. The CPA I met with recommended I tell them, Right now we're making it but soon we'll be on three wheels.

You may want to develop a budget that shows how you can break even. I included 10% of rent for vacancy and 20% of rent for repairs in mine.

My best,
Joe in Mpls

I also went online and did some research to find out the financial strength of my credit union

[jasonsmith123]

When you say break even, do you mean break even on the rental property OR on the family budget? Does they care for the family budget when offering a lower rate for the investment property.

Also, they are not offering me 5.875%. They are offering it to their new clients on investment property with 1.5points. Will they offer this rate to me? How do I negotiate for it?

[classicgk]

Ideally one wants to break even on the rental property. They do look at your family budget at the same time. One strategy is to show how much you are losing each month, and then see what they have to say. Like my credit union I doubt they want the property back. I would leave their answer open ended; not ask for 5.875 just because that is what they are offering but to see instead if you could get 5% to improve cash flow. I posted a message telling what I have tried so far with my credit union.

[jasonsmith123]

I have a second home in a different city than where I live. I have financed that as a second home. I rent for my primary residence. I was wondering if I could use NACA’s help for loan modification of that property. I am underwater on that property and I would like to reduce the interest rate on that property so that I can hold the property.

Please advise.

[Moe Bedard]

NACA will not work with you if you own more than one property.......they will only work with owner occupied one property.

[jasonsmith123]

How does NACA find out if I have one property? I have only one property, but I am not living in it. Will NACA help? The loan is with countrywide.

[Moe Bedard]

You posted that you have a second home in a different city then where you live..............and in the original post you said you have an investment property.

this is NACA's criteria eligibility..............and they will pull credit........


You cannot own another property:

NACA cannot assist people who own other properties. If you own another property but are losing or selling it, we can assist you with your primary property after the disposition of the other(s). Servicers in the NACA Program also require owner-occupancy as a condition for accepting a NACA solution.


Live in your property:

NACA believes that owner-occupants stabilize neighborhoods. Therefore, NACA requires that you are an owner-occupant. Being an owner-occupant involves you in all aspects of the community because you own a piece of the community, not just real estate. Also, owners of multi-family homes may choose stable tenants that will strengthen the community and maintain the property, even if they could have higher paying tenants. By contrast, absentee landlords usually want to maximize the rent and have little involvement with the community.

[jasonsmith123]

classicgk,

can you please send me the documents and the plans that you had sent to your credit union? I would like to have see them before I create my own plan. I would like to take inspiration from your plans.

Thanks.

[Moe Bedard]

This is an anonymous forum..........so unless classicgk can post here a generic draft of what they did for their mod.............they will not be able to send docs to you.

[jasonsmith123]

Yes, I was requesting for a generic draft from classicgk.

[jasonsmith123]

I called my credit union today and asked them to consider my financial hardship situation. However, they transferred me to the collections department and the person speaking there was very rude. I told her that my income has reduced from $6000 to $4000 and the rental on the property has reduced from $2100 to $1400 (not factoring in expenses). However, she said that this is not a hardship situation. I told her that I cannot find another part-time job due to my recent surguries and the medical condition. However, she failed to consider anything. She was just offering advice, which is the last think I need.

Are these things normal? Being transferred to collections? and being rudely spoken to?

What should I do next? I am feeling very down and low after speaking to her.

[HopingtoFind]

Very normal... You need to find another department or person who deals with loss mitigation in your credit union..

Collections are there to collect.... they are not trained in loan modifications and generally do not know anything about it.

[jasonsmith123]

I would like to have my budget reviewed by this group. How do I add a file as an attachment here? It does not seem to work.

[jasonsmith123]

Here is my current budget. I would appreciate if you can look at this critically and help my give feedback on this...I was going to send this to my credit union:

Income / Expense	2008 days	With loan modification	Without loan modification
	Previous	Current	Current
Total income	8750	4400	4400
Household expenses	-4900	-4400	-4400
Rental income	1900	1400	1400
Mortgage expense	-1800	-1150	-1806
	3950	250	-406

For the household expenses, I have more detailed breakdown in another spreadsheet. Please let me know your feedback on this.

I am looking for a loan modification on my investment property.

Thanks.

[HopingtoFind]

Are you including any other expenses associated with your rental, such as taxes, insurance, maintenance, utilities... What about mortgage payment on your primary home, is that part of you household expenses?

Also.. they might ask you for your bank statements and/or tax returns... income/expenses you're providing to them should be reflected in those documents...

Regardless of what anyone says in regards to the income/expenses you have posted it is ultimately up to the lien holder of your note...

[jasonsmith123]

Does someone have a good format for the Budget spreadsheet, which includes rental property? I would like to change my format and add more details to it.

[jasonsmith123]

What do they look for in a budget in terms of expenses and income ?


Does the budget below show everything that they look for?

It would be great to get any feedback on this budget worksheet.

Budget worksheet
		Good old days	Now	Now
			With reduced pay	With reduced pay and reduced mortgage
Income from job		8250	4000	4000
Rental Income		1550	1050	1050
Total Income		9800	5050	5050
Rent		1550	1550	1550
Auto
	Gas	185	150	150
	Tol	28	28	28
	Service	14	14	14
	Insurance	92	92	92
	Parking	35	35	35
Cash expenses		120	60	60
Clothing & Dry cleaning		80	30	30
Newspapers		85
Family
	Insurance	45	45	45
	Babysitting	250
Personal
	Barber	22	22	22
Groceries		820	500	500
Entertainment		500
Travel expenses		300
Health & fitness
	Deductibles/Co- Pays	40	40	40
	Un-insured Dentat/Eye Etc.	65	65	65
	Prescriptions	40	40	40
	Other	10	10	10
	Stress-Management	320	150	150
Household		550	250	250
Education		35	35	35
Prof and Legal fees		35	35	35
Utilities
	Electricity	95	85	85
	Gas, Water and Sewer	35	35	35
	Cell	80	60	60
	Telephone	30	30	30
	Internet	60	25	25
Rental Property - Sabrina Court
	Mortgage Mortgage. Payment	1806	1806	1150
	Property Tax (Monthly)	185	185	185
	Insurance (Monthly)	50	50	50
	HOA Dues	30	30	30
	Repairs/Maintenance	120	100	100
Total Expenses		7712	5557	4901
Surplus Deficit		2088	-507	149

[classicgk]

Jason,
I got your request for a copy of my budget proposals. I haven't had time to go over yours but it looks like you are on the right track.

I met with a CPA who was really helpful. I had first met with a lawyer. What the CPA proposed is that I try to do what I wanted to do. We will see

My sympathetic CPA also suggested I move to Quickbooks from Quicken because the format was more professional. Just had my first three hour session with the bookkeeper. We took all the numbers directly from my checking statements which I will eventually have to submit to loss mitigation. I now have my first professional profit and loss statement!!!!

I was happy to see the bookkeeper insist on working directly from my recorded expenses on my checking statements. I am a bit leary of budgets that are pulled from thin air with no factual bases. I still need help on developing a good personal budget.

My own rough calculations are that I have to allow 10% for vacancies and 20% for maintenance. So if I have $1000 rent $100 is expensed for vacancies and $200 for maintenance. Doesn't leave much for PITI

For me because our financial affairs are so complex - good thorough documentation is the first order of business. That is for me to also know exactly where we stand.

I think I am going to need a couple of months of P & L before submitting a loan modification to Chase. I am waiting for my credit union to respond for my request to 1)help refinance some strategic loans from friends and some debts I am honor bound to repay to improve cash flow and 2) to refinance some loans at longer terms and lower rates. I have not proposed any principal reductions.

As far as the rude collections person remember they are the pit bulls. When I was in the Army(Vietnam era) in basic training it was the drill sgt who yelled; the battalion commander was incredibly soft spoken.

I do suggest seeing a nearby accounting professional to review your information and to help present it in std accounting format. I was incredibly impressed with the person on this board who ran homes for the disabled who managed to obtain loan modifications for a number of properties. Gotta find his posts again - they are an inspiration!

My best,
classicgk in Mpls

[classicgk]

In your budget I dont see an allowance for vacancies: the maintenance budget looks low unless you can document it.

[classicgk]

Hi Jason,
One question that always comes to mind: how do you manage a rental property in another city? Do you have a retired handyman Dad there? Do you have travel expenses to that city if you need to show or repair the rental?

Joe who just has his albatrosses on the block he lives on....

[HopingtoFind]

Originally Posted by classicgk

In your budget I dont see an allowance for vacancies: the maintenance budget looks low unless you can document it.

We never had an allowance for vacancy in our financials for rentals.... go figure.

[jasonsmith123]

I am wondering how much does the credit score drop if I stop making the payments to the investment property? Please let me know. Thanks.

[jasonsmith123]

I wrote a letter to the President of the Credit Union. I showed him the rental payment I am getting for the rental property and I am loosing more than $1000 a month with the current mortgage. Just because I wrote to the president, they have agreed to look into my current loan and are considering a loan modification.