Property Valuation Reports

[Richard]

Moe:

I am an attorney. I recently was able to get two loan modifications done and will tell you about them later. Today I was told by Ocwen that they wanted to get a property valuation done on my client's property before they continue with the workout. It was their feeling that they could do more for my client if the value was lower than the mortgage balance. Something about writing down the balance owed? Have you heard of this before. First time I have come across this one.

Richard

[Moe Bedard]

Hello Richard,

This I have heard of, but never experienced. From what I gather, they will do a BPO and if it comes in lower then the current mortgage balance, then they adjust to the balance to the new value. That would be great if they did that all the time. But my guess is this is a 2nd right?

[Richard]

Moe:

Got your reply. No this is a first. If they write down the principal balance to reflect the new valuation what happens to the amount they write down? Do they forgive it and if so does it result in a 1099? If it is not forgiven is it paid at time of sale or refi? Your thoughts please. Thanks.

Richard

[Moe Bedard]

Richard,

They can go either way. As I mentioned in my post, I asked if it was a 2nd because they may base this on how upside down your client is. Meaning say they do the valuation and it's worth $30k less. Well, the 2nd now knows they are up the creek without a paddle if they do not assist and bend over backwards to modify his loan and make it work for your client.

They can ask that this be paid via an unsecured loan or they can just forgive it. I have seen both. However, I would never recommend signing a new unsecured note. It's either forgive it or take a hike.

If they don't, your client may walk and they collect nothing.

[Richard]

Moe:

Thanks again. This is a 1st mortgage. I think the same principals will apply. Do I have any leverage to having my client not signing an unsecured note for any balance? If it is forgiven will it result in the 1099? Thanks.

Richard

[Moe Bedard]

Under the new Mortgage Forgiveness Debt Relief Act of 2007 , it would be forgiven.

[angel83]

i couldn't find the thread about the new housing bill....The new bill will only help about 10-20% of people who are in distress right now. Why is it that those that qualify get a NEW mortgage that is equal to 90% of the value of their home at current prices. Something like this needs to be offered to everyone. Who do I write?!