Litton Success! Principal & Interest Reduction

[LorieSOCal]

Ok first of all let me say thank you so much for having such an excellent resource available in loansafe.org. I tell everyone struggling with mortgage payments to come here.

I was a long-time lurker but thought I would post my success to let people know two things that helped me.
1. We never gave up. We called, emailed or faxed every single day.
2. We didn’t take the lender's/servicer's first offer.
3. We were willing to give our home back. (We love our home but figure if we owe 25% more than it is worth we don’t 'own' it anyway, right?)

Here is our story:
We refinanced our home in San Diego in 2006 with an adjustable rate loan with a 2 year prepayment penalty. The loan was set to adjust to 9.8% in October 2008 and would make our payment unaffordable. In August of 2008 we started researching loan mods and found loan safe. We contacted the Loss Mitigation department. As loan safe will let you, never contact the customer service or collections departments; they will give you nothing but a run around.

Loss mitigation told us they would send out some forms. Two weeks later nothing had arrived so we called back & left a message. Then we did the one thing that got the ball rolling: we emailed a letter to the managers of both the loss mitigation and the retention departments. That got their attention. In fact we had a call within a few hours!

We faxed a hardship letter, tax returns and budget showing $150 excess per month before the loan adjustment. In our letter we stated 3 things: we would not be able to afford the upcoming adjustment, we couldn’t refi because we owed more than our home was worth, and included recent comps (what sold recently and for how much.)

A few things to note:
From start to finish our mod took four months August to December 2008.

We were never late on our loan. They worked with us even though we weren’t late so don’t take no for an answer!

Litton first offered an interest rate reduction to 7.6. We refused that offer. Then they offered 6.75 and we refused. The final offer was 25% principal reduction and a loan rate of 6.275. We accepted and everything was finalized on December 15, 2008. We didn’t really care about the interest rate because with the principal reduction now we owe what it’s worth and will soon refi.

Because of the principal reduction, we did receive a 1099 in February. It was a total surprise. No one mentioned we would get one. Fortunately we were able to take advantage of the Mortgage Forgiveness Debt Relief Act of 2007. Even if you can’t, the IRS has another program if you are insolvent at the time of the modification. I am not a tax expert so do your own research but I just wanted to give you a starting point to see if you can avoid taxes on the forgiveness.

I will close by saying that if I can do a loan mod anyone can. It doesnt take any special skill. I used a modified version of the Loan Safe hardship letter customized to my situation.

If I were to give anyone advice, it would be never give up, become a pest, have a paper trail, understand what he true value of your home is, be willing to walk away, and never accept the first offer.

Keep up the great work Loan Safe and best of luck to everyone!

Lorie in San Diego