Indymac constr to perm - Modify now or wait?

[timebide]

Hi.

In 2006 I took out a construction to perm loan through Indymac. Three months into the project I fell off the roof and crushed my heel. Indymac wanted to requalify me and put me into a new loan. I stated in no uncertain terms that with my injury I would not qualify for a new loan so they modified the existing loan. The original loan was $370K. The modified amount is $480K. The value appraisal was $500K. Recently two neighbors sold under value at $392K
At this moment I just received the last construction draw so there is 30K in the checking account but only because the construction loan was a reimbursement loan. I made arrangements with the contractors that they get paid with the loan disbursement. The 30K is paid to them so it will be dispersed within the week.

The construction portion is now complete and it is time for it to roll over into a perm loan. They are offering a 5/1 Arm and the loan officer stated that because the LTV was more than 80% I needed to have PMI. Since I did not qualify he was raising the interest rate to 8% to factor in the missing PMI.

The docs for the perm mortgage just came in today and they are requesting them back by the day after tomorrow. This again, is a modification of the original loan. There was no qualification.

I have had the original documents researched by a loan modification specialist and there are errors in the TILA and other sections. However, I am not in a position to pay an attorney. After a second surgery to remove the hardware I am still not making anywhere near the same income that I originally was.
About eight months ago I simply stopped making payment on about 200K in unsecured medical and credit card debt. I have a mortgage on a motorcoach that was purchased in 2005 and have been 30 days late several times and 60 days late on that mortgage.
With my current income there is no possibility that I can keep up with any of this. I have been living in the coach while the house was under construction. Now that the house is finished I have made arrangements for the coach to go to a rental company and am working with that lender to see about a forebearance or interest only for a period of time. I will not be able to pay the Indymac loan as it stands. I doubt that I could even make the first payment in full.

Indymac included the mortgage payments into the restructured loan for the construction period so I have never been late on that mortgage. I live in Oregon so there would probably be a minimum of 180 days to foreclosure. Would I be better off to start the loan modification prior to signing the perm loan docs, even though I am not late now.

My feeling is that since I already have mortgage lates and the other debt has already hit my credit report that I might be better off just accepting this loan and don’t make any of the payments. With the forebearance of late payments that ‘should’ happen with a loan modification and a lower payment amount I would be able to continue forward at that point. I realize that I would probably be looking at negotiating a short sale in the future if the market does not come back but am willing to deal with that when it occurs.

Am I in a stronger position prior to signing the perm loan docs or would I be better off as “one of the masses’ through their automated loan modification program after I am late. Would it make any difference that I have never made a payment on the perm loan.
Since this loan has no PMI it means they cannot sell it. Indymac is now Indymac Federal. Does that mean they don’t care about selling it anymore and will be carrying it in-house until/if Indymac is sold. If that is the case then why are they accounting for the PMI in increased interest rate?

No matter what I do need a few months of limited or no payments to catch up and then lowered payments.
Any and all input is highly appreciated!!

[timebide]

Hi. I was just wondering if I posted this correctly since there was no response. I really don't know what the best thing to do is and was hoping for some hope and direction. Thanks.

[Moe Bedard]

Hello and welcome to Loan Safe Timbide! Sorry, we must have missed this or were tied up off line. Now, lets see if we can help you.

I have had the original documents researched by a loan modification specialist and there are errors in the TILA and other sections. However, I am not in a position to pay an attorney. After a second surgery to remove the hardware I am still not making anywhere near the same income that I originally was.

This is a tough call for anyone. However, sometimes (not all the time), the money you spend hiring an attorney will be recouped in what they can do or shield you from with the lender. This however does not guarantee that you will come out much better and with this being a purchase loan, the legal remedies are not strong nor intimidating to most lenders.

Under TILA, primary residence refinance tranactions offers the most protection.

With my current income there is no possibility that I can keep up with any of this. I have been living in the coach while the house was under construction. Now that the house is finished I have made arrangements for the coach to go to a rental company and am working with that lender to see about a forbearance or interest only for a period of time. I will not be able to pay the Indymac loan as it stands. I doubt that I could even make the first payment in full.

The good news is that your a realist and all you can really do with everyone is be 110% honest with them and mitigate as much damage to you as possible. This is the first step in some type of solution to your mortgage and credit issues.

Whatever happens, you will come out of this wiser and stronger a person and remember your credit score does not determine your character.

Indymac included the mortgage payments into the restructured loan for the construction period so I have never been late on that mortgage. I live in Oregon so there would probably be a minimum of 180 days to foreclosure. Would I be better off to start the loan modification prior to signing the perm loan docs, even though I am not late now.

Indymac is now operated under the FDIC and they gave certain policies in place in regards to their loan modification program. One of those policies is that you have to be late. FDIC’s Indymac mortgage help line at 800-781-7399.

My feeling is that since I already have mortgage lates and the other debt has already hit my credit report that I might be better off just accepting this loan and don’t make any of the payments. With the forbearance of late payments that ‘should’ happen with a loan modification and a lower payment amount I would be able to continue forward at that point. I realize that I would probably be looking at negotiating a short sale in the future if the market does not come back but am willing to deal with that when it occurs.

Usually, if a mortgage is not paid on time in the first year, the mortgage servicer offers a forbearance agreement that will soon be followed by a loan modification after a short period of time.

Am I in a stronger position prior to signing the perm loan docs or would I be better off as “one of the masses’ through their automated loan modification program after I am late. Would it make any difference that I have never made a payment on the perm loan. Since this loan has no PMI it means they cannot sell it. Indymac is now Indymac Federal. Does that mean they don’t care about selling it anymore and will be carrying it in-house until/if Indymac is sold.

If that is the case then why are they accounting for the PMI in increased interest rate?

This is a catch 22 question with no real answer. We would only be guessing here, but I don't see how you can get the perm loan with your credit issues and this is very serious. But, I am confused, this is really just a modification they are offering anyway (thats how it appears). I say negotiate that rate of 8% down and maybe get a broker price opinion on your home and show them the value issues along with your hardship issues.

The are reorganizing Indymac for the eventual sale. It may take 6 months to a year or so.

Re: PMI - Because they may sell it and it may be required by the new lender is my "guess", so don't hold me to that

Here are some links from the FDIC in regards to Indymac clients.


http://www.fdic.gov/consumers/loans/modification/indymac.html

Where should borrowers interested in the program call to apply?

Borrowers who are delinquent or who are experiencing financial hardship and are falling behind on their IndyMac Federal mortgage should call 1-800-781-7399 to speak with an IndyMac Federal customer service representative. They may also visit the FDIC website (FDIC: Federal Deposit Insurance Corporation) or the IndyMac Federal website (IndyMac Federal Bank - Home) to find out more about the loan modification program.

Modification Announcement: FDIC: Speeches & Testimony - 8/20/2008

[timebide]

Thank you, Thank you for the response. I am down to the wire and starting to feel the pressure. Your statement of "I don't see how you can get the perm loan with your credit issues" is the main reason that I am considering just signing and sending in the documents for the perm loan. They are aware of my credit, as that has been no secret. I am afraid that if I balk now they may just not do the loan at all. Kind of feel like I am better off renegotiating after a signed sealed deal than to rock the boat before I even get there. The qualification for the perm loan was done at the time of the original purchase so as long as they keep modifying that loan I 'qualify'. Just looking for some feedback from someone with knowledge of the industry.

Thanks for being here for all of us!

[Moe Bedard]

My pleasure!

When I mentioned that I don't see how you are getting this loan is that I feel it is really just a loan modification and not a new loan. My understanding is that most all Indymac construction loans were portfolio loans and they have the power to change these terms to however they see fit or should I say the FDIC does.

I feel that if this rate is something you cannot make and is destined to fail, then by all means you should not agree to it. But and that is a BIG BUT, it could hurt your chance of this other deal going through. What I don't get is that how the heck are they offering a loan like this right now to you. They don't exist in the market?

You may want to fight for a lower rate if that will help you keep your home or start the short sale process now possibly.

[timebide]

It definitely is a loan modification. The original loan was in 2006. It has been that long in the construction phase because of my injury, plus it took eight months for Indymac to approve the extension on the construction loan. Since that original loan everything has been a modification. The original loan included roll to perm which is what is happening now.

After our discussion I decided to send in the paperwork for this loan. A bird in the hand so to speak. After that has been recorded I will decide what the next step will be. Thank you for the sounding board, and the sound advice. I will keep you apprised.

Thanks again for a space to air these discussions with a good dose of knowledge behind it.

[Moe Bedard]

Sounds like a plan that will help you sleep a little while you gather your thoughts and plan your life from here on out. I'm glad you found some peace of mind here and please keep us up to date on your progress from here on out.