Early in the game but probably need loan mod from Homecomings/GMAC

[martialgir]

Hi All,

First of all, I really appreciate that this forum is here. I have read many of the threads and think the experts are doing a great job providing sound advice for people.

Now getting to me...I have been in the mortgage industry for over 23 years. In January 2008, I lost my six figure income job with a mortgage broker (VP of Business Development) and began working for the Federal Gov't for $50k annually. I have a first mortgage with Homecomings, 30 year fixed rate at 6.375%, balance $390,000 and a HELOC with my credit union at around 7% right now, balance approx. $160k.

When I got my loans, I was a full doc, good credit, good ratios, etc. etc. After I lost my job, and took a 2/3 pay cut, it didn't take long for me to burn through my 401k, other savings, etc.
My property is a farm with a house, barn, outbuildings on 20 acres in very desireable Virginia area. I decided to divide my property in half and sell some of the acreage to pay off the second. My boyfriend moved in and was willing to co-borrow with me so we would qualify for a refinance of the first to remove the liability from the land I want to sell. He has excellent credit, no debt and savings. He is a teacher and together we don't make as much as I did before.

To make a long story short, from Feb through November 2008, is how long it took me to get county approval, survey, etc. at a cost of $10k, which I didn't have. I had a contract on the land, which fell through because of the delay. Long story short, I exhausted all of my resources, my boyfriend is now tapped out and I am going to go delinquent for the first time on the first in December. It will be 3 days late, Jan 1st. The second is current as is all of my other credit.

I cannot afford the first mortgage payment, let alone both. My biggest problem is that the first and second encumber the entire 20 acres so no matter what, even if I sell the acreage, I am encumbered by the first and now I can't refinance because I am about to go 30 days delinquent on the first.

Also, because my credit is about to go into the crapper, I am not going to link myself to him and drag him down. Without the division, the house and land would probably sell/appraise for $500,000. With the division, the house and 10 acres would appraise for $450,000 and the land would sell for $175,000. (I had a contract for $190,000) I would lower just to get the sale. At $175,000 I could still payoff the second and pay the commission and my realtor thinks I would get that easily. It is currently listed for $199,000.

Anyway, not knowing what the mods are going to look like in January, what do you think the possibility is that Homecomings would release their interest in the acreage so I could sell while modifying at the same time? Without doing a principal reduction but giving me 3% interest rate and 40 year am, I would be able to afford the payments, by myself, without dragging my boyfriend in, if I didn't have the second to pay.

Any suggestions would be welcome. As you can see, I would have equity with the division selling and no one loses anything.

Thank you.

[Moe Bedard]

Hi martialgir,

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

Since the modificatons are up to the investors on the loans....that would be a question that you would need to ask Homecomings.....you would need to begin by calling and asking what options the investor on your loan offers.........and then make a decision from there.........
Homecomings
1-800-206-2901

[The Professor]

Frankly I believe you are being overly optimistic in your suggestion that the holder of the first loan is going to go along with giving up part of their collateral (the 10 acres) so that it pays off the second loan. A more practical result would be that the proceeds be utilized to pay down the first loan, thus effectively improving both it and the second loan in terms of the security of their respective positions.

You are not in the driver's seat when it comes to lender determination as to complying with a request to partially release their security. In approaching it so that the holder of the second loan gets paid off, I'm sure they would be happy with that result but the holder of the first loan, assuming they act prudently, won't go along with it.

Take care,

Daniel

[martialgir]

Frankly I believe you are being overly optimistic in your suggestion that the holder of the first loan is going to go along with giving up part of their collateral (the 10 acres) so that it pays off the second loan. A more practical result would be that the proceeds be utilized to pay down the first loan, thus effectively improving both it and the second loan in terms of the security of their respective positions.

Hi Prof. Shays,

Unfortunately, the only way I would be able to manage is to have one of the mortgages completely removed. Both encumber the entire 20 acres and I can't sell unless both are removed from the security. It makes sense to have one completely paid off and then only having to deal with one payment. The PITI on my first is $3000 and the PI on the second is $1400. I only make $50k per year so I can only afford approx. $1600 per month. The only way that would work is if my outstanding balance on the first is modified down to a rate of 3% with a 40 year amortization and the second is completely wiped out. Only in this scenario are both lenders going to get everything.

I used to average between $120k-$150k annually before I got laid off. I thought I would continue to pay the second, thus showing I can afford it and then when the account with Homecomings gets 2-3 months behind, they would be ready to deal, especially if I go to them with a contract for sale on the land. In the meantime, I could get an appraisal for the residual 10 acres and the house,, etc. showing the equity position of approx. 10%. This also might meet the criteria for the HOPE financing. I can't go regular FHA because my property value and loan exceed the value maximum requirements for my County which is why I did not explore this option earlier but the HOPE program enables you to go up to $417k.

Homecomings could play hardball, like you said, in which case both lenders would lose. I'd keep paying on the second, not be able to sell the land, then Homecomings would have to go through the time and expense of a foreclosure and the entire 20 acres in one piece might cause them to lose money and then the credit union would lose their entire loan balance. The other problem with this scenario is that I really like my credit union and hate the have them screwed over at all.

I don't know...maybe January will bring new options.

Thanks for listening. You are really doing a great service to the people who are on this board.

[martialgir]

Professor,

Your suggestion was helpful and I decided to modify what I was going to ask for. I have an interested buyer on the land right now and we are talking about $175k. If I go to Homecomings and offer to pay down the $390k balance, out of the proceeds, to $360k and propose a modification with stepped up payments then I can afford to keep my home. I will be proposing 3% for the first year, 4% for the second, 5% for the third and then the note rate of 6.375 for the life and the loan would be amortized for 30 years. At this level I can afford my payments of around $1800 per month PITI.

Next the credit union would have to agree to settle for $100k instead of a full payoff of $160k. There is not enough equity in the house and land as it is for the credit union to get their money and if I don't sell the land their position is more fragile. I cannot sell the land without both mortgages being removed since they both encumber the property.

Furthermore, I have drafted letters to my four unsecured creditors, balances totally approx. $43k and offering to settle with them for 60% of the balances for a total of $25k among the 4 of them. If all parties do not accept, then I have no choice but to declare BK. I am in Virginia and I am not sure about deficiency balances but I will be looking into the best route if I cannot get consensus. After the commission is paid and delinquent taxes and closing costs are paid, there is only about $1000 left of the $175k.

If everyone agrees, then I will have a mortgage I can afford and a car and tractor loan left for approx. $800 per month total and no unsecured debt. According to the financials I have done, I would have approx. $200 per month left after these three debts based on my net pay.

What is your opinion regarding this plan? Also, do you have a mailing address for Homecomings where I can send a certified letter to the head of loss mitigation and/or a name? I am trying to paper trail all of this so I can take to a lawyer if I have to.

Thanks again.

The one piece of leverage I have is that the division plats are not recorded and I own them.