Modification Possible: Seeking Opinions

[Jason Smith]

First, thanks for all the excellent feedback on this forum.

I have a question for the community about my family situation.

We purchased a home in Las Vegas March 2007.

Paid 535k. Put 20% down. The home has lost nearly 30% of its value since that time. It's now worth about 400k while we owe about 410k.

I have a 10 year ARM through Wells Fargo, 6% rate. I have not missed any payments.

We would like to be able to refi into a fixed rate at the attractive rates being offered.

However, despite putting 20% down, we do not have the necessary loan to value ratio to take advantage. We don't want to sink any more capital into a depreciating asset.

Are banks willing to refi without 80/20 loan to value ratio for borrowers? I heard from a local banker that Fannie was considering doing away with the 80/20 requirement for some.

Has anyone had any experience with Wells Fargo in attempting modification on a loan that was not delenquient but upside down?

In situations like this are banks doing principal adjustments?

We dont want to just walk away from our property but if interest rates continue to slide it will make more economic sense to cut our losses on this and just buy another home at a lower fixed rate.

Thanks for any feedback

[LHarveyMadman]

Being upside down in and of itself is not justification enough for the lenders to offer a modification. Since your ARM isn't going to reset for 8 years, then it might be hard to use this as a reason to get modified. However, I was able to get a modification with an adjustment date that was still about 2 years in the future. So it's worth a shot, but it will take some effort to get their attention since Wells Fargo is dealing with a lot of people who are delinquent or are facing hardships.

As is always mentioned here, the decision to modify the your loan is given up to the investor.

You won't be able to do a conventional refinance without some equity in your home, and especially not in Las Vegas, where the market is still very choppy and could decline some more. However, if you are able to scrape the cash together to have 3% equity, you could go with FHA. However, the rates might not be as good as with a conventional refi, and you'd have to pay PMI until your LTV drops below 80%.

If you walk away from your home, you'll take a huge hit to your credit score, and would have to wait a few years before obtaining another mortgage. Even if you didn't have to wait to buy again, the drop in your credit score would probably disqualify you from getting the low interest rates that you seek.

[Jason Smith]

Hello,

Is it a good or bad idea to mention in a hardship letter that you were advised by a financial advisor to walk away from your home?

I called the Wells Fargo Executive Communications Team today and found out my loan is owned by Wells Fargo.

My home has lost 30% of its value over the last 2 years, erased my down payment and all equity and I now owe more than the home is worth.

I am not late on any payments, nor will I be moving forward, but am submitting a loan modification package to see if I can lock in a low fixed rate.

I'm a long time WF customerand I don't think they want my house.

Good idea or bad?

[Pedro]

i say bad...if they think your going to walk away and default they may just start without you knowing so.

i think you should just go along with the hardship and deeply express your situation and you "dont want to walk away"

if you think you have nothing to loose then whats the difference if you try for a loan mod? keep the "walk away" as a last resort, who knows they just might surprise you.