Home Loans and Support

BOA Interest Only Lones and Need for Feedback/Adivce

Discussion in 'Bank of America Mortgage Help' started by calimada, Aug 23, 2013.

  1. calimada

    calimada LoanSafe Member

    Hi Everyone,

    I've been trying to modify my loan for 3+ years and I've failed supposedly to negative even though I thought this was completely BS.

    At the beginning of this year, my case finally came up with State Attorney General's office and after about 7 months of continuous delays, they final reviewed me for modification again.

    What the state Attorney general office found out is BOA's formula automatically denies you if you modified payment is higher than your origination payment....

    Well in my case, I had a 5 year Interest Only Arm. My original payment was $2050 and after it adjusted it jumped to about $2500. In addition my investor doesn't approve extended terms of my loan, so even at 2% interest rate there was absolutely no way my loan would pass in their scheme.

    The SA asked that my loan be re-reviewed but that it would be acceptable if they had the modified payment be higher than the original payment but less than current payment. I found this totally acceptable given that I'm behind 100k on payments, but if I was to be given a sort of reset to the loan, I could make a payment now.

    So first off, if you're in this situation, call the State Attorney's office and explain you might have this problem. My contact is Adam Hollofcenter and he is awesome.

    Ok, so now I need to explain a few more things... Despite getting agreement on both sides to do this, CA has seen crazy jack up of home values to the point where my LTV < 100%. A year ago is was 130% plus so I would have quailified had it none been for this glitch.

    BOA denied me DOJ modification now because my LTV < 100%. I tried to prove that my home value should be closer to 435k but this argument went nowhere.

    A few days ago, BOA offered me an in house modification. They said my payment would be about $2900 (although this includes escrow/real estate taxes of about $600), so the payment is actually around $2300.

    More so they would offer me forgiveness on my principal of $35k in addition to what I was behind. This would bring my loan amount to $465k but they would add $20k because that was the amount of escrow i was behind. Bottom line total balance would be $485k. 2.0 % for 5 years then it would adjust to "market".

    I was ready to jump for joy, but today I got a call saying I would be put on trial first and they couldn't confirm any details until the modification was "finalized".

    My CRM doesn't know the final loan amount (she says it will adjust w/ trial) or what will happen after 5 years. This would be in in house modification so I'm afraid about what rules they are playing by.

    How concerned should I be... I mean this seems like great news, but could this be a bait and switch situation. Also what if the market interest is 9% after 5 years? FYI my current interest rate is %3.375 and ajdust every July 1st. Will this be the cap or where start they the 5 years are up.

    Advice appreciated.
  2. Evan Bedard

    Evan Bedard Call 1-800-779-4547 Loan Safe Mortgage

    Hello Calimada,

    This is VERY common with any loan modification - whether it be an in-house modification or HAMP the servicer will rarely disclose the final terms until you successfully complete the required trial period. I would definitely accept the offer if it's affordable and I'm glad to hear you were able to receive assistance from the AG's office!

    Your interest rate will not adjust with market rates after the first five years has lapsed, this is not an ARM. A modification generally comes with "step-rate" terms meaning they will adjust accordingly to the terms outlined in the modification. Most modifications look something like this:

    Years 1-5 = 2%
    Year 6 = 3%
    Years 8 through life of loan = 4-5% fixed
  3. Medora

    Medora LoanSafe Member

    Hi Calimada,
    I have some similarities to your situation with BoA, so could use some clarification to your terms here.
    We got an in-house 5 year IO mod in 2009. It will readjust to 5% fixed and amortized in Feb 2015. I'm concerned about that, because our "term" will be 20 years at that time. I'd always assumed we'd easily be able to extend the term at that time since it had been the very first solution offered us before the first mod.
    So YOUR loan has now reset to amortized, correct? Extending the term would be one way to lower your monthly payment? And they denied that option?
    How did you get your case reviewed by the AG (and what state are you in?)
    You say that, "BOA's formula automatically denies you if you modified payment is higher than your origination payment...."
    How can this be?? If this were the case then everyone victimized by an ARM reset shock (a lot of folks) would be left out of the mod system. And these are the folks the mods are trying to help! So you are saying that you asked for a modification AFTER the re-set and so they first denied, because they could only come up with monthly payments of more than $2000 like your first loan?
    Clarification appreciated, as I'm wondering if I run the risk of falling into the same BoA murky trap: Payments w/ taxes are around $2K right now, and will double for my reset. So OF COURSE the modified offer would be more than the "origination" amount, if by that they mean the first modified amount, not the original pre-mod amount.
    Why do they make this so hard???
    Thanks for your insights--and congratz on a decent offer--phew!
  4. calimada

    calimada LoanSafe Member

    Hi Medora,

    Yes my loan amortized in 2010 and the payments went from $2000 -> $2500 (interest rate actually dropped from 5 -> 3.375).

    According to the lender, the investor (BNYM) doesn't allow modifications with extended term. I remember seeing something about this in the Pooling and Service Agreement for my loan.

    I'm in California. I submitted my case through the CA Monitor which is primarily composed of members of the state attorney general's office. I don't remember how I found, them, possibly calling the state attonery general's office and after getting to someone who what they were doing, told me about the CA Monitor website. About 3 weeks later, Adam Holofcener called me.

    Yeah, I can't really understand this, and thats why I blasted this away as soon as I found out. I think just however they derived their formula, it didn't take this into account but it does seem like it is valid w/ in the legal guidelines provided in the Modification/National Mortgage Settlement. I believe it was put in place to prevent banks from trying to use this an excuse from increasing payments, but they just didn't properly take into account loans like ours.

    And I think this is only a significant problem for people who have low interest rates and were originally interest only. You see the formula is based off of the origination payment, but the current payment (which also seems bogus).

    And I'm not counting my chickens before they hatched, they haven't even mailed me the offer yet. I'm really also interested to see if they forgiving or deferring the amount to bring my loan down to the affordable payment.
  5. calimada

    calimada LoanSafe Member

    Hi Everyone, I got more information on my offer.

    Current Unpaid Principal = 501k
    Late Principal/Escrow/Late Fees = 100k (20k of which is escrow)
    Current Payment (Prinicpal + Interest Only) 2513
    Prop Tax is ~ 616 / mo
    Total Payment = 3150
    Current estimated value of home: 615k
    Value when I applied for modification: 435k
    current interest rate: 3.375
    Other liens: 61k charged off Chase Heloc (last offer was 9k to settle)

    So now the mod offer
    Modifcation Type: NACA
    New Balance = $465 +20k escrow = 485k
    Loan length = 22 years
    Interest Rate Years
    1-3: 2 percent; (payment would be $2900)
    4: 3 percent (payment would be 3122)
    5-22: 4.5 percent (payment would be 3600)
    Deferment = 60k (at end of 22 years)

    Ok now my questions:

    1) The new balance is 465 + 60k, deferment, does that mean the rest is forgiven?
    2) The interest rate for years 5-22 (4.5 percent)is higher than my current interest rate (3.375 percent)
    3) They are not offering extension of my loan term, can i fight that w/ NACA
    4) I can afford payment now and possibly in year 4, but when interest rate jumps to 4.5% that is currently unaffordable)
    5) Should I take this or fight for a better offer
    Last edited: Sep 11, 2013
  6. TomEason

    TomEason LoanSafe Guide Staff Member

    calimeda

    Thanks for your post.

    For an answer to question 1, I recommend you ask your lender.

    #'s 2,3, and 4 are statements, not questions.

    Answer to 5) You might consider accepting it now, and remodding in several years. However, if you can't stomach the thought of going through this ordeal again later, you might turn it down and try for a more affordable mod now.
  7. Evan Bedard

    Evan Bedard Call 1-800-779-4547 Loan Safe Mortgage

    Hello Calimada,

    It seems that they deferred $60K (i.e. owed as a balloon once the loan matures or you sell the property), this is a very good offer given the fact you were $100K behind on payments before the modification - although it's not your fault they dragged their feet for so long.. Is this new payment approximately 31 percent or less of your gross monthly income?
  8. calimada

    calimada LoanSafe Member

    Yes it is, however by the time year 5 hits, it will be almost 40 percent
  9. calimada

    calimada LoanSafe Member

    Tom, let me restated #2-4:

    2) Can they offer a modification where the ending interest rate is higher than my current interest rate
    3) Is extension of the loan really only on the approval of the investor
    4) I guess 4 is more of request for advice which both of you answered. Accept and consider another mod in 5 years. I guess that is better than losing the home.
  10. TomEason

    TomEason LoanSafe Guide Staff Member

    calimada

    Thanks for your post.

    2) Assuming the loan mod is HAMP (BTW NACA is not a "modification type"), and the lender is a participant, that lender is bound to follow HAMP loan mod program guidelines.

    3) Most lender participants relegate loss mitigation decisions to the loan servicer.
    Last edited: Sep 11, 2013
  11. calimada

    calimada LoanSafe Member

    Hi Guys,

    Ok I finally received the paperwork and had a chance to review it.

    The new balance will be 525,000. They don't specifically state, but I believe the rest that I am behind is being forgiven. The thing is they don't specifically state this anywhere. Here is the exact verbage:

    The modified principal balance of my Note will include all amounts and arrearages that will be past due as of the Modification Effective Date (including unpaid and deferred interest, fees, charges, escrow advances, and other costs, but excluding unpaid late charges, collectively, ("Unpaid Amonts") less amount paid to Lender but not previously credited to my Loan. The new principal balance of my Note will be $525,000.001 (the "New Principal Balance"). I understand by agreeing to add the Unpaid Amounts to the outstanding principal balance, the added Unpaid Amounts accrue interest based on the interest rate in effect under this Agreement. I also understand that this means that interest will now accrue on the unpaid interested that is added to the outstanding principal balance, which would not happen without this Agreement. I understand that interest will not accrue on the Deferred Principal Balance which is further defined below.

    So basically they are saying my balance went from 501k to 525k, of this 60k is deferred.

    My interest rate is 2 percent for years 1-3, then 3 percent for year 4, then 4 percent for year 5, then 4.5 percent year 6-22. Then I owe a baloon payment of 60k.

    This seems like a good offer, given the value of my home is over 600k right now, however I really don't like how the interest rate goes beyond my current interest after year 4.

    Those with experience, what are my chances of fighting this and seeing an improvement?

    The only other part I need understand is why my escrow payment is so high. I calculate it to be around $620 (prop taxes) but they have it listed as $700 and I pay my own insurance.
  12. TomEason

    TomEason LoanSafe Guide Staff Member

    calimeda

    Thanks for your post.

    If the loan mod follows the standard HAMP waterfall, your arrearage is capitalized and added to the principal balance. And HAMP mod interest rates follow a rate step-up plan.

    Although you can try, I doubt you'll be able to improve you mod offer.
  13. calimada

    calimada LoanSafe Member

    State Attorney General Office rep got back to me too. He basically also said that this was the only modification I'd get approved for (i.e. be happy and take it).

    Any reason to have it read by a real estate attorney (or someone else) or these things pretty standard/clear cut. Any verbage/language I should look out for?

    I still find it hard to swallow that my interest rate will go up to 4.5% but at least I will be able to stay in the home for another 5 years.
  14. mpaterso

    mpaterso LoanSafe Member

    4.5 pct is a competitive, low rate these days for a 30 yr fixed rate. If your payments are more affordable under the mod, you should take the deal. Best wishes and good luck to you.

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