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Modification Balloon Payment?

Discussion in 'Loan Modification' started by BigMikeTRR, May 24, 2012.

  1. BigMikeTRR

    BigMikeTRR LoanSafe Member

    To the point. We had a First and Second mortgage with Chase that was a few months late. The 1st had a payment of 2169.55 with a principal balance of about 337,734.00.he 2nd payment was 458.41 with a balance of about 82,695.35. My wife and I contacted Chase in early 2010 and asked for help. We were eventually in July 2010 approved for a modification. We endured a TPP (Trial Period Plan) of three payments at 2,230.93 (September 2010 through November 2010) successfully, which led to an approval of a permanent modification. Keep in mind that we asked for help because our income had decreased and we were struggling a bit to make our payments, but we were not in foreclosure and were behind maybe 120 days max when all of this happened. We needed a lower payment. Our permanent modification is structured as such:

    The modified principal balance of the Note will include all amounts and arrearages that will be past due (excluding unpaid late charges) and may include ampounts towards taxes, insurance, or other assessments. The New principal balance of my Note is $332,719.66 (the "New Principal Balance").

    The Interest Bearing Principal Balance will re-amortize over 378 months to a remaining scheduled balance on the Maturity Date of 126,344.85 (the "Balloon Payment"), which is part of the interest bearing Principal Balance. Payment is 1,988.48, an amount sufficient to amortize the New Principal Balance to the remaining Balloon Payment over 301 months.

    Fast forward, while applying for credit elsewhere, we dicscover that the old 2nd is being reported on our credit as CURRENTLY delinquent! Yet the new principal is reported current. Once the new permanent modification was in place, Chase began sending us the payment statement for ONE loan at the forementioned 1988.48 plus escrow. We thought the balloon payment was the second loan being put on the back end of the modification. And if that is so, it seems incorrect to report it as continuously late! We inquired to Chase and the 'research department' sent us a letter stating Our records show that this is an active account and your account is still due for the April 2010 payment. We cannot make any changes to your credit profile until we receive your payments. During the modification trial period, we may continue to report your loan as delinquent to credit bureaus even if you make your trial payments on time. However, after your loan is modified, we will report the loan as delinqquent only if the modified payment is not received on time.

    WTH? They answered this inquiry as if we were STILL in the TPP! So we call and some smart-ass says the second was charged off and we'll be getting cals about it? Really? When? We were never informed of such a thing! NOONE has written, called, sued us, no collection efforts....nothing! Did the wires get crossed somewhere? They ARE getting the money for the old second on the back end....right? When was there a judgement filed to court (it doesnt exist)? AND, if it's mysteriously charged off with ZERO court trails or notifications AND no mention of such during the modification process.....how did you conjur up the huge balloon payment that happens to nearly eaqual the old second. AND, now the loan is transfered to Ocwen....and their research department says no second loan was transfered or attached to the new loan number with them. We simply want the old second to be removed from our credit as CURRENTLY delinquent as you read this. Suggestions? Advice? Is this weird? Legal?
    Last edited: May 24, 2012
  2. hangtough

    hangtough LoanSafe Member

    It seems there was nothing worked out with your 2nd loan. Charged off means it's usually with a JDB (junk debt buyer). It can take months or even years before you start getting letters and being sued (here in Florida we had 2 accounts from last paid in 2009 and they started suit in late 2011 which we fought and won btw). Seems you're getting told different stories.
  3. Cat Damiano

    Cat Damiano Mortgage Wars

    Hi BigMike,

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

    A modification will not combine your first and second loan, only refinancing can do that. The balloon payment would have been a part of your first lien separated out using the waterfall steps and necessary to bring your payment down to within 31 percent of your gross income.

    Here is how the modification works;

    Step 1: Capitalization

    In the first step, the servicer capitalizes accrued interest, out-of-pocket escrow advances to third parties, and any required escrow advances that will be paid to third parties by the servicer during the TPP.

    Step 2: Interest Rate Reduction

    In the second step, the servicer reduces the starting interest rate in increments of 0.125 percent to get as close as possible to the target monthly mortgage payment ratio. The interest rate floor is 2.0 percent. The initial interest rate would be fixed for the first five years then increase by 1 percent in year 6 and another 1 percent in year 7. For the remainder of the term the rate will be fixed at the prime market rate at the inception of the permanent loan modification.

    Step 3: Term Extension

    If necessary, in the third step the servicer extends the term and re-amortizes the mortgage loan by up to 480 months from the Modification Effective Date to achieve the target monthly mortgage payment ratio.

    Step 4: Principal Forbearance

    If necessary, the servicer will provide for principal forbearance to achieve the target monthly mortgage payment ratio. The principal forbearance amount is non-interest bearing and non-amortizing.

    The amount of principal forbearance will result in a balloon payment fully due and payable upon the earliest of the borrower’s transfer of the property, payoff of the interest bearing UPB, or at maturity of the mortgage loan.

    There is no requirement to forgive principal under HAMP.

    Here is an example of how the balloon payment works;

    You currently owe $300,000 in unpaid principal total along with all past due interest capitalized.
    In order to get you to an affordable payment, because they just are not able to do it on the $300,000 amount, the servicer has to split off $100,000 of that $300,000, and puts it as a non interest bearing, non amortizing balloon payment.

    Then the remaining $200,000 is amortized at the interest rate given over the terms given to arrive at the payment you will be making.

    So that $100,000 is still there, you just wouldn't be making the payments on it, however, if you sell, transfer, or refinance the property, it will of course be due as it is a part of the original unpaid principal balance that you still owe even without a mod. What you need to understand is that the lender isn't forgiving that amount, they are forbearing it.

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