Huge Payment Increase, Low Credit Score, Denied Mod

anna17

LoanSafe Member
Nov 11, 2009
18
3
3
This is probably not workable, but I want to examine every possibility, just in case there's some oddball refi out there that could help me.

I have a Countrywide > B of A > B of A NA > Nationstar loan that was interest-only; now I have to pay the entire principle in 20 years. (This isn't a modified loan; it was I/O from the start.) My payment went from $2600 to $4400 a month. I can't even afford ONE month at that cost!

There's a long backstory about how I got myself into this situation, but here's the significant parts: Perfect credit for decades until nearly 4 years ago when I suffered a spinal injury and was either unemployed or underemployed until recently. I never missed a house payment, but I feel behind on other bills and my credit is now a shameful 581. Never filed BK; one CC company did sue me, but I filed an affirmative answer in court and they went away. Guess they figure that anything tougher than a default judgment due to nonresponse isn't worth their time. No liens on the house.

I had successful surgery and am back working full time since the beginning of the year, paying everything on time, etc. And then this huge increased payment hits me. I immediately applied for a loan mod, put together a nice complete well-documented package for them, but Nationstar denied me, saying that "the modified payment would be higher than the original payment and the investor says the modified payment needs to be lower to approve the mod." Say what? This makes no sense! Aren't mods supposed to lower the interest rate, extend the term, etc? I can't imagine how the payment would be higher. I am not even a full month late yet, so there aren't months or years of missed payments to absorb. Oh, and there's no escrow shortage.

Probably the payment would be affordable if they could just increase the 20 years to 40 years, which seems like a win-win because the servicer would get much more interest.

If I could have qualified for a refi prior to this, that would have been the thing to do, but I assumed my credit score put me out of the running for that. Or any loan I could get would have a high interest rate, which wouldn't lower my current payment enough.

REALLY don't want to sell. There is some damage I'd have to repair (and can't afford to) unless I got a cash buyer who didn't need bank approval, and there wouldn't be enough left over to start over, particularly with my poor credit and lack of cash. I doubt anyone would even rent to me at this point. Wow. I've been a respectable professional all my adult life and now I feel like I'm about to become a bag lady.

Here are my stats:

Loan Balance: $550K
Less than 30 days late (I made a partial payment; Nationstar allows it)
Gross Income : $8200/mo
Mortgage Payment: Was $2600, now $4400; includes escrow.
Equity: Some, possibly enough to cover potential foreclosure costs, but not sure
Servicer is Nationstar, not sure who investor is, but it's not gov't sponsored

What a mess! I was so happy to be back on my feet again, and how I've getting knocked lower than I've ever been.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,050
161
63
San Diego, California
www.loansreduced.com
Hey Anna,
I've been a part of LoanSafe now for over 8 years and when it comes to different loan options, I'm very good at determining if anything is available.

I'd like to ask a few questions and feel free to e-mail me your responses here: [email protected]

1. Where is your home Located?
2. What is your home worth?
3. Was the 2nd mortgage you have now purchase money? Did you buy the house with the 2nd or did you get it after?
4. When was the last time you took any draws on the 2nd?

This will help me understand what is going on. Hopefully outside of these issues your week is going well.
 

anna17

LoanSafe Member
Nov 11, 2009
18
3
3
Hi Erik - What a quick reply. You're awesome!

1. I am in the Seattle area of Washington state.
2. The question of what my home is worth is a tricky one. Depends on who asks. ;-) It was recently assessed at $855,000 by King County. Tax assessments are pretty reliable here because they are yearly and 100% fair market value. I recently appealed the assessment because of some interior damage to the house. Don't have the final word on that yet, but my meeting with King County went well, so the value may drop to $740,000. OTOH, Zillow somehow thinks it's a gilded mansion and puts it at $1,100,000.
3. I'm actually referring to a first mortgage above. We originally went with WA Mutual in 2005, then refinanced with Countrywide in 2007. The first is 560K. The second is a piggyback 90K HELOC. Got them simultaneously. It was originally a 100K HELOC, but Countrywide put the kybosh on draws back in 2009 for houses that were underwater.
4. Which answers your last question: no draws since 2009.

As I said, the current problem is with the 560K first mortgage, with the payment increasing from $2600/mo to $4400/mo.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,050
161
63
San Diego, California
www.loansreduced.com
Not a problem, you caught us during the time we watch the forum like a hawk :)

The reason I asked these questions is to really determine the best angle to take in the long run. Because your 1st and 2nd were obtained when you bought the home the transaction would be considered a rate & term refinance with a conventional or government loan option. With a jumbo home loan as long as you haven't taken any draws on the 2nd lien in the past 12 months it would also be considered a rate & term refinance.

Here's the dilemma that I see:
The FHA and Conventional High Balance loan limits are 592,250.00 - if you add the 1st and 2nd lien together in your case you're at 650,000.00 which is above those loan limits.

That leaves you leftover with only limited options with the credit score you currently have or can get via a rapid re-score. I'm guessing you don't have the ability to get any gift funds to bring the balance down beneath those loan limits?

I'm trying to think of a few other options as well...
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,050
161
63
San Diego, California
www.loansreduced.com
I have an option if your home is worth 930,000.00 with 30% equity but it sounds like that would be a stretch. I think we really should run the credit simulator to see what you can do to increase your score, that would be the best start.
 

anna17

LoanSafe Member
Nov 11, 2009
18
3
3
You won't believe this: I JUST went out to the mailbox and got my new county assessment. They now have me at $942K!
Now, this has nothing to do with my appeal of the previous assessment. That hasn't gone through yet, nor do I know whether it is going to be accepted or denied. But $942K is where I'm at now.

I'm less worried about the HELOC than I am the first mortgage with Nationstar. The HELOC is with Bank of America. If the HELOC pushes me over the limit, can we refi just the $560K mortgage at Nationstar? Of course it would be best to combine them but it's really that $4400/mo payment to Nationstar that's got me totally freaked out.

Regarding my credit score, there are probably tips and tricks I don't know about to eke out a few points, but I haven't looked up anything like that. I've even been too scared to look at the actual score until yesterday. I have no extra cash to pay off anything. My history will show payment perfection until early 2014 when I defaulted on everything at once except the mortgage and HELOC. I have no loans at all now other than those.
 

anna17

LoanSafe Member
Nov 11, 2009
18
3
3
Oh, and I can't get any gift funds. Would be nice. My dad is 92, and his $800,000 home on the California coast is sitting in a trust for me, and I will own it immediately upon his passing. But I don't own it now, and I'd really rather have my dad than his house. ;-)
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,050
161
63
San Diego, California
www.loansreduced.com
That's not actually a bad idea to just do the 1st mortgage. Can you call me when you get a chance? 619-379-8999

I want to run by a few scenario's with you.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,050
161
63
San Diego, California
www.loansreduced.com
That's more than ok, I am on Pacific Standard time and get in the office around 9AM PST.
 

anna17

LoanSafe Member
Nov 11, 2009
18
3
3
Erik,

Thanks so much for talking with me yesterday and for making life look so much brighter!

To all LoanSafers who need financing solutions, I HIGHLY recommend that you talk to Erik. I was amazed at the options that are available even if your credit isn't great. My credit is pretty bad, but Erik took the time to explain how I can easily and affordably bring my credit back up to a respectable level in less than a year, which will most likely qualify me for a refi at a good interest rate. He even chatted with me about ways I can struggle through this year while I'm stuck in a bad financial situation. Finally, I feel like I'm actually going to make it through this awful time and save my home. It's going to mean some hard work, but I can do it! Even if the bank keeps giving me denials. Amazing what you can figure out when you have a really smart and informed person like Erik giving you a complete assessment of your financial situation and what you can do about it.

Note, also, that I'm giving Erik a totally rave review despite my not even qualifying for anything at this point. But instead, Erik helped me put together a workable plan, and that is pure gold. Another thing I really appreciated: Erik truly put me at ease by assuring me that my situation is very common; it happens to good, intelligent people and is nothing to be ashamed of. That has actually been a real sticking point for me; my financial problems made me feel like such a dirtball loser that I had lost my resolve to fight for myself. That can sap your energy at a time when you need it the most. It's so important to believe in yourself and keep fighting...and win!

Again, thanks so much, Erik!!!