Profile picture for bundyelvis

No help for home owner ?

I talked to my mortagage company, American Home Mortgage and explained to them I can't afford the new payment when it adjust next month. I got a heart attack and other health problems and can't work. The mortgage is 465,000 and a partial interest only negative amorization payment over 2k a month plus adding 350.00 a month to the principle. I ask them ifthey would lower the principle to the appraised value (appprox 235,000) my wife (who is not on the note who I recently  married) Would go on the note and help make the new payment. My wife has a 790 fico score and makes 45,000 a year. I make 1800 a month on Disability. They said no. They said my wife can try and buy it at the trustee sale. There only going to get maybe the appraised value anyway, why not make the deal? No wonder the bank is in trouble.
  • January 28 2009 - South Lake Tahoe
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Answers (6)

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Profile picture for SoCal Engr
I feel bad for your situation, and I think the loan you have stinks to high heaven and should never have been offered, but neither addresses the real point of your question.

Why should the bank refuse to modify the loan, especially if they are unlikely to make any more at auction?

1. By modifying the loan, they send a signal that they are willing to accept less than was agreed upon. Your situation may be legit, but you're not the only person who is in a bad situation and has a legit story for how they got there. This does not even start to account for the number of people who will try to game the situation once they know the lender is willing to modify.

2.  By auctioning, they might actually get more than through the modification. At worst, they should be able to close the book on the deal, unlike a loan modificiation where there is always the possibility that the borrower will default again. Also, the fact that the person in default actually loses the house puts more incentive on the borrower to not default.
(Warning, bad metaphor to follow) While I know it is not possible to squeeze blood out of a turnip, it might sweat some blood if it knows that there is no other option.

The bank may be in trouble, but because it offered you a loan that it never should have (neg am, yada yada). Having the loan defaulted on, it is now doing what it can to close the books on it's losses and move forward. It is going to be in worse shape if word gets out that it is rolling over and accepting pennies on the dollar to avoid defaults.

This may seem heartless, but the question was "Why not make the deal?" I wish you the best in your situation, and hope that everything works out for you. Unfortunately, it looks like holding onto the house will not be part of your solution.
  • January 29 2009
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Here is some info on loan modification.  I hope this helps.
  • January 29 2009
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I have followed you from when you first mentioned what they were trying to attempt to do to you.  Again, sorry to hear about that.

Here is the deal.  I have done several modifications for lenders that dished out similiar products.  I have always thought this to be a distructive loan and never issued one to anyone.  If it was for an owner-occupied purpose then i wouldn't do their loan and made them go elsewhere.  For the amount of money that brokers were getting paid they did their very best to make you get it. 

What I think I understand from all of this is that these loans are some of the rare few products out there that the government will not pick up with the TARP monies.  These lenders cannot get rid of these products so they continue to eat away at them.  I think that at this point they are trying to get you to fold...either way.  It will benefit them for you to foreclose at this time because their balance sheet is being gnawed away so it is do or die for them.  They can write off their losses if you foreclose or they make you pay more to offset the losses if they can't shake you.


Thank you for your time.  Again, I wish you the best.
  • January 29 2009
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Profile picture for Bentley Advisors
That sounds pretty cold on the banks part.  Although principal reduction to that extent may not be an option, there are plenty of other ways they may be able to assist.  Here's a great resource: http://www.hud.gov/foreclosure/index.cfm
  • January 29 2009
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Profile picture for tchau_99
I am really sorry to hear this....

Your banks is not really helping themselves out.

Try again a few more times and see if they will work you. Let them know that you will be foreclosing if they don't want to work with you.

What is your interest rate?
  • January 28 2009
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Profile picture for Clearpoint
I am very sorry to hear about your job and health issues however I fail to see a reason why the bank should drop your mortgage balance to it's current value.  They loaned you $465,000 so you could buy the home, you signed a contract to pay them back that amount plus interest.  However, I see no problem with them trying to work with you to find a temporary solution ie. reduced rate, principal deferment etc. but if the amount is still to much of a burden then losing the house might ulitmately be the best for you. 

  • January 28 2009
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