Profile picture for 21222

Should I accept this mortgage modification ? does it sounds ok?

Hi guys please see following email from my lender and give me an idea. is it a good deal or am i getting ripped off?

Current mortgage terms: %6.21, 5/1ARM 30 years.  Current payment:$ 1313

"AF will offer to adjust your payments over the next 34 months based upon two changes to your note. We will drop your initial interest rate to 3.5% from 6.125% and  we will calculate your payment using a 30 year amortization (payback schedule) instead of interest only.  After the modification paperwork has been signed and your second trust lender has re-subordinated their second trust to Acacia's modified mortgage your new payment will be $1,184.91 (942.09 principal&interest + $202.54 re tax + $40.28 tax escrow shortage). Hopefully after one year a new escrow analysis will be performed and your short portion tax escrow will be dropped.

However in February of 2012 when your loan is scheduled to adjust it's rate after it's first 5 year fixed payment term, it will adjust using your initial original interest rate as your measure for rate increase or decrease however the loan will continue to amortize over 30 years. "

please give me some ideas. I need you help everyone. best regards. BB

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March 11 2009 - Sterling
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Answers (14)

Profile picture for HopeNHousing.Org
I think I would take that deal bud!

3.5 is pretty low, and 2012 is quite some time away, You may very well be able to refi by then.

Plus with the 3.5 you may be able to pay down some the principle each year if you save what you can. But lyee92 may have said it best...

"I think weather this is a good offer or not depends on your own situation"

However if you would like any help in your efforts of obtaining a loan modification perhaps you should contact the Hope 'N Housing Organization. They are a nonprofit group that stop foreclosure through loan modification or other foreclosure prevention services they offer to homeowners who need to stop foreclosure.

You can visit them on the web...
http://www.hopenhousing.org
or give them a call...
1.888.696.5401
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March 27 2009
Profile picture for lyee92
I think weather this is a good offer or not depends on your own situation.  You have to consider what's the loan to value ratio.  If your loan to value ratio is so high that you're not expecting the value of the house will ever catch up to the loan amount, what's the point of paying down the principle?  Just let it go in that case.  2nd thing you might need to consider is the current market rent at your area.  If your monthly obligation is comparable to market rent, and you're absolutely in love w/ this house, then you should take it, since you'll have to rent some place anyways.  Nobody says that you can't forfeit after you're taking the modification if prices drop further.
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March 27 2009
Your not going to get better than 3.5%....Take it...any one under here that is telling you not take it doesn't know what their talking about.
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March 27 2009
I spent a lot of time developing a script according to the detailed guidelines of this plan.  Currently, it provides more info than the Treasury eligibility calculator.  Treasury's calculator, among other things has bugs and doesn't highlight some of the major incentives to borrowers under the mod and refi plans.

Please feel free to compare and contrast.  I believe my eligibility results are more specific than Treasury's on:

www.homeaffordplan.com

I welcome any questions or criticism of my calculator and also hope it is useful to people here.  Most of the questions I see here could be answered by plugging a few numbers into the eligibility calculator I've developed.

Good luck out there.
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March 26 2009
Banks generally do not do modifications in their own best interest. And its true that you would be better off if you could get a reduction in principle. I guess what I'm saying is, its kind of like a negotiation and perhaps you could keep trying.
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March 26 2009
Profile picture for prfstrkr
sounds ok to me
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March 26 2009
Profile picture for shelswartz
Interest-only? Sounds like you were suckered into an ARM. Get rid of it no matter what it takes, before you end up paying DOUBLE your current mortgage!
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March 26 2009
Ok let me add another opinion.  The best way to decide if it is good for you is does it actually help you?  Did oyu negotiate this modification yourself? Most loan companies will modify your loan but they are trying to be certain that you can pay the new terms as well as the remainder of your living exspenses/debt.  As far as principle reduction goes.  Wouldnt we all love that.  Unfortunatly from what I read and discuss with other professionals in the modification industry reduction only happens about 20% of the time.  They the chance for principle reductions when the LTV is 140% or greater and even then most banks will only lower the ltv to 110%.  I believe I would push for fixed rate or some clear definition of what the 5 yr adjusted rate would be , how often it would adjust, what is the cap.  I hope that this help.

This is not legal advice and does not replace legal advice
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March 26 2009
It doesn't sound like a bad deal to me.  they are lowering your rate and by making it pricipal and interest you are not only getting a lower payment but also paying down your balance.

Your other option, assuming you can prove hardship, is wait for the cramdown legislation to pass and declare bankruptcy.  but do you want that on your credit history and are you comfortable with it on a self respect level if you can avoid it?
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March 12 2009
Profile picture for escher

If someone is offering a 3.5% fixed rate teaser to deadbeats, why am I, a current buyer without credit/mortgage troubles, not getting these rates? There has to be a catch. If a lender could lend at the going rate, why would they choose to offer a lower rate?

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March 12 2009
Profile picture for CORONA NICK
jwg

Listen up buddy, most likely this person overpaid for his house.... by changing the terms of his loan without reducing the principle only kicks the problem down the road... Also, there are modifications that do reduce principle, so why would anyone accept anything less is beyond me.
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March 12 2009
Profile picture for jwg
  • jwg
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Am I reading this wrong? Where are you seeing Neg am? It says that 942.09 with go toward principal and interest. Where else are you going to get a 3.5% interest rate on your mortgage? People with the best credit in the world can't get these terms. Bottom line: if your interest is going down, your payments are going down and your mortgage balance is going down... what's not to like? If you can do better, more power to you but I can't say it looks like a bad deal by any standards.  
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March 12 2009
Profile picture for CORONA NICK
Any modification that does not lower your principle is not in the best interest of the home owner. I wouldnt take that.
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March 12 2009
Profile picture for escher
There are lots of questions. The main one is: how much do you really need the $128 per month lower payment that you will get with this plan? Is $128 between you and starvation or foreclosure? If it is not, then you should not accept this modification. You already have terrible loan terms. This offer is going to make them even worse. You will be having negative amortization on top of a declining asset value, which means you will be in even worse shape in 5 years. If you can possibly afford it, you should try to obtain a fixed rate at current market interest rates.
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March 12 2009
 
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