Loan Modification

[San Onofre Guy]

This isn't for me but my sister in law and brother in law. They bought in 2005 north of the San Fernando Valley, yes about the worst time. Fortunatly they bought in a good neigborhood and have a small house with a pool which is needed in that hot area. They are anything but simple and bought very high end televisions and other toys in the past year. They are calling me for advice tonight on how to get a loan mod. I told my wife that they should talk to me before hiring a lawyer as I suspect that there are many scams out there.

I understand that they paid $569,000 in 2005 and Zillow says it is worth $340,000. I believe that they are current on their note and their monthly payment is $4,000 ouch! Does anyone have advice on a loan modification? I don't want them to need to hire a lawyer.

[bae]

Did they lose their jobs and can no longer honor their agreement?

Or are they simply upset that they have "lost" money on the value of their home, and are looking for someone to help remedy their loss?

[redfox]

Have them call a local lender and ask about HARP.

[San Onofre Guy]

They postponed discussion until this weekend.

My sister in law lost her job in 2008. I think like many people they look at what it costs to live in this house and what it would cost to live in an apartment and get sick over the cost of the house. I verified with my wife that they have never missed a payment. These folks are very style concious and pretend to be wealthier than they are. I don't think they realize that most of their friends are in the same boat. They have never refinanced thus they have a six year history of making the payment.

My plan is to tell them to meet with someone they trust who has been in the residential loan business for a couple of decades. A professional won't think differently of them due to their financial situation as I am certain most "professional" friends of theirs already suspect what the situation is. I will suggest that they explore a refinance to a 40 year loan which will ease their payment and make extra payment to pay down the balence. They might be so far underwater that they will have to put a bunch of money aside, say $20,000 to $40,000 to add as a downpayment if you will to make the refinance happen.

I don't think people understand the need to take a long term perspective in residential real estate. When I bought my current house in 1995 I paid $256,000, a neighbor told me it had been worth $400,000. I bought in a huge real estate downturn. My house in 2007 was probably worth $850,000 and is now worth $600,000. What I am saying is that my relatives live in a desirable neighborhood in one of the smaller homes in that area. I suspect that ten years from now their house will have regained the loss. My reasons being is demographics. Babyboomers are just hitting age 65 now. Many since the economic downturn have delayed retirement, I think retirements will begin to escalate in the next 12-18 months and those retirements will have an effect on employment numbers. There is pent up demand for real estate close to economic centers, as the employment picture improves, so will real estate.

I qualify that statement with stating that housing in fringe areas will continue to stagnate. Places like north Los Angeles County (Lancaster) and Riverside and San Bernardino might never recover.

[Anne Lee]

I've heard that loan remodifications are notoriously hard to get, that it's a program the banks put out there to pretend to be helping after the TARP bailouts. YMMV.