ANALYSIS: HOMEOWNERS WALK AWAY AFTER GETTING A LOAN MODIFICATION
CARLSBAD – With the media abuzz over President Obama’s loan modification plan, homeowners are becoming more hopeful that it may be worthwhile to keep their home… or so one might think.
Jason Lane, a Senior Advocate at YouWalkAway.com, said, “One of my clients recently got a loan modification from her lender that would save her over $300 a month, but, at the same time, her property taxes increased about $300 a month making it impossible for her to afford the home even with the modification. She is now walking away and attempting a short sale.”
Jason went on to say, “Another customer of mine recently received an excellent modification that reduced his mortgage payment by over $800 a month. However, he is now walking away because his employer has cut back his hours and he would be able to rent a house the same size for $1,200 a month less.”
Michelle Dominguez, a customer of YouWalkAway.com, received a modification directly from the lender a few months back in which the interest rate was reduced to 3% for the 1st year and 5% thereafter. She is now considering walking away because, even though the payments are now more affordable, she lives in a condominium complex where the units are not selling. The units that are listed are $150,000 less than what Mrs. Dominguez owes. Beyond this, Dominguez is stuck with incredibly high Home Owners’ Association fees and Mello-roos, an additional property tax.
“We see this over and over,” said Molly Whalen, a Senior Negotiator at Home Legal Source, a law firm that performs loan modifications. “The homeowner wanted a principal reduction and they didn’t get one. Now they are walking away. They just don’t think it makes sense to keep a house that is not worth what they owe especially because they don’t believe the value will go up any time soon. They feel trapped.”
Employees of lenders are feeling the strain as well. An anonymous employee of Washington Mutual’s loss mitigation department explained to a Home Legal Source negotiator, “We are getting five [loan modification submissions] a minute and our analysts each have 500 to 700 files on their desks. How on Earth are we going to be able to find out who really needs a modification and who doesn’t?”
Many loss mitigation departments are also complaining about slow computers, being significantly understaffed, never receiving documents that have been sent, and of just being completely overwhelmed.
When does it make sense to walk away from a home that isn’t even worth what it would cost to build it? When would it make sense to walk away from a home if you were forced to choose between your mortgage payment and your car payment or health insurance? At what point would you break down and say that your house simply is not worth the emotional stress it’s causing? Eventually, something has got to give.
Jon Maddux
CEO
YouWalkAway.com
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{ 4 comments… read them below or add one }
It saddens me that people have to go through all that trouble to do a loan modification and then have to leave their houses because they still can’t afford the house and it makes more sense to walk away. Why would anyone get a loan modification?
I am waiting for a house that has been a short sale but it has been almost months. i was thinking maybe the banks is holding up the short sales situation. im currently living also in my house but like everybody else im trap to same people who walk away from there house. should i do the same thing like what everyones do now that my house is not worth it and its causing as stressful.
Mr. Crabajales,
Make sure you can qualify for both mortgage payments. Most lender’s guidelines are not allowing a current home owner with a mortgage to purchase a second home with an additional mortgage unless they qualify for both payments (not using the rental income either).
I say, homeowners who can still afford to stay in their homes need to hang in there. Most of us have a mortgage greater than the value of our home here in Riverside County, California.
And, it doesn’t look like the current government is here to help the home owners, only the corporations.
Otherwise, why not give everyone a 4% fixed rate mortgage across the board. Property taxes should be lowered to reflect current market values. Use the bail out funds to bail out homeowners and lower the principal on the mortgage to reflect property values. It’s cheaper than paying for evictions, and the banks wouldn’t have to pay numerous employees to handle the notice of defaults, pre-foreclosures, foreclosures, CFK, trashout and property preservation companies, realtor commissions, tax liens, utility liens, etc!
I am really having a hard time trying to get a loan modification for my house.. I am without a job now since June but I am behind 6 months on the payments.. I went to do the modificationa and asked if I could make some kind of payments to get almost caught up with the payments and they said no. So what does one do? I am really confused on what I should do, I have lived here for 21 years and I am the first time owner of the house. Any suggestions? And I am really cautious of things that are out there because a lot of them are scams.. Any suggestions would help and any references that I can check on to make sure everything is legite please?
Sincerely and egerally seeking advice…