Now that the election results have begun to sink in, and economists have decreed that our economy is officially in recession (actually, the recession started a year ago), lenders are starting to see the writing on the wall. If lenders don't do more to work with homeowners to fix bad loans, then the new Congress and incoming Obama Administration will likely pass legislation that will force lenders to do things that the lenders will not like.
As a result, lenders have been announcing new and improved loan modification programs at a blistering pace. The problem is, there are too many new programs for the average homeowner to keep track of, and many programs have conflicting eligibility requirements.
The most publicized program is that of the FDIC, which has set a great example of how to work out bad loans through its mandated modification program for IndyMac borrowers. As the FDIC takes over more and more troubled lenders, its program may well become the standard that other lenders look to. Even so, the IndyMac plan is far from perfect: IndyMac's implementation of the plan has been slow because of the need to hire and train enough people to do the work, the FDIC may have scrapped IndyMac's traditional workout guidelines in favor of its new approach, and an IndyMac representative told me flat out that the FDIC workout options will not be discussed with any borrower representative, even a lawyer.
Then we have the Fannie Mae and Freddie Mac workout plans. I would love to tell you more about how these plans work, but I can't because I haven't spoken to anyone who's done one or is even in the process of doing one. The main reason for this is that these plans have what I believe is a major flaw: borrowers must be at least 90 days late on their loan payments to qualify for these plans. Many homeowners who are that late on loan payments really cannot afford to keep their homes. I think the folks who came up with these plans understand that. As a result, nearly no one will qualify for these workouts. It's a case of Fannie and Freddie refusing to take objective reality on the ground for what it is. That happens to be the very reason the government had to take over the ailing companies in the first place.
Then we have the hodgepodge of private, voluntary programs offered by lenders, which range from laughably unrealistic to very good long term solutions. While there are too many to comment on individually, I can say that my own experience has made me realize that two rules generally apply: it's a tightrope walk even under the best of circumstances, and borrowers will do better if the lender stands to take a huge loss in a foreclosure.
The continuing wave of bank takeovers and forced buybacks of loans present challenges to homeowners seeking help with their loans - your loan may be with one bank today, and with another bank or the government next week. If you are a homeowner struggling with a bad loan, you should consider getting qualified professional help to deal with your lender.
Jason,
I have one of those adjustable loans based on a libor + 6.5 margin that has reset @ almost 10 % in Sept 2008. Lender is Chase but it is a Freddie Mac loan.
It was an investment property and is rented now, however the rent only covers about 60 % of the loan payment. I have tax and HOA's to pay. I have been paying extra for 2 years however now I am paying even more and strugling to afford it. I have asked Chase in July for a loan modification/ restructure with an affordable fixed interest rate and nothing yet. I could not refi due to values going down by 40 % in that condo complex. I spent countless hours on the phone and faxing countless pages of requested documents. One month they reported me late to credit bureaus even tought I had send the payment on time.Every time I call I am told a story that is a bit different than the story the last person told me. ( Chase put the payment in a suspense account ??? while making a decision !!! that was never made , told me they won't report it late but aparently they did ) I had to then spend more time to have that issue fixed. To top it off I had a Chase Equity line with some credit available left on another property that closed after I was reported late by no other than Chase. My AMEX reduced the credit line I had by 90 % .
I now feel like they are set on ruining my credit and everything else becasue I am asking them to get me in a program with a fixed rate. I have told them values went down by 40 % and they are set to loose if I let it go... I don't think they care so then why should I ? I am tired of them and tired of Chase. I have been a loyal customer to them for over 14 years have a lot of my accounts with them ....
I had perfect credit before and never missed a payment ever however this year I had to cut all my expenses and my daughter expenses, I can't afford medical insurance for myself becasue I have to pay 10 % to Chase ... this isn't fair. I would be a perfect customer since they know I am going to have it rented and keep it . Al' they have to do is get me the fixed rate.
What do you think I should do ?
Elena,
Your problem is not unusual. Chase being as large as it is, it is easy to get differnt people to tell you differnt things and not follow through. I have worked chase accounts where they indicated that they were working the case as a modification but never did anything. Then they sent the borrower to foreclosure and I send the borrower to court to contest the suit since Chase had never responded to the modification. The court demanded that Chase do a work out and the modification was approved within 2 days with very favorable terms.
It is like anything it is not alway what your know but who you know. But it always helps to know more than the contacts at the bank.
Good luck!!
People do so many things to get rid of housing debt! Actually, there is an easy way of doing it - loan modification. Websites such as http://www.editmyloan.com/ can come is real help.