I wish everyone the very best and if you need me, feel free to e-mail anytime at darren.brennan@comcast.net.

I haven’t heard anything about mods covering just a reduction in income. Thus far, it appears 3 payments must be missed, and you must have purchased before Jan 1 2008. Remember, we only reward bad behavior here, not those who have struggled and met their promises

My main point to homeowners was: keep a very close eye on how this policy finally gets written – it *could* be a tremendous windfall. I would expect this to become official before 2009.

I continue to believe that a simple amendment to Chapter 13 would be a better solution to the problem. Dealing with just the one issue would be like having an unknown health problem and only seeing a podiatrist for a cure. You’d probably still have a relatively high recidivism rate, but if your goal is really to keep people in their homes (as opposed to saving credit card companies), then that would be the way to go.

What evidence is there that folks are getting 30 yr fixed at 3% in a loan modification?

I have heard of drastic payment reductions, or deferred increases, but they are usually either temporary (3 to 5 yrs relief), or in the form of deferred interest.

Is it just wishful thinking, of is there real movement to 3% 30 yr fixed rates?

On a side note, now, even NAR is trumpeting the poor recidivism rate of loan mods.

Finally, I wonder if they will do loan mods for loan originators who’ve experienced a reduction in income…

Oh, the irony…:)

$300,000 home loan times 3% fixed for 30 years = $1330 a month

Comparison: if you currently pay 7% on $300,000, your mortgage is $2100. Moving from 7% to 3% is a $750 monthly savings! Over the course of a year you will save $9000! Over the full 30 years you will save $277,000!! Now you tell me if it’s worth missing 3 consecutive mortgage payments. Research how much 3 missed payments will actually affect your credit rating. You will easily rebuild your credit rating in a few years as you laugh all the way to the bank. The $27,000 you save in the first 3 years will help offset your need for more credit. How long does it take you to put $27,000 in the bank after taxes have been paid and all your expenses met? It takes ages if you’re middle class. Using the numbers above ($300,000 at 3%), you could now afford to pay $27,000 *cash* for a car in just 3 years, merely because you moved from a 7% loan to a 3% loan. Last time I looked, that buys a pretty nice vehicle.

Yeah, I realize that is the definition of greed, but its what got the market in the mess we are in today. I would think if masses of underwater owners decided to start walking out on loans, banks would try harder to work with the people who can pay rather than the ones who can’t.

Steve says: “I’m tempted to offload my cash and investment assets on my fiancé, get myself “laid off” from my current job and stop paying my mortgage, then get a temporary job paying 20 – 40% of my current salary and request a loan modification. Perhaps get the feds to knock off 2% – 3% off my interest rate and 20% – 40% off the principal owed on my 30 year FRM”

I would tell Steve to offload his cash and investments on his car payment and any credit card debt. Then go into phase two with the “layoff”. Washington State pays $2000 monthly unemployment to anyone who made over $45,000. The limit is 6 months, soon to be extended to 12 months.

I don’t own, so unfortunately I can’t capitalize on this incredible handout (cut off date for purchase is Jan 1, 2008). As the details become set, people may want to follow the modification criteria *perfectly* (I mean perfectly) and lock in that 3% 30 fixed year rate.

Let me give you an example of the benefit:

$300,000 loan with the FHA 3.5% down payment at 3% fixed = a mere $1332 a month!! Property tax and PIM raise that up to around $1630. Bottom line is, who doesn’t want those payments locked in for life?!! Do your own calculation to see what you would be paying. If you’re a taxpayer, why shouldn’t you want to participate? As a taxpayer, you’re just going to be paying for your neighbors “modification” anyway.

Maybe if you paid the money that would have gone to the mortgage to credit cards, but that would be extremely risky because if they then said no, you might actually end up getting foreclosed unless maybe you could take cash advances on the same cards to get the loan current again (which even if you could do that, might have severe interest rate implications).

Bottom line is I think it’s unlikely that an attorney would recommend a purposeful default in order to qualify.

BTW, maybe this can be confirmed by someone, but I’d seen on one TV source that to qualify you had to have not filed bankruptcy (they didn’t say within what time period). Now I can see that as a lending criteria, but not a workout criteria. The IRS, for example, often wants the taxpayer to file bankruptcy prior to a payment arrangement. If no bankruptcy is one of the criteria, it just seems like a backdoor effort to protect (bailout) the credit card companies (banks).

I agree we will end up slowing the housing recovery by slowing the price correction and keeping people in houses they can’t afford for a while longer. We will also prop up some bad companies, and reward their inept, risk taking management. We will certainly come out of it with a ominous national debt. Maybe we can make something good out of it for the next generation.