Randy Johnson of Newport Beach, author of “How to Save Thousands of Dollars on Your Home Mortgage” and a mortgage broker since 1983, answers questions…
Lost in Huntington Beach asks…
Q. I bought my house in August, 2005 for $750,000 in the city of Huntington Beach. I did a stated income, 100% loan. The first is a five-year fixed, interest-only at 6.475%, the second is a fixed 9.5%. I have never been late or missed a payment. I used to have a great job back then, but now I can barely afford my mortgage at almost $5,000 monthly. My question to you is this: People that are going into foreclosure are getting help. I work my tail off to keep my bills, mortgage, etc, paid on time, and my credit rating is 700. Where is the help for me? My property value has dropped $150,00, and my loan will adjust in 2010, and I’m sure I wont qualify to refinance. If I can’t afford my payments, should I stop paying and then maybe I can get a modification? Is there any help for people that have made their payments on time? I don’t want to hurt my credit, but it seems that foreclosures will be a norm and maybe I can bounce back?
A. First of all, I sympathize with your plight but I can’t offer much in the way of encouragement. Obviously, a solution for you will require modifying your mortgage to reduce the balance and interest rate. Further, the holders of the first and second would have to cooperate, not as likely if the loans are owned by different companies now.
All I can suggest is that you stay in touch with your current lender and see if any of the possible programs that are bouncing around Washington D.C. these days ever come to fruition.
Paul in Port Hueneme, CA asks:
Q. I bought a foreclosed fixer as an investment a couple months ago. It was kind of rough, so I paid cash. After fixing it up real nice, I applied for a 75% mortgage. After paying for an appraisal and other fees for a mortgage, the broker apologizes and tells me that I can’t have a mortgage until six months of ownership. I have perfect credit, good income, no debt, etc. Go figure…..no big deal……but you would think that I am the kind of person that they would want to lend money to.
A. I agree, it is a stupid rule if improperly administered and it sounds as if you got caught in one of those Catch 22 situations. I don’t know all the details but not every lender has that rule. There are other stupid rules too. Some lenders don’t want you walking away from the table with more than, say, $100,000 cash in a “cash-out” refinance. In your case, you are also likely to get hit with a “cash-out” pricing penalty. Be sure to ask.
You are obviously a good credit risk, so if this sounds stupid to you, remember that these rules were brought to you by the industry that has brought the world economy to its knees by enforcing stupid rules like this and not enforcing sensible rules, like determining if people could pay back their loans.
Your mortgage broker should try again and try harder.
That’s it. Read prior questions and answers by clicking on the headlines below…
- Paying your mortgage may be the best use of your money
- A ‘good’ borrower these days is someone who…
- When insurers kill your mortgage application
- Mortgage insurance companies not giving breaks
- How price reductions work when Uncle Sam owns a foreclosure
- How long should we wait to refinance?
- Can you be too old to get a mortgage?
- Why aren’t foreclosures cheaper?
- When you can’t afford your mortgage
- How much to put down and other mortgage answers
If you want Johnson to answer a question, email it to Mathew Padilla at mapadilla(at)ocregister.com. Include your name or nickname and the city you live in — that information will be published with your question. Johnson will answer up to three questions each week, so keep checking back for a response. If many questions are submitted, it could take a while to get a response, or he may never get to it.
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On scenario 1, depending on the index i.e. libor, tbill etc…..and the adjustment change date in 8/2010…he may actually see same rate as the indexes have come down significantly YTD, and more than likley the first interest only option is good for 10 years.
Scenario 2, should check with his “local” credit union, or community bank. If not a member - become one asap. 60-75% LTV is in their wheel house….
I did the same thing paid cash for property due to lender giving 7 days to close on short sale approval. Numerous banks wanted 6 mos seasoning even though fannie mae considers this a take out loan. …..after trying 5 banks (wamu screwed up purchase loan and refi but they had bigger problems at the time, Wells, TB&W, greystone) finally received approval and funding from Provident. There you go free advice and help to all
Problem #1: Looks like you may have to become delinquent to get help, and that assumes that you have “hardship” that is verifiable. Few banks are willing to modify while you are current. Even Fannie Mae’s current guidelines for modification is looking at 2 months delinquency before reviewing for loan mod. But so what if you get a few dings on your credit report? It’s better than wasting $50,000 in unnecessary interest payments over the next few years.
Lost in Huntington Beach asks…
Q…. I have never been late or missed a payment. I used to have a great job back then, but now I can barely afford my mortgage at almost $5,000 monthly.
Not sure what the issue is. He can still afford the mortgage, according to his own words.
If household income has fallen a lot, then please provide details. HOW MUCH has income fallen?
Without details, what’s to say that he didn’t lie about his income on the mortgage application or is simply upset about paying on a place with negative equity?
It is not true that you have to be behind in your payments to get a modification. You have to be persistent with the lender. I was able to get my first modified with IndyMac before the FDIC took over. It took six months of bugging them, going up the food chain, etc… Finally, they gave in and I was able to get a modification.
I was not behind and due to reset on Sept 1, 2008. It saved me $330 a month. Going through this process was like dealing with a HMO.
Also, from what I have heard, if you are behind, you can become current with the modification and request the lender to show the loan as current.
Cry me a river. You made a bad investment and you want to know why you arent getting help? Why is it anyone’s responsiblity to help you pay the mortgage on a house that you cant afford? You have the option to walk away. Your credit is going to take a hit, but there are consequences to every decision.
You still are making 5k a month. Why the hell would you want to spend every penny of that each month trying to keep this house? You can rent for 2k a month. After bills and expenses you probably can save 1500.00 a month for the next 7 years while your credit improves. 1500.00 x 12 x 7 = 126k Down payment on your next home that you will probably be similar to your current home at half the price. Your mortgage in 7 years will be 1600.00 a month. THen you can start enjoying yourself. For now you have to suffer the consequences of your bad decision.
..and there you have it.. One buys at the top. The other tried to pick a bottom, making a purchase on a foreclosure. This is not ‘investing’, this is ‘blatant risk taking’.
Loan mods take persistence,,, Do like ‘re investor’ and ’scott’ posted above. Keep calling them. Call them a few times a day. The only problem i see with dealing with the lender/bank directly is that terms will be only negotiated in which the banks benefit, not you.
Its true that you dont have to be delinquent, but those who are will be helped first. So its important to keep hounding them. The banks hound people to pay their debt, and if they put you in a bad loan its now your turn to hound the banks non stop 27/7. Its alot of work and of course there are no guarantees.
OR Hire a lawyer or call a loan mod specialist (they’re everywhere now) who has lawyers to represent your best interest. You ‘may’ get a better deal.
As for the guy who tried to call the bottom, you may need try more banks.
And there you have it. One buys at the top. The other tried to pick a bottom, making a purchase on a foreclosure. This is not ‘investing’, this is ‘blatant risk taking’.
Its true that you don’t have to be delinquent, but those who are will be helped first. So its important to keep calling them.
The only problem i have with dealing with the bank directly is that you will only be able to negotiate a deal that benefits the bank. Having an attorney will get you a better deal.
I had to post several times because they system keeps editing me.
the blog doesn’t like the word lawyer.. hmm interesting..
OC trojan..stop paying if you can’t pay/afford it anymore! I did, you’ll eihther get the help, or you’ll forclose.. that simple.. and in the process, you’ll get to learn like me, that you’re at fault too (I was).. we’re all at fault partially. The good thing, (besides an expensive lesson) that’s if it’s out of your control.. and you’ve not touched the loan (used only to buy a home,no refi), then you’re free of responsability (taxes on the loss), and you’ll get another chance three years from now or sooner.
good luck everyone! Welcome to GD2!
peterbob, ( I didn’t either for 2 years!)..stop paying if you can’t pay/afford it anymore! I did, you’ll eihther get the help, or you’ll forclose.. that simple.. and in the process, you’ll get to learn like me, that you’re at fault too (I was).. we’re all at fault partially. The good thing, (besides an expensive lesson) that’s if it’s out of your control.. and you’ve not touched the loan (used only to buy a home,no refi), then you’re free of responsability (taxes on the loss), and you’ll get another chance three years from now or sooner.
good luck everyone! Welcome to GD2!
the law protects you through end of 2009, if you can’t pay anymore/can’t afford it/lost your job..etc…
After 2009, losses on the home are added to your income! and a big tax bill coming your way…. YOU’VE MADE 1 MISTAKE, do you want it to make it twice??
best deals anyway will be alter, it will be avious.. when you see more sales than forclosures, and with a repeat pattern, and no more price drops for 1 year.. and yes, no one is expecting a V shape recovery, we’re looking at an L…
do the best for your family.
You all know the best fix to this is time and market always decides the outcome, the more intervention.. the longer it takes to reach bottom..
ex_owner,
sorry to hear that you had to walk away. But im sure it was a win-win situation. The bank got their house back and you have freed up lots of cash.
You’re right. Others should check their situation before they walk, because you may be responsible for the tax .
I suggest heading out to the bookstore and checkout the the info on fixing your credit. Its really a simple process. You could have your credit profile back to perfect condition in 1 to 2 years or even sooner. Congrats on your new found freedom and peace of mind.
fha allows for cashout within the first 6 monhts. Fannie and Freddie just changed this guideline within the last 30days.
Lost in HB, Tanta at Calculated Risk (who sadly died a few days ago) wrote some articles a while back that gave very detailed instructions on how to write a hardship letter to your lender(s) — She had a lot of experience in the industry and explained how to give the people reading your letter EXACTLY the information they need.
Writing a letter that makes their job easier will make them more receptive to your plea.
Lost in HB,
Zero money down………did I read that right? Ain’t much skin there to lose.
Walk away, save up and in time you’ll be able to buy again.
Randy Johnson’s legal name is Gordon Randolph Johnson. His DRE record is available here: http://www2.dre.ca.gov/publicasp/pplinfo.asp?License_id=00851186
I probably wouldn’t have researched this info but for the lack of knowledge I perceived in his advice. While he’s not totally clueless, his advice is near meaningless and a waste of time.