Loan Modification Mistakes – Part 2 of 7
Written on May 5, 2010 by Merre Ward
Making a Decision from a Business Point of View
For the past 2 years I have met with homeowners who feel an extreme moral obligation to keep their home and take every last penny they have to make the mortgage payment. Yet, my wise son at age 25 put it this way a 2 years ago; “Letting one’s house go is a business decision” – well said young man! I also agree. One can repair their credit, but recouping hundreds of thousands of dollars is an entirely different story!
Just last week I met with a woman who is so attached to her home and is $400,000.00 upside down, cannot afford the payments as they are today and is out of money. Yet I gave her a sliver of hope that her and her husband can purchase again in 3 years if her credit score is restored (easy to do with the correct coaching and one’s willingness to do what needs to be done). She did come to grips with the reality due to the fact that she now had some correct information, she has a game plan and more than anything she and her family now have a glimmer of hope for their future.
Making the right decision is hard enough, but making SOME TYPE of decision will free you from sleepless nights and the daily wrenching in your stomach. If you can remove your emotions for a moment and look at your financial situation, most will realize short selling or foreclosing on the home really might be in your best interest in the long run. But just like any good business decision, getting the right coaching from professionals must be part of the plan. These professionals include: an experienced real estate agent, a tax professional and legal consul.
What does this all have to do with a loan modification? Simply, a modification is not always the “Best Business Decision” for a homeowner. The waiting game one has to endure is agonizing enough and then when you get the result, most are not happy.
The only positive word I can say about modifications is if you are one of the lucky folks who gets a modification payment that is less than or equal to what you would pay for rent for the same home, then it might be a good idea to stay in the home. But you must also consider how far underwater you are. When working with homeowners we will give a current fair market value of the home and show them how many years it will take for appreciation to catch up with their current loan balance. Most often modifications just delay the real problem.
I have never been an advocate of modifications because it freezes the natural process of home ownership. For instance, if you are $200,000 underwater, modify your loan and if it takes 9 years for appreciation of your home to catch up with the loan balance, you are a sitting duck. During that 9 year stint you cannot sell or refinance. If you have 50% of an areas homeowners as sitting ducks the market will stall out. Homes will not continue to appreciate at a normal pace because everything is at a stand still. And what if your home does not appreciate after 9 years – now what???? Just some food for thought!
Before you make any decision, get all the information and be sure to keep your business hat on when assessing the big picture.
You can contact the whatsHAFA.com Team for a personal assessment of your situation. More than anything we want you to have a little bit of hope for your families future!
