Loan Modifications

Loan Modifications

The first wave of the lending crisis started with sub prime lending. All you needed was a pulse to get a home loan using nothing down. The economy was great and housing prices kept rising exponentially. Any real estate brought you instant equity and wealth in California.With all that equity, borrowing on it was easy. Some used it like an ATM machine. Some used it to remodel homes, take trips, purchase vacation homes, maybe even to buy a boat or new car. We used it for a lot of training and to purchase investment properties to build long term wealth. The monthly cash flow was suppose to provide income to help pay for expenses.

The change in the economy affected a lot of people, including us. We had more vacancies and evictions since some of the tenants stopped paying or moved to a lower rental unit. Repair costs and other expenses were high. In addition the lending industry completely changed. The 2nd wave of the lending crisis entails all those adjustable loans like those 5/1 ARMs. Changing from an adjustable loan to a fixed loan is difficult. Not too many have equity, can come up with a down payment up to 30% of the loan balance, have high credit score and a great monthly income at a W2 job. Being an investor or being self employed makes it difficult to get a loan even if you have assets, cash flow, equity.

Are lenders overwhelmed with foreclosures that they have little time for prevention or proactive help. It seems so backwards that the bank only pay attention and help you when you stop paying? Modifying your loan is generally impossible if your payments are current, or your income to debt ratio is high. There would be no need for a loan modification if the income to debt ratio was good. Isn’t the purpose of modifying the loan so you can make payments rather than losing the home to foreclosure? It is so impersonal and secretive when you question what should be the debt to income ratio or to find out what exactly is needed. Those answering the phones can’t tell you. All they do is plug in your information in a computer system and that determines your fate.

It is a guessing game. They allow you to call back to provide different information should your income or expense change. The challenge is what are the changes that need to be made. Even when you do send the required information there always seems to be something else that is needed. Some banks throw away the documents if anything is missing and you have to submit it all over again. Better cross that “T”and dot that “I” and lets not forget to say “mother may I”.

That old saying “squeaky wheel gets the attention” applies here. Being behind in payments gets the attention of the lenders and forces them to work with you. In this case the bank has more to lose since they do not want another property on their books as it affects their lending abilities and overall business. It gets to the point where you have to decide, do you pay the bank or pay for your food, shelter and living expenses. To lose your credit means nothing when your livelihood is at stake. Maybe one day all the lenders will realize people need help and are willing to meet their loan obligation when more affordable and realistic modifications are made.


Amy Yoshimitsu
Lois Threlkeld

“Investing in Your Future”

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