If you are looking for a loan modification and have been turned down you may wonder why. If your loan is commercial you will almost always be turned down. The question is why. After all weren't we all taught that 80 percent of something is better than 100 percent of nothing ?
Here is one answer. If your loan is through Fannie and Freddie then you stand a really good chance of getting a loan modification if you meet the criteria. But if your loan is held by private investors then your chances go way down. The reason is that the clauses that allow banks to change a loan are cloudy. So while a bank can usually modify a loan that is in the "best interest" of their investor, what best interest is, is debatable. And in this case you can substitute the words law suit for debatable. Yes that's right . If you go under the bank is not liable. But if they modify the loan then the holder of the note can sue the bank for their money.
Ain't life grand? This problem needs to be fixed going forward and lets hope banks are working with investors to be able to modify loans. You may think banks are being paranoid. But when asked, Willy Sutton said he robbed banks because that was where the money is. So banks are paranoid and investors will sue. Let's hope this problem can be worked through and potential foreclosures can be modified for the benefit of all
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Charlie Ragonesi All Mountain Realty Big Canoe and Mountain Blog
On line at www.allmountainrealty.com Call at 706 579 1098
When clients ask me for mortgage information I always refer them to the mortgage experts - I get lost with all of the changes constantly taking place! Great post!
There is a difference between the investor of the note and the servicer of the note. The servicer may take on liability if they agree to a modification on their own, but my experience is that many servicers ask the investor for the best course of action. A correctly built case, provided in writing, helps the servicer complete the modification with less exposure.
This definitely needs to get fixed!
Loan modifications definitely can become tricky. I have found that the DU REFI PLUS program has been pretty beneficial to those whose property value have come down.
Hi Charlie,
Since banks have their own guidelines if the loans are not under Freddie or Fannie its really hard to determine what exactly the criteria are for loan modifications. Banks are not required to even tell people why they have been declined. For some it can be because they make too little money to afford even a modified loan, and some make too much so the bank thinks they dont need a modification! Added to that, as you mentioned, the investors who own the loan may decide to decline a modification for any number of their own reasons.