Bad Bank Coming To A Theater Near You

Hello Paul,

I’m currently in a 2 year mod that I was able to work out with my current lender.  The fist year (which runs til April 09) was to set the rate at 2% which makes my payments about $2850 per month (includes taxes), I also have a second HELOC for 30K with payments of about $200 per month so I pay around $3100 per month under the first year.  The second year (runs from April 09 to April 10) will fix the rate for one year at 4% which will set the payment for the first at around $3400 + $200 for the second.  Our combined current income is $7,000 take home per month, but we also have the following monthly expenses:

$500 utilities
$560 car payment (we are upsidown about 6K)
$600 for child care
$700 food
$350 gas
$170 car insurance
$75  house insurance
$100 clothing and misc
$200 Student loans (about 50K for both of us)

In addition to this, we carry about 40K in unsecured CC debt for which I’ve stopped making payments since I cant afford to.

My biggest concern is that I do not want to walk away from the house and would love to keep it but I’m not sure if I can.  I know that if I get rid of the car payment and maybe enter credit counseling for the cc debt I will be able to afford the $3400 per month payment (albeit, very tight).

My biggest concern is that after the second year mod expires in April 10 the loan will go back to what it used to be a Neg-Arm loan. The principal + interest payment would be at that point about $4500, which I know I cant afford.

I’m not sure what to do, I’ve contacted Wachovia and they said that because I’m in the current Modification they cant do another one, but I dont see the point of finishing this mod (I wish I knew more when I did this last year) if after next year I will be in the same position.

I figured if I’m gonna take action I need to do it now.  If I can get them to modified the loan permanently for 30 years or even 40 years that would be great as long as the payment remains around $3200 which is about 40% of my monthly income I’m willig to stay in the house, otherwise what’s the point.

Joe

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Hello Joe,

That’s a tough decision; but my personal opinion is that your concern that the loan won’t be modified again in the future is not warranted. 

As the housing crisis continues, the prospects of obtaining a favorable modification increase (and don’t decrease). 

Soon we will have a “bad bank” that will be buying ‘toxic’ mortgage loans to get them off of bank’s balance sheets and my suspicion is that whoever is obligated on a loan that is owned by the “bad bank” will have an increased ability to obtain a modification.  Additionally, on the near horizon is my friend Raph Cramdown.

Read: Breath Inside The House – The Qualified Written Request

Thanks for the questions and Joe, Lord willing, you can weather the storm.  In the meantime I might check to see what type of violations exist in your mortgage loan.

Paul