MucheDumbre

I had a very interesting conversation with my Tony Soprano mortgage company the other day. With the layoff and the client list dwindling, I’m paying about 65% of my income to my mortgage. Yeah I know, which is why I’ve been keeping up with all the socialistic mortgage aid programs. Think what you want about me but I’m not afriad to admit when I’m wrong or ask for help when I need it.

So the phone call when something like…

“Hello Mr. Soprano, this is EeKay Gee, how are you today?”

“Well Mrs. Gee, if you would stay on time with your payments I would be better.”

“That is exactly why I called…. I believe I have a solution to both of our problems.. I found a program that goes into effect on December 15, the plan is a basically a loan modification. These are already in existance for hardships, but this is a streamlined version that gets the process started and over with in a matter of minutes.”

A loan Modification can be for many purposes, but basically what they are is the borrower asking the lender for either some plan to repay their past arrearages over time, a reduction in the price that they pay or a payment deferment for X amount of time.

In order to get approved for a loan modification the borrow has to jump through many hoops like a

Image by Lori Spindler via Flickr

good little poodle. There is a hardship letter explaining why you want a loan modification and what you would like that modification to be. Past years tax returns,full financial statements including 401k,retirements,annuities,insurance benefits,bank statements,letters from your boss,medical records, stock and bond statements,pay stubs,disability,unemplyment-retirement and/or Social Security benfits you have applied for… and finally a credit check.

Because anyone asking for a loan modification is sure to have steller credit.

The new streamline approach forgives all of that and asks for 3 simple things,

• that you are able to pay no more than 38% of your income
• that you certify your gross monthly wages
• that you haven’t filed for bankruptcy

easy peasey-pudding pie.

Image via Wikipedia

“You see Mr. Soprano, this new system makes it all so much faster and easier.”

“Yeah, but Mrs. Gee this is for Fannie,Freddie and Indymac mortgages only.. By the way,Big Pussy will be stopping by your house later tonight.”

“Mr. Soprano, I’d love to have Pussy for dinner, but while this plan is only mandated for Fredddie,Fannie and IndyMac, many other major lenders are following the same plan. The FDIC is recommending all lenders, including private ones such as yourself, follow the plan.”

The plan is not only easy-peasy in it’s application, it’s simple in it’s problem solving abilities. The lender will rework the loan to make sure the borrower is not paying anymore than 38% of their income, there are various way to do this, as this .pdf explains. Lowering the interest rates and extending the term of the mortgage are just a couple of options. The idea is to keep people in their homes at a payment they can afford and keep the mortgage company from losing more and more money when borrowers default.Which leave their homes vacant and all the unsold homes bringing the market down even farther.

“Mr. Soparno, if you would lower my interest rate from 13% to 6 percent for 5 years and then raise that interest 1% a year until it reaches the Freddie Mortgage Survey Rate you would still be making money off the money you loaned me and I would be able to stay in my home”

“Let me get this straight, you want me to reduce the money I”m going to make so you don’t have to pay me back for something that you promised to pay back?”

“Yes.”

“I’ll give this, you have balls. But Mrs Gee, we don’t give free stuff to people in this country and you … “

“I’m not getting anything for free though, I’m getting something at a 6% interest rate for 5 years and then an increase of 1% until it matches the prime mortgage rate, that’s extra money for you off of your investment. I know this is non-tradional, but the biggie lenders are seeking out and cold calling their borrrowers and offering this to them in an effort to keep people paying on their loans and not defaulting on them. JP Morgan, Citigroup and WellsFargo all are using the program voluntarily. Which the FDIC hopes that all lenders will follow.”

“Mrs Gee, this program doesn’t benefit me in any way so why would I offer it to you?”

“But it does Mr. Soprano. I will be paying you back on your loan instead of not paying you anything and that is a benefit to you.”

“No, a benefit is when I get something out of what I put in, why would I reduce the interest rate to such a small level when I can make double that leaving it what it is now?”

“Mr. Soprano, you won’t be making double anything if I default on this mortgage, with this plan you will atleast get your investment back plus 6%.”

“Yeah, but I want 13%.”

“..and I want wishes to flow from my ass like raindrops, but I’m willing to let that dream go if I….”

“What did you just say?”

“nothing….”

“That’s what I thought. Look Mrs. G, as I said, this plan isn’t for your type of loan, I will send you the loan modification papers that we have always used and you get me everything on the requirement list, if you don’t have something, write a note explaining why you don’t have it and then take it to a notary and get the note notarized. Do this for each individual item, you can’t just make a blanket note covering all the things on one paper. After we receive this paper work from you, we will pull your credit report and if your credit is above average, we will go from there.”

“You would rather get nothing than get something.. “

“That’s the gist of it, yes.”

“Can I ask why”

“Because I do not believe anyone should get a free ride, I worked hard to get where I am at and if I can do it anyone can. If I reduce your interest rate I will be losing 7 points and I am not in the buisness to lose money, a 6% return is not good enough when a year ago I was getting 13%.”

“..and 6% will seem like a butt-load of money when you are getting zero.”

“Oh, I will be getting something..I will get your house.”

“Not right now you won’t. Now you’ll force me to file bankrupcty and while we are dragging that process out for 6-9 months you won’t be getting anything, and when congress approves the plan to allow bankrupcty judges to re-work mortgages into the FDIC plan, I will start paying you back your money with a 6% return on your investment”

“That won’t happen, you forget I have more money to spend on lawyers than you do..Pussy will be there to collect my return shortly”

He’s right of course, it was my responsibility to repay him the money he loaned me at the rate he charged. I have done that each and every month but now, through no fault of my own, I can’t keep paying 65% of my income out to one creditor. To give me and the millions of others like me this plan is not giving us scumbags something for nothing. It’s just smart buisness. According the Joint Economic Committee of Congress, the average foreclosure costs $77,935 while preventing a foreclosure runs $3,300.

When the best interest for all is to take a little less than you hoped to get.. isn’t something better than nothing? Especially when to do so cost pennies that can be put back on to the borrow compared to tens of thousands that can’t be put onto to anyone other than the lender.

I guess not…

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