Why Loan Modifications Are A Bad Idea

Why Loan Modifications Are A Bad Idea
Trying to Get A Loan Modification Is An Exercise in Frustration & Misplaced Hope

Many financially distressed homeowners and investment property owners who are facing foreclosure put all their hope in getting a loan modification from their bank or mortgage company. Unfortunately, as this McSweeney's article - Could It Be That the Best Chance to Save a Young Family From Foreclosure is a 28-Year-Old Pakistani American Playright-slash-Attorney who Learned Bankruptcy Law on the Internet? depicts, the loan modification application process can be exhausting, time consuming, frustrating and expensive.

In this article the financially distressed borrowers had to wait over 14 months and spend thousands of dollars in attorney fees just to get their loan modification which which was a re-write of their mortgage loan to 40 years at a lower than current market interest rate for the next 5 years or so with an adjustable rate that is capped after that. While this helps the borrowers in the short term, it will hurt them badly in the long term. For starters, the borrowers are still heavily underwater (i.e. upside down) on their house and will likely remain so for over 10 years. In addition to that, the modified payments are not usually reported as normal payments on a credit report. Therefore, the borrowers will likely have their credit damaged slightly each and every month due to the reduced payment. In 10 years these borrowers will find themselves still unable to sell and due to the damaged credit probably unable to buy. If they had just accepted the reality that they cannot afford the house they could have sold their house via a short sale without paying a bunch of attorney fees and much faster than 14+ months. The end result would be that in 3-4 years their credit would be almost fully restored and they would be able to qualify for a new mortgage and buy another house at a much lower price. This is the much more financially sound strategy. While I fully understand that home ownership has it advantages and comes with strong emotions, I highly recommend that if you are facing default or a mortgage foreclosure that you put away your emotional thinking cap and put on your logical thinking cap since that is the one that will help you solve your housing and mortgage problems with a short sale rather than just push it into the future with a loan modification.

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Jim McCormack is a Nashville Real Estate Broker who provides Expert Real Estate Solutions for for Nashville, Brentwood, Franklin, Nolensville, Spring Hill, Thompson’s Station, Murfreesboro, Smyrna, LaVergne (La Vergne), Antioch, Columbia, Mt. Juliet (Mount Juliet), Springfield, Gallatin, Hermitage, Hendersonville, Clarksville and Middle Tennessee (Davidson, Maury, Montgomery, Robertson, Rutherford, Sumner, Williamson and Wilson Counties) Homeowners and Real Estate Investors Facing Foreclosure and Needing to Short Sell Their Homes and/or Investment Properties. Jim Specializes in Short Sales and Foreclosures and Providing Sellers Short Sale Help and Foreclosure Help. Jim's Help is Free to Nashville TN Short Sale Sellers. Jim Helps Sellers Stop Bank and Mortgage Foreclosure with a Short Sale, or a Fast Cash Offer. Avoid Foreclosure by Working Directly with a Nashville Tennessee Real Estate Expert and Investor who is Uniquely Skilled, Honest, Compassionate, Caring and Exceptionally responsive to the needs of his clients. Jim Encourages You to See What His Clients Say About Him. For Buyers, Jim understands the Various Nashville Tennessee Housing and Investment Real Estate Markets Extremely Well and is Particularly Skilled at Assisting Buyers with Determining the Market Values of Homes and Investment Properties. Due to that Real Estate Valuation Expertise, Jim can Help Nashville Home and Investment Property Buyers Get Fantastic Deals on Their Nashville Area Real Estate Purchases.

Housing Recovery Already Dead?

Housing Recovery Already Dead?
Government Subsidized Housing Recovery Already Failing

According to this Real Estate Economy Watch article, Recovery Softens as More Markets End Year with Annual Price Decline, the government sponsored artificial housing market recovery has already begun to sputter. Despite the NAR's (National Association of REALTORS) reports earlier in the year that the housing market was recovering, the latest reports show the opposite. This should be no surprise since the government efforts to "save" the housing markets are largely the same policies that caused the housing bubble and crash. The government has used the following strategies to try and inflate housing prices:

• Lender of Last Resort - The government is not responsible for over 90% of all the residential mortgage loans in the United States. Since there is basically no private mortgage market this method should be re-worded as the "Lender of Only Resort". The government has accomplished this by a massive expansion of FHA insured mortgage loans (despite record FHA loan defaults - see FHA In Financial Trouble: Bailout Likely), continued mortgage buying by Fannie Mae and Freddie Mac (despite the fact that Fannie and Freddie are bankrupt), VA guaranteed mortgage loans, USDA Rural Housing mortgage loans and more.
• Withholding of Foreclosures and Shadow Inventory - Since the FHA, Fannie Mae and Freddie Mac collectively control a large majority of residential mortgage loans they are able (and apparently very willing) to hold back foreclosures and soon to be foreclosures from hitting the market. Therefore, inventory is artificially restricted, which (if you remember Economics 101) means prices go up.
• Letting Banks Cook Their Books - The government has basically let banks pretend that they are in much better financial condition than they actually are via loosening accounting rules. The accounting rule changes allow the banks to sit on a mountain of foreclosures and soon to be foreclosures and pretend that they don't exist. Without these accounting rule changes the banks would have to sell these properties much faster, which would increase the supply of houses and, therefore, housing prices would come down.

From my own personal experience I have the following story to relate to you: I received a Broker Price Opinion (BPO) order yesterday and again today (11/20/2012). I normally ignore these, but I read the email anyway. BPO's are typically ordered by the mortgage company/bank when a mortgage loan goes into default so that the lender can determine the value of the collateral (i.e. the house) that is securing their mortgage loan. I sold this particular Murfreesboro Tennessee house as a short sale (I was the short sale listing broker) for $70,000 with a closing date of 5/14/2012. The buyer was a REALTOR whose husband is a contractor/builder. They did some renovations (paint, carpet, light fixtures, appliances, etc.) and resold it to a home buyer for $109,900 (those buyers somehow financed $112,142) with a closing date of 8/29/2012. Given that I just received this BPO order, it must mean that the home buyers have already defaulted. Yes, that is less than 3 months after they purchased the house. This cannot be a good sign for housing. I am sure this re-sale showing a 57% "gain" in the house value (from $70,000 to $109,900) will be heralded by the clueless media and by NAR and other real estate groups who are noting more than cheerleaders for the housing market. Unfortunately, the truth is that this transaction is little more than putting an unqualified buyer into a house in order to puff up housing prices. As can be seen by the result, this strategy will fail (again). Today's home buyers are truly the least financially qualified that I have ever seen. Poor job security, too much debt, etc. When will the madness end? I am betting on 2013 being difficult year for housing prices. Of course, since I specialize in short sales, distress sales and foreclosures that probably means another good year for me. Here's to more misery!  If you have an FHA insured mortgage loan, there is a great short sale program for you called the HUD Preforeclosure Sale Program (see FHA Insured Mortgage Foreclosure Help for more information). Please do not let the bank foreclose on you. If you have a property and you owe more than the property is worth and have a mortgage owned by Fannie Mae, Freddie Mac, a HAFA eligible mortgage loan, an FHA Insured mortgage loan, a VA Guaranteed mortgage loan, or any type of mortgage loan, and you have missed payments, or will miss payments, please contact Franklin Tennessee Short Sales and Foreclosures Expert for a free no obligation consultation to discuss your foreclosure prevention options.

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Jim McCormack is a Nashville Real Estate Broker who provides Expert Real Estate Solutions for for Nashville, Brentwood, Franklin, Nolensville, Spring Hill, Thompson’s Station, Murfreesboro, Smyrna, LaVergne (La Vergne), Antioch, Columbia, Mt. Juliet (Mount Juliet), Springfield, Gallatin, Hermitage, Hendersonville, Clarksville and Middle Tennessee (Davidson, Maury, Montgomery, Robertson, Rutherford, Sumner, Williamson and Wilson Counties) Homeowners and Real Estate Investors Facing Foreclosure and Needing to Short Sell Their Homes and/or Investment Properties. Jim Specializes in Short Sales and Foreclosures and Providing Sellers Short Sale Help and Foreclosure Help. Jim's Help is Free to Nashville TN Short Sale Sellers. Jim Helps Sellers Stop Bank and Mortgage Foreclosure with a Short Sale, or a Fast Cash Offer. Avoid Foreclosure by Working Directly with a Nashville Tennessee Real Estate Expert and Investor who is Uniquely Skilled, Honest, Compassionate, Caring and Exceptionally responsive to the needs of his clients. Jim Encourages You to See What His Clients Say About Him. For Buyers, Jim understands the Various Nashville Tennessee Housing and Investment Real Estate Markets Extremely Well and is Particularly Skilled at Assisting Buyers with Determining the Market Values of Homes and Investment Properties. Due to that Real Estate Valuation Expertise, Jim can Help Nashville Home and Investment Property Buyers Get Fantastic Deals on Their Nashville Area Real Estate Purchases.

FHA In Financial Trouble: Bailout Likely

FHA In Financial Trouble: Bailout Likely Federal Housing Administration's Financial Problems Will Hurt Housing Prices According to this Wall Street Journal (WSJ) article, FHA Nears Need for Taxpayer Funds, the Federal Housing Administration (FHA) is in deep financial trouble, and as a result, the FHA will need a taxpayer bailout soon. It appears that the government propping of the housing market at taxpayer expense goes on and on despite the poor results and future problems that it creates. It is a shame that the US government keeps trying to fool home buyers into thinking the housing market is recovering only to leave them underwater when the housing market falls again. When the subprime mortgage market vanished, the FHA stepped in and made a lot of loans to would-be subprime borrowers. It should be no surprise that a lot of these loans would go bad. As of September 2012, the FHA insured almost 739,000 loans that are 90 days or more past due or in foreclosure. This is an increase of more than 100,000 loans from one year ago. This number of seriously delinquent loans represents approximately 9.6% of the FHA's $1.08 trillion worth of insured mortgages. Since the FHA insured mortgage loans accounted for nearly 1/3 of all mortgage loans to owner occupants (i.e. home buyers), the collapse of the FHA will significantly hurt the housing market. If you have an FHA insured mortgage loan, there is a great short sale program for you called the HUD Preforeclosure Sale Program (see FHA Insured Mortgage Foreclosure Help for more information). Please do not let the bank foreclose on you. If you have a property and you owe more than the property is worth and have a HAFA eligible mortgage loan, an FHA Insured mortgage loan, a VA Guaranteed mortgage loan, or any type of mortgage loan, and you have missed payments, or will miss payments, please contact Franklin Tennessee Short Sales and Foreclosures Expert for a free no obligation consultation to discuss your foreclosure prevention options.

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Jim McCormack is a Nashville Real Estate Broker who provides Expert Real Estate Solutions for for Nashville, Brentwood, Franklin, Nolensville, Spring Hill, Thompson’s Station, Murfreesboro, Smyrna, LaVergne (La Vergne), Antioch, Columbia, Mt. Juliet (Mount Juliet), Springfield, Gallatin, Hermitage, Hendersonville, Clarksville and Middle Tennessee (Davidson, Maury, Montgomery, Robertson, Rutherford, Sumner, Williamson and Wilson Counties) Homeowners and Real Estate Investors Facing Foreclosure and Needing to Short Sell Their Homes and/or Investment Properties. Jim Specializes in Short Sales and Foreclosures and Providing Sellers Short Sale Help and Foreclosure Help. Jim's Help is Free to Nashville TN Short Sale Sellers. Jim Helps Sellers Stop Bank and Mortgage Foreclosure with a Short Sale, or a Fast Cash Offer. Avoid Foreclosure by Working Directly with a Nashville Tennessee Real Estate Expert and Investor who is Uniquely Skilled, Honest, Compassionate, Caring and Exceptionally responsive to the needs of his clients. Jim Encourages You to See What His Clients Say About Him. For Buyers, Jim understands the Various Nashville Tennessee Housing and Investment Real Estate Markets Extremely Well and is Particularly Skilled at Assisting Buyers with Determining the Market Values of Homes and Investment Properties. Due to that Real Estate Valuation Expertise, Jim can Help Nashville Home and Investment Property Buyers Get Fantastic Deals on Their Nashville Area Real Estate Purchases.

Nashville Bennie Dillon Condo Bank of America Freddie Mac Short Sale Closing

Nashville Bennie Dillon Condo Bank of America Freddie Mac Short Sale Closing

Nashville Bennie Dillon Condo Bank of America Freddie Mac Short Sale Closing

Jim McCormack, a Nashville, Brentwood, Franklin, Nolensville, Spring Hill, Thompson’s Station, Murfreesboro, Smyrna, LaVergne (La Vergne), Antioch, Columbia, Mt. Juliet (Mount Juliet), Springfield, Gallatin, Hermitage, Hendersonville, Clarksville and Middle Tennessee (Davidson, Maury, Montgomery, Robertson, Rutherford, Sumner, Williamson and Wilson Counties) Short Sale and Foreclosure REALTOR, Real Estate Expert and Real Estate Investor was able to get this Nashville (in the Bennie Dillon Condo Building) Bank of America Freddie Mac Short Sale listed and closed in 166 days despite the short sale mortgage lender (Bank of America) mishandling the the Borrower's application to the HAFA short sale program. Jim was able to get this Nashville (in the Bennie Dillon Condo Building) Bank of America Freddie Mac Short Sale approved due to the following reasons:

• Proper research and work prior to marketing the home for a sale. This includes researching the loan type and correctly packaging and promptly submitting the documents required to get the Seller's application to the HAFA short sale program moving forward and understanding how to proceed when the Seller was not approved into HAFA.
• Understanding the short sale contract approval process.
• A reasonably accurate valuation by the mortgage lender (Bank of America).

Please do not let the bank foreclose on you. If you have a property and you owe more than the property is worth and have a HAFA eligible mortgage loan, an FHA Insured mortgage loan, a VA Guaranteed mortgage loan, or any type of mortgage loan, and you have missed payments, or will miss payments, please contact Franklin Tennessee Short Sales and Foreclosures Expert for a free no obligation consultation to discuss your foreclosure prevention options.

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Jim McCormack is a Nashville Real Estate Broker who provides Expert Real Estate Solutions for for Nashville, Brentwood, Franklin, Nolensville, Spring Hill, Thompson’s Station, Murfreesboro, Smyrna, LaVergne (La Vergne), Antioch, Columbia, Mt. Juliet (Mount Juliet), Springfield, Gallatin, Hermitage, Hendersonville, Clarksville and Middle Tennessee (Davidson, Maury, Montgomery, Robertson, Rutherford, Sumner, Williamson and Wilson Counties) Homeowners and Real Estate Investors Facing Foreclosure and Needing to Short Sell Their Homes and/or Investment Properties. Jim Specializes in Short Sales and Foreclosures and Providing Sellers Short Sale Help and Foreclosure Help. Jim's Help is Free to Nashville TN Short Sale Sellers. Jim Helps Sellers Stop Bank and Mortgage Foreclosure with a Short Sale, or a Fast Cash Offer. Avoid Foreclosure by Working Directly with a Nashville Tennessee Real Estate Expert and Investor who is Uniquely Skilled, Honest, Compassionate, Caring and Exceptionally responsive to the needs of his clients. Jim Encourages You to See What His Clients Say About Him. For Buyers, Jim understands the Various Nashville Tennessee Housing and Investment Real Estate Markets Extremely Well and is Particularly Skilled at Assisting Buyers with Determining the Market Values of Homes and Investment Properties. Due to that Real Estate Valuation Expertise, Jim can Help Nashville Home and Investment Property Buyers Get Fantastic Deals on Their Nashville Area Real Estate Purchases.

Columbia Rolling Fields Bank of America Fannie Mae Short Sale Closing

Columbia Rolling Fields Bank of America Fannie Mae Short Sale Closing

Columbia TN Rolling Fields Bank of America Fannie Mae Short Sale Closing

Jim McCormack, a Nashville, Brentwood, Franklin, Nolensville, Spring Hill, Thompson’s Station, Murfreesboro, Smyrna, LaVergne (La Vergne), Antioch, Columbia, Mt. Juliet (Mount Juliet), Springfield, Gallatin, Hermitage, Hendersonville, Clarksville and Middle Tennessee (Davidson, Maury, Montgomery, Robertson, Rutherford, Sumner, Williamson and Wilson Counties) Short Sale and Foreclosure REALTOR, Real Estate Expert and Real Estate Investor was able to get this Columbia TN (in Rolling Fields) Bank of America Fannie Mae Short Sale listed and closed in 130 days despite the short sale mortgage lender (Bank of America) mishandling the the Borrower's application to the HAFA short sale program. Jim was able to get this Columbia TN (in Rolling Fields) Bank of America Fannie Mae Short Sale approved due to the following reasons:

• Proper research and work prior to marketing the home for a sale. This includes researching the loan type and correctly packaging and promptly submitting the documents required to get the Seller's application to the HAFA short sale program moving forward and understanding how to proceed when the Seller was not approved into HAFA.
• Understanding the short sale contract approval process.
• A reasonably accurate valuation by the mortgage lender (Bank of America).

Please do not let the bank foreclose on you. If you have a property and you owe more than the property is worth and have a HAFA eligible mortgage loan, an FHA Insured mortgage loan, a VA Guaranteed mortgage loan, or any type of mortgage loan, and you have missed payments, or will miss payments, please contact Franklin Tennessee Short Sales and Foreclosures Expert for a free no obligation consultation to discuss your foreclosure prevention options.

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Jim McCormack is a Nashville Real Estate Broker who provides Expert Real Estate Solutions for for Nashville, Brentwood, Franklin, Nolensville, Spring Hill, Thompson’s Station, Murfreesboro, Smyrna, LaVergne (La Vergne), Antioch, Columbia, Mt. Juliet (Mount Juliet), Springfield, Gallatin, Hermitage, Hendersonville, Clarksville and Middle Tennessee (Davidson, Maury, Montgomery, Robertson, Rutherford, Sumner, Williamson and Wilson Counties) Homeowners and Real Estate Investors Facing Foreclosure and Needing to Short Sell Their Homes and/or Investment Properties. Jim Specializes in Short Sales and Foreclosures and Providing Sellers Short Sale Help and Foreclosure Help. Jim's Help is Free to Nashville TN Short Sale Sellers. Jim Helps Sellers Stop Bank and Mortgage Foreclosure with a Short Sale, or a Fast Cash Offer. Avoid Foreclosure by Working Directly with a Nashville Tennessee Real Estate Expert and Investor who is Uniquely Skilled, Honest, Compassionate, Caring and Exceptionally responsive to the needs of his clients. Jim Encourages You to See What His Clients Say About Him. For Buyers, Jim understands the Various Nashville Tennessee Housing and Investment Real Estate Markets Extremely Well and is Particularly Skilled at Assisting Buyers with Determining the Market Values of Homes and Investment Properties. Due to that Real Estate Valuation Expertise, Jim can Help Nashville Home and Investment Property Buyers Get Fantastic Deals on Their Nashville Area Real Estate Purchases.