Loan mod runaround

If you enjoyed Diane’s post about the difficulties she encountered in trying to get her lender to approve a short sale offer on her property (see Short Sale FAIL), then you may find this account (from the front page of this morning’s RGJ) of a woman’s attempt at a loan modification good reading: Local homeowners get the runaround on loan modifications

The print edition of this story also contained tables showing success rates of loan modifications by lender, and stats on Nevada loan modifications and repayment plans.  [Note: I am presently trying to get permission from the RGJ to reprint the table.  If I do, then I’ll update this post.]

UPDATE: Thank you you to the RGJ for permission to reprint the table below.

Source: Reno Gazette-Journal

If anyone has a loan mod experience (successful, or otherwise) he or she would like to share with the blog, please comment below.  I’d love to hear your story.

One takeaway from the RGJ story is that homeowners in default should consider the Nevada Foreclosure Mediation program. According to the side notes for the article “the program has received nearly 3,900 requests in its first six months, or more than 10 percent of Nevadans facing default.  So far, 1,821 mediation requests have been assigned to a mediator and 877 mediations have been conducted.”

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About Guy Johnson

I am a licensed Nevada REALTOR® living and working in Reno, Nevada. Give me a call at 775-722-4011. My team and I will be happy to assist you with your real estate needs.
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36 Responses to Loan mod runaround

  1. Avatar Walker says:

    And of those 877 mediation that have been conducted, how many have resulted in a loan modification?

    How many failed at bringing about an agreement?

    Without knowing this, it is absolutely inaccurate to describe the foreclosure mediation program as successful. Word on the street is that most mediations fail to bring about an agreement.

  2. Avatar Raymond says:

    I agree. If 800 of those 877 mediations fail to bring about an agreement, the program is a rousing failure. Especially when we consider that only 10% of all defaulting borrowers even enter the program. When this is all said and done, 4 years from now, I doubt that this program will have helped save even 3% of all defaulting borrowers.
    But it will allow the politicians to say they tried to do something.

  3. Avatar DonC says:

    A rational bank wouldn’t be feeling any love for loan modifications because they don’t work. So long as the home owner is under water they’re likely to default. You can modify the interest and lower the monthly payments but this modification probably won’t alter the outcome.

    The only way for loan modifications to work would be if the bank eat a chunk of the principal, and banks aren’t going to be interested in doing that (how many home owners would be lined up for this one?).

  4. Avatar RealtyMarm says:

    That is exactly what is happening in some of these mediations. The borrower wants the bank to take a big hit. The bank says no. The mediator reports no agreement. The borrower appeals to the district court for a review. The district court does nothing. The borrower is now living payment free in the house for months, which will turn into years, while the court’s figure out what to do.
    This program is just another feel-good boondoggle that in the end will be counterproductive because it prolongs the inevitable.

  5. Avatar BanteringBear says:

    What happened to the “Lateral Move” thread?

  6. Avatar Guy Johnson says:

    The post was removed for various reasons; not the least of which is that the homeowner began receiving threats. Unacceptable.

  7. Avatar smarten says:

    Guy –

    Unacceptable threats I cannot condone.

    But here everything is public record. There is no right of privacy and the identity of any person who commits any act that is the subject of public record has no grounds to complain. No one who has commented on the particular blog has suggested anyone make threats against anyone.

    I think the lesson to be learned is if you purchase a home while you own another; you take out a mortgage on the second home; you have a mortgage on the first home; you default on the first mortgage the day after you close on the second mortgage; and you think your actions are private and you’re shielded from public purview; you’re mistaken. And you have no standing to complain about what the public has discovered and comments upon.

    I think the blog should be reinstated. I think the property owner in question should file a complaint with the police.

  8. Avatar skeptical says:

    FWIW, I just wanted to throw in a vote of confidence in Mike. He does outstanding work and did nothing untoward or unprofessional. I, for one, greatly value his contributions. This blog would be severely diminished without him.

    One cannot be responsible for the acts of all the lunatics and crazyheads out there. Mike should shoulder no responsibility for the actions/threats of a few whack jobs. As Smarten succinctly wrote, there ain’t nothing on this blog that can’t be found in public records.

    (hmmmm…. I wonder if the thread was removed because that Montreux rich kid’s friend from Portland got his panties all up in a wad….)

  9. Avatar DownButNotOut says:

    Right or wrong mean little if someone is getting threatened. Maybe put another way deserved or undeserved this blog shouldn’t be the reason someone gets threatened. Let Nancy Grace take care of that.

    Just my opinion, but outing ‘public information’ isn’t always right, and I can think of many examples, although the discretion what posters on this blog have presented has been admirable. I’ve enjoyed what’s been uncovered before threats were introduced.

    Kudos BB in pointing out it had been taken offline.

    I applaud you Guy for doing the right thing.

  10. Avatar Mike McGonagle says:

    Anonymous threats to the owners of any properties I profile here are disgusting, and I am ashamed that any of the readers of this blog would stoop to such tactics.

    To the owner in question, I understand from Guy that you tried to contact me and found me unresponsive, so let me explain. I had a 60 trial of Microsoft Works 2007 Professional that expired over the weekend. Removing the trial version removed all my previous programs, including Outlook, Excel, and Word, and leaving me without email capabilities and unable to read and respond to your concerns. I would like to respond to you, but just haven’t been capable of receiving your email. Everything should be fixed in a couple days when my new software arrives, but until then, you can contact me at sharkjack4@yahoo.com or 775.345.7435 (I’m in the book and have always been).

  11. Avatar BanteringBear says:

    I agree that it’s unacceptable for people to be threatening the owner. But, I also agree with Smarten- that’s a criminal matter. The owner should involve the police, and they can do a trace on the IP address, and he should prosecute. While I will respect Guys decision, I do NOT agree with removing the post. There was some good discussion there.

    I fail to see the difference between putting builders and developers like Todd Jaksick under the microscope, vs. software developers (I’m assuming since it’s Microsoft) who engage in the exact same behavior. It’s PUBLIC record. If you don’t like it, lobby to change the law, or DON’T engage in such transactions.

  12. Avatar BanteringBear says:

    I think the fact that the guy was receiving threats shows how angry people are with all of the unethical behavior taking place right now. Let’s face it, people like that guy (or gal, I didn’t even check the records), are the ones who ran prices up well beyond what the average person could afford, and now they are taking advantage of the horrendous collapse they helped to create. They have no shame. Perhaps a little public humiliation will go a long way in teaching them a lesson.

  13. Avatar willk says:

    I wonder if the person was really getting threats from anyone reading this blog.

  14. Avatar skeptical says:

    Back to the topic at hand, how many more loan modification applications do you suppose will be filed when 25% of all public employees are fired or reduced given pay cuts? They are among the few left with a “stable” job and decent income.

    http://www.lvrj.com/news/jobs-on-line-for-state-schools-82773377.html?numComments=190

    “Nevada’s budget outlook is so bleak that lawmakers doubt whether state government can remain afloat without drastic cuts to everything from prisons to schools to state parks and services for the poor and elderly….

    Mark Taylor, deputy state controller, estimated that saving $1 billion through pay cuts, if implemented in March, would mean reducing salaries of state workers, teachers and university and community college faculty and support staff by 25 percent to 30 percent through June 30, 2011.

    Almost 55 percent of state spending goes to public schools and Nevada’s higher education system….”

    This thing ain’t done by a long shot. A very long shot. The great price compression that began in 2007 continues apace. For all the bottom callers, bulls, and pollyannas out there, show me how we are even half way to the bottom.

    Reversion to 1995 prices will occur before reversion to 2005 prices, absolutely no doubt about it….

  15. Avatar BanteringBear says:

    “This thing ain’t done by a long shot. A very long shot. The great price compression that began in 2007 continues apace. For all the bottom callers, bulls, and pollyannas out there, show me how we are even half way to the bottom.

    Reversion to 1995 prices will occur before reversion to 2005 prices, absolutely no doubt about it….”

    A lot of recent speculators are going to get their collective @sses handed to them. They bought, assuming they could get positive cash flow or something close to it. They didn’t count on declining rents and extraordinary vacancies. Heck, if I were looking to rent in Reno right now, I wouldn’t even pay anything. I’d just pick an empty house and move in. Squatters delight. They’re everywhere.

    It’s quite sad what’s happening to the economy in Reno. It’s just dying, suffering not only the effects of this Ponzi economy, but from an identity crisis. When your business model depends upon endless growth and it comes to an abrupt halt, there’s carnage. I’d imagine people are just leaving in droves.

  16. Avatar MikeZ says:

    RE: “I think the fact that the guy was receiving threats…”

    I have hard time accepting that any of the data miners here would stoop to threats.

    “I was threatened” was a handy way to get the entire discussion shut down and erased, wasn’t it?

  17. Avatar DownButNotOut says:

    First, I don’t believe that ”we’ pay for everyones’losses in the form of taxes, that is just way too much of a broad statement. I would suggest that fully half the people that write in here don’t pay the amount of tax advantage they take from the government.That’s another topic.

    As to BB’s ‘It’s quite sad what’s happening to the economy in Reno. It’s just dying, suffering not only the effects of this Ponzi economy, but from an identity crisis. When your business model depends upon endless growth and it comes to an abrupt halt, there’s carnage. I’d imagine people are just leaving in droves’

    He’s right – I couldn’t agree more. A great place to live, is becoming a top 10 place to stay away from. I don’t personally claim to understand it. I love the area.

    So BTW – why aren’t we hearing from/ talking about the leaders of this City? Why aren’t we doing something about this? Why continue to criticize those that try to make the area profitable (developers) WITHOUT coming to the table with solutions?’

    There’s lot of smart people on this blog. As a good sample of our countries individuals, answer me this – why the fu@k do we accept to continue to go down this road?

  18. Avatar CommercialLender says:

    WillK and MikeZ beat me to it. Hogwash. Seems to me its rather convenient to quickly claim threats, an action that would have the added convenience of buying you enough time to employ a lawyer to see if they can threaten you to take down the site. No, I rather suspect there might have been some truth to some of the insinuations after all.

  19. Avatar Sully says:

    “Why continue to criticize those that try to make the area profitable (developers) WITHOUT coming to the table with solutions?”

    DBNO – I already mentioned that the county and cities here need to hire REAL planning commissions.

    A building boom is created when demand exceeds supply. Take San Jose area. Hi Tech companies moving in, in droves and bringing new jobs. Creating a need for housing and more commercial shopping centers, etc.

    Reno area does not have these basic ingredients to warrant the boom that took place here. Just had cheap land. So the boom here was more of a ‘build it and they will come’ scenario rather than based on any foreseeable need.

    Had the area decided to first focus on job creation (not casino or distribution) perhaps in the Hi Tech area. Got the school system in line to support the new jobs, then actually started getting some companies to move here then this boom would make sense.

    As it now stands, it looks like someone(s) in the approval process stood to gain personally from any approvals. Building so many high end neighborhoods in an area that (st the time) had about a 50K income median, with no new expectations in sight, made no sense what so ever.

    So, which developer do we give the Man of the Year award?

  20. Avatar LWB250 says:

    While not completely related to this post, but certainly a point of contention, this week’s Planet Money’s podcast deals with the “ethics” of walking away from a mortgage as well as the scenario recently visited where one bought another property while in foreclosure on their first.

    It makes for a very good listen, and addresses a number of points that have been the focus of recent topics on the blog, especially some of Mike’s.

    http://www.npr.org/blogs/money/2010/01/podcast_to_walk_away_or_stay.html

    LWB250

  21. Avatar Gary says:

    LWB250, Mary’s description in the podcast of “strategic default” is precisely what appeared to have happened in a thread that was recently excised from this blog. Those avoidable, intentional defaults may keep this housing monster fed even after employment starts ticking up, especially as social stigmas to foreclosure subside from a seemingly unremitting assault.

    Wide application of business ethics to personal home ownership may end up being the nightmare we’ve feared, and is certain to forge a permanent change on the lending dynamic going forward.

  22. Avatar MikeZ says:

    RE: “Those avoidable, intentional defaults may keep this housing monster fed even after employment starts ticking up”

    I see it completely reversed: borrowers bleeding a slow death prolong the problem and leave thesemlves more vulnerable to catastrophe.

    Stopping the bleeding and throwing it back to the lender forces faster resolution.

    RE: “Wide application of business ethics to personal home ownership may end up being the nightmare we’ve feared”

    Or, it could be a savior. It makes no sense to me for a homeowner to willingly sacrifice their future to do what’s best for a bank that wrote them a bad loan.

  23. Avatar Gary says:

    MikeZ wrote, “I see it completely reversed: borrowers bleeding a slow death prolong the problem and leave thesemlves more vulnerable to catastrophe.

    Stopping the bleeding and throwing it back to the lender forces faster resolution.”

    MikeZ, I think you need to clarify where the slow death comes from. I was referring specifically to borrowers who are continuously employed and ostensibly still able to meet the original terms of their mortgages as well as they ever were. It seems to me that they’re not really experiencing slow death at all when they choose a “strategic default.” They’ve simply decided that an alternate plan will provide a greater yield from their mortgage payments.

  24. Avatar DonC says:

    I think removing the thread was an over reaction. The guy was a sleazeball and didn’t want to be outed. So sad too bad. As Smarten has said, if you don’t want to take the heat maybe you shouldn’t commit the acts. But hey, there wasn’t anything criminal about what he did — businesses to stuff like this all the time before declaring bankruptcy and people think the moves are smart business dealings. And he did take a house out of inventory …

    On the other hand, I’d agree the entire claim that there were threats, presumably of physical violence, seems a bit over the top. I might believe a crank call or two but credible threats of actual physical violence seem borderline implausible.

    FWIW I thought the thread was interesting.

  25. Avatar RB says:

    I thought the podcast and the deleted post were interesting. The whole topic of strategic default is an eye-opener. Did someone say (before the thread was removed) whether Nevada has an anti-deficiency statute like Arizona? I’d be curious as to how many other states have such a statute, too.

    Mike, thanks for showing us what’s going on out there in default land. Guy, thanks for letting him post, even if that one item was short-lived.

  26. Avatar Jessy says:

    I am a good example of someone who could be bled dry if I keep paying my mortgage. I was one of those people who thought buying an investment property was a good idea (I was such a sucker) back in 2004.

    I finally recently got myself out of debt from renovating the place and have built up an emergency fund, but this month I am losing my tenant. I am now faced with a tough decision. I could use my emergency fund to pay the mortgage until I find another tenant, and when I finally do get a tenant I will have to settle for much less rent than 2 years ago. So even then I will still be underwater monthly even more than I was before. In less than a year my cash reserves will go away if I try to hold onto the place. The only thing making me hold on for this long is the fact that I borrowed the money to buy the place, and I believe in paying it back. My husband tells me we should let it go and keep our cash because we would be putting ourselves and our children’s futures at risk.

    Gary, that’s where the slow death comes from.

  27. Avatar Jessy says:

    And by the way, we bought the property with a conventional loan and 20% down. We had planned on keeping the property for many years as a long term investment. We are now throwing good money after bad.

  28. Avatar smarten says:

    Jessy, did you purchase the property with a fixed interest rate loan? Have you refinanced? Is your interest rate under 5.25%? If not, you should explore refinancing.

    If the answers are yes, I suggest holding onto the property. Your game plan was initially to keep the property for the long term, so what’s happening now is nothing more than a blip along the way. You’re really not underwater until you’ve decided to dispose of the property.

    If you have a conventional loan, it means that each month you’re paying down the outstanding principal balance. Stated differently, sometimes we forget that paying down your mortgage has the side benefit of a forced savings plan. And the longer you pay the more each month goes to principal paydown.

    Rents may be lower now, but they’re likely to be higher in the future. IMO you shouldn’t be making decisions like these because of the ups and downs in the rental market. You must have initially factored in some vacancy factor and rental rate modifications [probably higher], so what has changed? If you want to re-rent your property quickly, drop the rent so it is more attractive than the competition. And require a year’s lease.

    Now aren’t your real property taxes lower now than they were when you purchased in 2004? If so using the same reasoning for lower rents, shouldn’t you continue to hold onto the property because some of your carrying costs are lower?

    The less rent you receive, the larger the negative. The larger the negative, the larger the income tax loss/deduction which will offset other income otherwise subject to taxation. This won’t make up for the larger negative each month but over a year’s worth of time, it will make up for some of the loss in the form of the lower income taxes you will pay.

    Now the alternative. You will pay a very large price for stopping payments on your mortgage and walking away. A forced sale will be treated as debt forgiveness which will subject you and your husband to a substantial amount of phantom income which will subject the two of you to additional taxes. Since this is an investment property, you won’t be entitled to relief as you would if the home were your principle residence. And according to Diane, you won’t be entitled to mortgage mediation with your lender. And of course there’s always the potential for a deficiency, destroyed credit, etc., etc. [just look at what Diane Cohn is going through].

    I remember our buddy Michelle Plevin, a Reno Chase agent, bragging how she was able to successfully negotiate a loan modification on one of her investment properties just by calling up and asking. My recollection is she encouraged others in a similar situation to give her a call – she was there to help.

    So I say call Michelle. And if you do, please report back here as to whatever assistance she is able to provide.

    Hope my analysis made sense and was helpful.

  29. This does not look like a good road were going down.

  30. Avatar skeptical says:

    Smarten, you state, “what’s happening now is nothing more than a blip along the way…”

    Are you serious? It was that very logic from the Fed, the banks, the realtors, and the buyers that led to this cataclysm. No, Smarten, this housing depression in not a “blip along the way.” Expect prices to revert to bubble levels in 20 or more years.

    You followed up with, “Rents may be lower now, but they’re likely to be higher in the future.” Do you mean the future as in 20 years from now? If not, what alternate reality do you live in? Where exactly will all these cashed up renters come from, and why would they pay more with thousands of empty houses in Reno?

    You’re starting to sound like a real estate agent, Smarten. Losing a bit of credibility along the way.

  31. Avatar billddrummer says:

    Something interesting, although not specifically on topic–

    More Californians are paying their credit cards but not their mortgages.

    http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2010/02/01/daily47.html?ed=2010-02-03&ana=e_du_pub

    According to Trans Union, more than 10% of Californians with current credit cards are delinquent on their mortgages.

    Sounds like ‘strategic cash management’ to me.

    You can use your credit card to pay for gas and groceries.

    Once you make the mortgage payment, that cash is gone forever.

  32. Avatar Gary says:

    Since this seems to be the doom and gloom thread, does anyone have an educated guess as to what is in the America’s future if the 5 million people who are at least 25% underwater on their mortgage just walk away?

    I don’t think it’s a picture that Norman Rockwell would want to paint.

  33. Avatar smarten says:

    Skeptical, you’re too skeptical.

    If you look back to the Great Depression, in retrospect, it was blip along the road. A substantial blip no question. But if you believed in this country and were in it for the long hall, a blip.

    If you seriously think property values will never in our lifetimes return to 2005 pricing, you don’t believe in this country. I’m not saying values will recover in the immediate future, but they will recover. And if you’re in it for the long haul as Jessy represented, IMO she shouldn’t be jumping ship.

    But you think otherwise, don’t chastize me. Give Jessy whatever advice you deem appropriate [she asked for it], and back it up with facts.

    Jessy isn’t the only landlord out there in a renter’s market. I’m one and I haven’t thrown in the towel. I’m continuing to do what I did in 2005 even though the returns are lesa and the work is more. If you believe in this country, that’s what you do.

  34. Avatar MikeZ says:

    RE: “does anyone have an educated guess as to what is in the America’s future if the 5 million people who are at least 25% underwater on their mortgage just walk away?”

    The investors will lose 25% on those investments.

    It’s not the end of the world; Dow index holders lost 60% when the DJIA dropped from 14K.

    Welcome to the real world of investing, nothing is completely risk-free.

  35. Avatar Jessy says:

    Thank you both Smarten and Skeptical,
    This is Jessy’s husband. We have tried to refinance. Chase Bank told us they would modify the loan and then the paperwork magically disappeared for the third time. Jessy made a part-time summer job out of trying to get the bank to work with us. They won’t.
    We don’t really need credit except for fixing up the rental. Our cars and credit cards are paid off. The hit from the IRS is what we do worry about, but I think we’re better off paying those taxes than keeping the rental. It’s that bad.
    Our tax man who always told us to keep our rental, lost all three of his and his primary last year. Now he says get rid of it.
    I love this country, but remember that we were not the number one economy before the Depression and afterward we were. We were number one because we exported far more than we imported. Our country now exports jobs. We have become a country of consumers.
    When you think of property values next, walk through downtown Reno. The city has built the largest and most beautiful homeless shelter on the west coast. And they have come in droves. Don’t believe me? I talk to them and they tell me why they’re here. Who is going to come here on vacation now? I wouldn’t. Where is the money going to come from to improve our local economy? I believe in keeping your word and that is why we still have our rental. That’s it. The only reason. We are out of pocket hundreds of dollars every month if nothing breaks and it’s rented. Now we have to drop the rent to get a renter? And it’s going to be a couple months without a renter.
    Yes we planned for some of this, but 5 years down the line we thought rent would start catching up and we would be cash-flowing. Not losing more. At worst we thought our rental would at least be worth close to what we owed.
    Our daughter is 10 and tops in her class in every subject. She reads at a college level. She wants to be a lawyer that helps the world. And where is tuition going to come from, when I pour it down that money pit? If I take the money I’m losing every month and put it away for my daughter, I can pay for college.
    Should I keep the rental? I don’t think so.

  36. Avatar slacker says:

    Awesome post , I’m going to spend more time researching this topic

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