Mortgage Loan Modification?

We are currently in great standings with our mortgage and the bank which holds the note. Due to unforeseen circumstances, we've got a reduction in income. We have a HELOC with another bank and about 50K in consumer debt. We have been unsuccessful in obtaining a refi using an outside broker obtained on the internet. Are biggest setback is our mortgage payment which is a fixed 30yr at 6.5% ($3500 mo). We cannot afford to pay the 1st, HELOC and the consumer debt anymore. We've never made a late payment...do we have a good chance with a modification? We have financed 2 houses with our current bank and have a personal relationship with our banks' broker. We are going to call and ask but I was wondering if banks will modify one loan without having to touch the HELOC? We cannot refi both (not enough income to support it). We could afford to make the payment if we just had a lower 1st. NO WISE CRACK COMMENTS!! Serious answers only!

We would sell if the market wasn't in such a slump...believe me, that was my 1st thought. California is the worst!

I would take a very hard look at the consumer debt.

The interest rates on consumer debt are generally very high.

I would call the credit card companies where you have balances and remind them that you have never been late. Ask them for a reduction in the interest rates on your credit cards.

Tell them the alternative is that you can transfer those balances to credit cards that charge lower rates. Tell them that you like them and want to continue to be their customer, but that it does not make sense for you to stay with their credit card when you can get better rates elsewhere.

If they do not agree, I recommend that you start calling some different banks including yur own to get better terms on your credit cards. Also look for credit cards with lower minimum required payments.

Transfer your consumer debt to those credit cards. That will reduce your payments and costs on your consumer debt.

I would be very surprised if your bank will agree to modify the terms on your first loan, that is already a very good rate.

What are the terms on your HELOC?

There are lenders in my neighborhood that are advertising HELOC loans at the prime rate minus 1%. That is a very low rate for a second loan, Is your HELOC that low?

If not I recommend that you consider refinancing your HELOC to a lower rate, specifically to prime minus 1% or less.

Another responder mentioned refinancing your first to an adjustable rate loan with a minimum payment based on a payment rate of 1%.

These are very expensive loans. The fully indexed interest rate (interest plus margin) is often more than 8%. The unpaid interest is added to your principal balance.

Some unscrupulous Mortgage Brokers often trick you into accepting one of these loans with very high margins because the lenders pay the Mortgage Broker a kind of a kickback called a yield spread premium if they tack on a very high margin.

The kickbacks that Mortgage Brokers receive on these loans if they give you a very high margin can be $15,000 or more. The temptation to trick you into a high margin is very high. Many Mortgage Brokers cannot resist that temptation because the amount of money that they are paid is so high and most people do not even know what a margin is on these loans, so it is very easy for Mortgage Brokers to trick people on these loans..

These loans have very large amount of negative amortization. I would only recommend that as a last resort. It is a very expensive option for you, and it is also a dangerous option because it could cause you to lose your home.


Many of the homes in foreclosure today are the result of the homeowners getting those loans several years ago. The minimum payment period is only for two or three years and also ends when the loan amount has risen to a point where you do not have sufficient equity in your house.

This can happen even if they promised you that your minimum payment is fixed for 5 or 10 years. There is also a provision in the fine print on these loans that the minimum payment resets once the negative amortization has reached a certain point.

If you are making the minimum payment every month you will reach that point in a little over 2 years. Then even though you were promised the minimum payment would be fixed for 5 or 10 years, the loan will still reset and you will receive a notice from your bank that your loan has reset and your new minimum payment is now two or three times what it was.

Then the minimum payment reverts to the fullly indexed rate. That is often two or three times what the minimum payment was based on 1%.

Since you now have less equity in the home it may be impossible to refinance because you do not have sufficient equity in the house.

The result is that your minimum required payments will be much higher than they are today.

IF YOU ARE HAVING TROUBLE MAKING YOUR MINIMUM PAYMENTS TODAY, YOU WILL REALLY HAVE TROUBLE WHEN ONE OF THOSE 1% ADJUSTABLE RATE LOANS REVERTS SO THAT YOU HAVE TO MAKE PAYMENTS ON AN INTEREST RATE THAT IS 8% OR HIGHER ON A MORTGAGE BALANCE THAT IS SUBSTANTIALLY HIGHER THAN YOUR MORTGAGE BALANCE TODAY BECAUSE OF THE NEGATIVE AMORTIZATION ON A VERY EXPENSIVE ADJUSTABLE RATE LOAN.
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Seriously, you need to modify your financial behavior. Get financial counseling, and quick.

Talk about living beyond your means.

Have you considered selling and purchasing a smaller home?

Wow not good....depends on who u bank with..but its seriously doubtful with the amount of debt u incurred and market's credit ballls shriveled up..



PEOPLE, STOP TREATING YOUR HOUSE LIKE AN INVESTMENT VEHICLE!!

I had to have a loan modification on my mortgage but that was not an option untill we were 4 payments behind! Prior to that they just wanted to make us pay like $200 more a month for so many months then go back to our regular payments. Once it was such a high number past due they put it on the back end of the loan. My loan started off as a 5% ARM (only could adjust 1 point per year) at 128,000 the modifaction happened a year later and the new loan was fixed at 6.2% for 128,500.

you can certainly refi the first without touching the junior liens. However, you currently have a fixed at 6.5% (pretty good for todays rates) and you're looking to get a lower rate - I'm assuming the 3500 a mo includes your taxes and insurance? I would suggest working with a negative amort program for a year (possibly 2). You would pay between 1-2% mtg payment ($1940 per month)-This would allow you the breathing room to tuck away some $$ and get caught up on the consumer debt (unless you want to refi that as well). Let me know if you need more info......lauran@bankersmc.com

FYI - Your banks broker?????

You will have no problem getting a modification if all you say is true.

You can try, but I wouldn't hold out much hope for it. I have only seen it done only a couple of times in my career, and usually with investors that have multiple properties financed with the same bank. The bank had a major incentive to work with the investor to keep them from losing multiple homes.