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I owned 8 houses, one is my homehowner, the others investments properties which i rent.
All properties have a little of equity and i have never been late in my payments.
Can i be approved for a modification in these properties?
Please respond honestly,
Thank you,
R.Ortega
Hello Rene, getting a loan modification depends on several factors. Are the properties rented out? How much equity do you have on each property? Who do you pay each mortgages to? How long have you had the mortgages for? And, what are your goals of each property?
First off, if any of your properties are vacant, then you can forget about getting a loan modification. The lender will normally have a BPO done as part of the modification process. BPO is a “Broker Price Opinion”. Basically, when this is performed, they will have a good idea of how much your property is worth, and if the property is occupied. A vacant property tells the bank that the loan is very high risk and a modification doesn’t change the performance of the loan. So, that’s a no go.
Equity will most definitely have a negative effect if you have more than 15% equity. This is taken in consideration when lender determines what will benefit the investors more, a foreclosure or a modification. With a foreclosure, the lender will have a very good chance of getting back the full amount that you borrowed to obtain this property. A property with negative equity tells the bank that they could lose more if they foreclosed on the property rather than approve a loan modification.
Who do you pay your mortgages to? This is important to know because lender’s guidelines change all the time. Especially, with rental properties. Many lending institutes are not modifying rental properties when they are current. And there are some that won’t modify rental properties at all. One of the largest lenders, Chase Bank, will not modify rental properties that are current. Wells Fargo may not be modifying rental properties at all. But, you will want to call your bank and simply ask them. If the rep that takes your call is unable to answer you, you can simply submit a modification package and see how they respond. What I can tell you is that more and more lenders are refusing to do loan modifications on rental properties. If you are delinquent, then there is a much higher chance that your lender will consider a modification. Then again, your credit will take a hit if you fall behind.
How long you have your property has some effect on whether you can get a modification. Some lenders will not modify a loan unless you’ve had the loan for at least 1 year. Any time less, your bank may ask you to apply when you hit the 1 year mark.
What are your goals? This is important because if you are trying to get a modification to get your principle balance reduced, then you mind as well forget it…for now. The only lender I know that is actively reducing the balance is Wachovia. Some investors will reduce the balance but, they are very few and far between. Keep in mind, lenders that will agree to reduce the balance will only do it if there is negative equity on the property. If you owe just as much as the value of the home, then, lenders will only consider lowering your payments.
Now, the explanation I provided is very brief. What it comes down to is that I can’t thoroughly answer your question because a modification is a case by case basis and I would need to know the scenario for each one of your properties. Feel free to share more info or ask more questions. I’m here to answer them the best I can.
Thanks Rene!
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