Did the bank/your attorney/loan modification company ever disclose to you that even if the bank ended up giving you a modification with a lower payment that was going to be affordable how that was going to hurt you financially, as opposed to help you, which is what you think a loan modification does? And if it did hurt you financially, you would at least want to know "why," before you wasted all this time, right?
Well, think about it; let's say you owed the bank $300,000 and initially they said "you have to pay us $2500/month for the next 30 years to pay this off, but because of the economy, the job market, etc., and you might have heard of loan modification where you can lower the monthly payment, thinking, "Hey, if I can just lower it, I can afford to stay in the house.", and that's how you were thinking, right?
And let's say after many months of getting nowhere, or you might have even paid an attorney to do this for you and they finally approve you and tell you they'll lower your monthly payment to $1500/month. And because the payment went down by a $1000, you'll be happy, correct? You know why the average homeowner will be happy? Because that's exactly what the bank wants you to think that that's what you should be happy about. Think about it.
In life, there's always 2 sides to a story.
But think about it; the minute the bank decides to lower your payment, they know they'll be losing money from you every month. Multiply that by 12 months; multiply that by 30 years, and by millions of homeowners trying to do the same thing. Now, do you think bankers are sitting around their office, saying to themselves, "hey if we give the loan modification and lower their monthly payment, we'll be losing money every month, but let's go ahead and do it anyway; let's go lose that money!" So, it's kind of silly to think that when they do a loan modification, they're doing it even though they know they'll be losing money, correct? So why would they do that? Because there's a catch. So do you know what they do with the money they're not getting from you every month?
They charge interest, plus penalties, plus fees and other charges and put everything on to the back-end of the loan, then stretch out the term from 30 years to 40 years, and sometimes they even put a balloon payment at the end. So now, instead of owing them $300,000, you owe them $500,000 and the homeowner never pays off the loan. And if you don't pay off the loan, who's house is it really? The bank's.
But you thought it was a great deal because your payment went down. But guess who ended up with the better deal. They did, wouldn't you say? It's like credit cards. If you have a $50,000 balance and the payment was $500/month, but you couldn't make the$500/month payment and you call up the credit card company and tell them about your financial hardship; the credit card company may lower your payment to $200/month, but does that mean your balance gets paid off? Of course not! So how is it any different with your house? It's not. So lowering the payment isn't the answer.
So what's the solution?
The only way to resolve this mortgage issue a lot of people are facing is to get a principal reduction done. Because when you reduce the principal balance, guess what happens to your monthly payment anyway? It goes down automatically because your balance is lower, not to mention the fact that you pay off your loan quicker. And like I mentioned before, if you still owe a balance on your mortgage, who's house is it? So the question shouldn't be: "What's my payment?" because frankly, that doesn't mean you'll pay off the loan balance. The question should be: "when am I going to actually pay off this balance, and how much am I paying back to the bank over the course of the loan."
But why don't people ask the right questions when it comes to their mortgage? Because the banks have done a great job at training people to ask the wrong questions, and they can make more money off of people when they're un-informed, or mis-informed.
So how do you go about getting a principal reduction?
The reason why so many people are having a hard time paying their mortgage payments is because the banks were doing something called Mortgage-Backed-Securities.
Have you ever heard of that phrase?
So if you had a choice between just lowering your monthly payment through a loan modification/refinance, versus wiping out a sizeable amount off your principal balance, which would you choose? The 2nd one of course, right?
But how did we get here? Why are so many people trying to lower their monthly mortgage payment?
It's because for the past 15 -20 years, the banks were doing something called "Securitization," or "Mortgage-Backed Securities."
Well, just to relate it to real life, do you remember in 2008 when companies like AIG, Bear Sterns, Lehman Brothers went out of business; and the government came in to bail them out with our tax payer's money, but the whole economy crashed anyway, which is why so many homeowners are having a hard time paying their loans back?
Starting in the 1970s, banks wanted to find more creative ways to make bigger profits. So what they decided to do was package all these mortgages, and sell the rate of return investors could get on these "Mortgage-Backed Securities." Based on the amount of money the bank lent out to homeowners and the monthly amount the homeowners were paying back to the bank, banks were able to calculate the rate of return they were making from these homeowners. Banks would then go to other financial institutions and tell them about these great Mortgage-Backed investments they had created, selling potential investors the income streams they can make off of these investments. The initial bank would then sell these pre-packaged loans to other banks, investment firms, 401K plans, Pension plans, etc. Not that selling loans is illegal, but there are property laws in place to protect homeowners, which basically states: "any transaction that happens on a property, whether there's a Deed change, Mortgage change, etc., it has to be recorded with the County Clerk's Office." But guess what? Each time you want to record anything with the county court, there's a filing fee, which the banks did not want to pay, since we're talking about millions of properties. And these are laws that have been in p lace even before this country was started. (We get our property laws basically from English Common Law, which had to do with property rights, etc.).
So come 2008, economy crashes, millions of people are losing their jobs, and people couldn't pay their mortgages, so the banks had to foreclose on all these properties, but guess what? Since they got rid of the original ownership documents, do you know what they did? They started to forge all the ownership documents!!! (60 Minutes "The Next Housing Shock"), which is obviously illegal. And the problem for the homeowner is that they may even pay off the mortgage, thinking the house is now theirs, but the bank never had the ownership rights to even give them the Satisfaction of Payment, as proof that this is now their home, free & clear!!! And even if they're not planning to stay there forever, guess what, there will still be a Chain of Title issue when they're trying to sell the house!
So what we do, is we a Forensic/Securitization Audit on all the toxic loans these banks were selling to people, and this is why people are having issues with their mortgage payments. So we find out what these banks and servicing companies did to homeowners from the origination of the loan to its current state; who actually is supposed to have the ownership documents, who the trustees are, and all the state & federal laws they violated, at which point now the homeowner has the evidence and the leverage to hold the banks accountable for what they did and get a principal reduction on the mortgage balance.
And as a homeowner, how much less financial stress would you have if your mortgage balance got reduced by $50,000 or $100,000?
Article Source: http://EzineArticles.com/expert/Aaron_Countee/1200943