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Joe Mammy

Beach Lover
Mar 26, 2007
140
40
Just attended a very interesting seminar where a mortgage broker who is a specialist in foreclosure solutions divulged to us something the banks do not want you to know about-
"The Early Loss Mitigation Dept".

In primary home situations and second homes (investor properties are more difficult to pull off) she is becoming quite successful in getting "loan modifications" from banks that will reduce not only the interest rate but the principle amount. These modifications come from the EARLY LOSS MITIGATION DEPT and according to her every lender has one!
 

Mango

SoWal Insider
Apr 7, 2006
9,709
1,360
New York/ Santa Rosa Beach
Just attended a very interesting seminar where a mortgage broker who is a specialist in foreclosure solutions divulged to us something the banks do not want you to know about-
"The Early Loss Mitigation Dept".

In primary home situations and second homes (investor properties are more difficult to pull off) she is becoming quite successful in getting "loan modifications" from banks that will reduce not only the interest rate but the principle amount. These modifications come from the EARLY LOSS MITIGATION DEPT and according to her every lender has one!

Yes. This is true. It's very important to reach out to the Bank prior to reaching the point of no return. I hope you didn't pay money to learn this, Joe.

May I add, though, that some will not reduce the principal balances. I find this ridiculous because eventually it will wind up, in all likelihood, in foreclosure and they will be stuck with a declining asset. The smarter thing to do would be to reduce the principle balances with caveats that when the property sells, any proceeds up and over what was reduced, up to the original loan amount, will be repaid to the Bank. The average time a homeowner stays in the same home is 7 years.

Secondly, another tip. Once the Borrower has exhausted working out a solution with the Early loss mitigation Dept- some offer short sale as a solution-- it is imperative, especially if the Borrower can't make the payments, to obtain a lawyer. In true hardship, ie; loss of job or illness, the attorney will appear at the courts to answer the complaint, which after 90 days or so delinquency, the Borrower is served a court notice. Here the attorney is worth every dime because 90% of the complaints are not answered. The foreclosure mill attorneys go after these people first because it is cake walk work.

An attorney will buy time for a short sale to occur by arguing the case in court. It may also put added pressure on the Bank to provide a better workout. Because the FL, CA, NV court systems are so overwhelmed, and understaffed due to budget cuts, the Borrower could be looking at a years time for options.
If nothing else, then they can work with the Bank to just do a deed in lieu of foreclosure if the property doesn't sell via short sale, which doesn't impact the Borrowers credit as heavily as a foreclosure. The Banks at this point are amiable to deeds in lieu since they will not have to pay foreclosure mill attorneys to take it to final REO.
 

Joe Mammy

Beach Lover
Mar 26, 2007
140
40
Yes. This is true. It's very important to reach out to the Bank prior to reaching the point of no return. I hope you didn't pay money to learn this, Joe.

:D Pay money, no - she brought breakfast to our monthly sales meeting. The interesting thing to me was the "EARLY loss mitigation dept" - apparently a totally different dept than the "loss mitigation dept" that nobody enjoys trying to deal with.

The EARLY lmd deals with folks that are not in default- yet.

She said the banks all have them but few know to ask for them.
 

Mango

SoWal Insider
Apr 7, 2006
9,709
1,360
New York/ Santa Rosa Beach
:D Pay money, no - she brought breakfast to our monthly sales meeting. The interesting thing to me was the "EARLY loss mitigation dept" - apparently a totally different dept than the "loss mitigation dept" that nobody enjoys trying to deal with.

The EARLY lmd deals with folks that are not in default- yet.

She said the banks all have them but few know to ask for them.

Joe, I have worked for major Banks, in some shape or form, in mortgage banking. It's called the customer service dept or still yet, LMD. I do not understand why some people believe that they need to be in default before someone at a Bank will talk to them about payment arrangements or modifying their mortgage. If I were in your chair, the last person I would be referring my clients to, who are in these pre-default positions, is to a mortgage broker to negotiate the terms -- unless they are doing it as a public service and pro bono --which is unlikely.

This is emerging market for mortgage brokers and imho, should be regulated. A) They should have an on staff attorney B) they should have to be a certified credit counselor -- I have had one for as long as I can remember it being available-- C) Before being allowed to collect fees for mortgage modifications, be reviewed for the type of mortgages they procured in the past. Here in New York, as other States -- not sure about FL-- one has to report all mortgage types via a volumes of operations report. This is broken down by Prime, Alt A, and subprime.

I do not feel that they should be allowed to profit from this sector if they stuck every Tom, Dick and Harry in a liar or subprime loan.

Glad you got some donuts for listening to the spiel, though. :cool:
 

Busta Hustle

Beach Fanatic
Apr 11, 2007
434
34
Mango great information thanks. I would be willing to bet that ytd the number of mortgage modifications granted from all banks combined in our area is less than 1 tenth of 1 percent while at the same time foreclosures have more than doubled.
 

Casey L

Beach Comber
Mar 22, 2008
5
0
Sandestin
Here's an interesting question. An unmarried person buys a house - only his name is on the deed, the mortgage (pledge of property as security for loan), and the loan itself. Sometime later, he remarries and both live in the homestead property. If he falls behind on payments and is unable to negotiate an affordable modification, the lender will of course proceed to foreclose. However, the new spouse is not on the mortgage and has Florida's homestead rights. Seems to me that this would make it much more difficult for the lender to actually foreclose. Of course the original borrower still owes the the lender, but what would happen next?
 

Smiling JOe

SoWal Expert
Nov 18, 2004
31,648
1,773
I would recommend consulting an attorney for a legal opinion on that one, casey. As I understand things (and I am not an attorney, nor do I pretend to act as one), in Florida, the home being the primary residence of the married couple, even though only one's name is on the deed, both are the legal owner of the property. I would imagine the same thing goes for the note, though I am uncertain. If it were not the primary residence, things might be different.
 

Casey L

Beach Comber
Mar 22, 2008
5
0
Sandestin
Yes, I agree about an attorney in this case. However, just speculating, since they were married after the house was purchased, the only name on the note would be the original owner who bought the house. I think the key issue would be the homestead rights of the new spouse. Florida's homestead protection is one of the strongest in the U.S. and protects your homestead from forced sale by creditors, except for the cases of property tax, mortgage, or mechanics lien. However, the borrower has to sign the mortgage which pledges the home as security and allows forced sale by the lender. The new spouse did not sign the mortgage, but would have full homestead rights.
 

Geo

Beach Fanatic
Dec 24, 2006
2,750
2,782
Santa Rosa Beach, FL
Hi All:

Great thread...

SJ, can you elaborate (see bold part of your post below)-

Sometimes, that means that the lender will "gift" the balance to the seller, and other times, the lender will hold the seller accountable for the difference. The latter is less common, but I'm working one of those right now.

Are you saying that more often than not, the bank forgives the deficiency and the seller walks?

Thx.

G
 
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