Bank Said No.

What now?

Nothing can be more disheartened than being told ‘no” by your lender when trying to get a loan modification or principle reduction. You have spent months sending pay stubs, bank statements, hardship letters, maybe profit and loss, lease agreements, and a host of other items, only to have the lender require the same items over and over. And at some point you just get so frustrated and angry you wonder if they are really trying to help or just wasting your time. And then you get the letter saying ”…unfortunately you do not qualify”

What to do? I know if the bank were down the street, as they use to be, you would be down at the walnut desk demanding answers. But now we talk to faceless robots that have set answers and little sympathy. So what are the real options?

Well one thing most folks can do is reapply. The lender will usually go along with this. And if you have different numbers…pay, expenses, rents or such, you may even get the deal done. But just as the original mod was a long shot, this second effort just may put you over the edge. You can sometimes keep this reapplying going for a year or more. And sometimes it does exactly what you want it to do…stall the process and allow you to stay in the house without making payments for a long period. But it’s only a delay without a modification in hand.

What next. Easy…you’re behind $50,000, pay it and be current. Oh, sorry, not so easy. How about they spread it over 6 months and you just add it onto your regular payments. Right, you can’t make your regular payments so how could you do this little bit of financial magic? Well they have to ask. Some lenders will allow you to pay a part of the delinquency and spread the rest over 6 months. Some lenders wont.

You could file a bankruptcy. Your attorney would need to tell you the ins and outs of it, but it will stop a sale date and give you time to complete a modification or work some other option. There is more that one type of bankruptcy so you need to discuss both options. If you have a lot of other debt, credit cards and such, this option may take on even more importance. But remember...even with a BK you still have to deal with the lender if you want to keep the home. A BK only gives you more time.

You could try a Deed in Lieu. This is where you give the house back to the lender and they cancel your debt. You still have to qualify and often must list the house for 90 days before they will consider you for the program. Seldom works because of lender restrictions and antiquated procedures, but actually is the smartest move when successful. Some lenders will also allow a Deed In lieu followed by a lease back programs. Only certain loans qualify for this option.

A short sale is a long shot. You list the home and someone else comes in and buys it for an amount closer to what the property is really worth. The lender won’t sell the home to you for the same amount even if you ask real sweet because…well they just won’t. They also wont sell the home to some relative or some one you know. I've heard of many folks trying to have a relative step in and make the purchase and they give the home back to you. In most cases the new buyer will be required to sign a form saying they are not related to or know the homeowner. Now what will happen if you lie...probably nothing, but is it worth the risk?

A short sale has one other problem...you have to qualify for it. The paperwork is like a modification. You again must show a hardship and prove you can't afford to stay in the home. Being upside down in value is not going to qualify you.

Short sale-lease back. This is an option where your home is purchased through a short sale and the buyer leases the home back to you saving you all the fuss of moving. You have lower monthly payments and are free of the negative equity. This may also include a purchase option so you can buy the property back at a later date. The advantage of not having to move, smaller monthly payments and freedom from the struggle with the lender make this an attractive option.

For more options visit www.rateislow.com