Part #2 of 2 – Fast Track Loan Mods
Listen to a 57 minute call where Todd grilled me about this…
Make sure to Read Part #1
Thanks to Mr. Mortgage, here are some potential consequences for accepting the terms of a Fast Track Loan Modification!
Accepting this ’solution’ means you:
- acknowledge the full debt regardless of the value of the home (this means you won’t be able to sell your home until it comes back up in value to what you owe on it…unless you negotiate a short sale at that time and sign a promissory note to pay the difference);
- waive all rights to fraudulent or predatory lending claims in the future (these federal protections could get you released from your loan or even awarded damages in some situations);
- turn your loan into a full recourse loan that could follow you for life even if you choose foreclosure down the road (this is why you’d have to sign a promissory note if you sold your home in the future for less than you owe);
- remain an underwater, full-leveraged, renter for the rest of your life (in most cases);
- may not discharge any of this mortgage debt through any bankruptcy even after foreclosure (even if you need to file bankruptcy in the future, your home loan is excluded from your debts and will not be included in the agreement…you’ll have to keep paying for it no matter what);
These are very significant trade offs and they are all negotiable if you know what you’re doing. The key is to ask for a professional review BEFORE you sign anything. Listen to the call, Todd and I talked about these “gotchas” as I call them extensively.
The only ways out of this loan will be to refinance it, pay it off through the sale of your home, or enter into negotiations with the bank again from a MUCH disadvantaged position.
May 20th, 2009 at 12:56 am
You made some good points there. I did a search on the topic and found most people will agree with your blog.