Mark and Susan are among the growing number of homeowners who go to sleep at night knowing that their home is under water. In the case of Mark and Susan they bought their home for $350,000 in 2006 and are now watching homes twice the size of theirs selling in the neighborhood for $150,000.

Frustration and reality for California homeowners

The frustration for Mark is knowing that the government is providing assistance to first time home buyers and people who have decided to stop making payments on their mortgage. “We did everything right and could just let our house go into foreclosure like most homeowners in our position but I can’t see myself doing that”.

Mark is referring to the growing number of homeowners opting to either walk away or in some cases buy another home at a lower price then simply stop making payments on the first home letting it go into foreclosure. Most of Mark and Susan’s neighbors have  done exactly that and yet they continue to fight the temptation of following suit.

Mark also asked me how many homeowners were on the verge of default.

My response to Mark’s question was to share a statistic I recently read from the California Association of REALTORS showing the long run delinquency average of 4 percent increased to just under 9.2 percent. Foreclosure long run average was still relatively low at 5.2 percent.

9o percent of California mortgages were  still being paid on time in the first quarter of 2009.

Mark was surprised when he heard this statistic but it was no real comfort to him knowing that his situation seemed hopeless.

Is there anyone out there who can help?

“Why doesn’t the government help homeowners like us who have done everything right?” asked mark. “Give us a tax credit or provide a little incentive or relief by allowing us to modify our rate, anything to reward us for doing the right thing”.

I shared statistics, talked about legislation regarding tax relief laws for foreclosed homeowners, and just listened.

At the end of our conversation I realized that I didn’t have the answer for  Mark and Susan. All these nice people want is for someone to acknowledge their frustration and to let our legislators know they exist.

Mark and Susan are among the homeowners in this country who want to do the right thing.

I recently had a client stop by my office after receiving a modification agreement with very aggressive terms. A few months ago I was referred to a client who was on the verge of losing his home. When we met he shared his dismay and at the same time his willingness to hang on to his loan even though the value of the homes in his area have dropped by 40%.

After reviewing this clients situation two options were available, either apply for a loan modification or short sale and try to mitigate the legal and credit challenges of a foreclosure.

What I found interesting was a common theme among the lenders and that is as follows;

• Homeowners late on mortgage payments tend to receive priority during the loan modification process.
• Lenders are likely to modify as long as you are able to show the ability to continue to make the modified mortgage payment (It has to make sense).
• Banks are taking a “waterfall” approach when modifying a loan by reducing interest, extending loan terms(30yr to 40yr), and lastly freezing part of the principal balance thus reducing loan payment(Forbearance).

What I also found was that in the last 30 days alone lenders have begun to change their policies and procedures when modifying loans. Technically speaking you can modify your own loan which was the case of this client. Paying someone to modify your loan is a personal preference, it is a time consuming process and a good portion of homeowners do not have the time to have their day consumed by modifying their loan.

Persistence is key, Homeowners and banks are increasingly closing the gap; I have seen it and am happy to report that banks are modifying loan terms.

San Jose Mercury News Article shows the type of losses some homeowners have sustained in our area.

I read this article from the Mercury news today and thought you should take a look at it for yourself. It makes many interesting observations regarding the loss of value in our area. Take a look for yourself. Read Artcle