Steve,

I just received mail confirmation from Chase on a loan modification.  They have agreed to a reduction in payments to make the cost affordable for us.  Due to the value of the house, I know that it still amounts to us "renting" the house.  However for the cost of the new payments, I could not rent a house similar to this one.  I will keep your information if anything changes.

         Sincerely,

         Home Owner

        Dear Home Owner ,

         Thanks for letting me know. These loan mods are good for the bank and bad for you. Unfortunately the truth of the matter is that they are likely offering to increase your balance making this not only a worse financial investment for you disguised as a good loan for their books but they are causing you to miss your window of opportunity to get this $750,000. Debt off from around your neck. Please consider the following,

        The window of opportunity I am talking about has  significant benefits for you that will be lost forever if you go down this path they are leading you, not to mention that they are likely lying to you anyway. If they are giving you trial mod payments that are low, at the end of the trial mod they will just deny the modification or increase them to fully amortize putting you in the same position. I have seen it a hundred time.

       The mortgage debt relief act is set to expire at the end of 2012. This is in place with the Feds and the State to get you off the hook on the taxes for the amount that the lender forgives in a short sale or if you walk away in a foreclosure. If you wait until you realize that the lender just sold you a bill of goods to walk away or do a short sale it will be too late to avoid a significant tax bill on phantom income.

1.       The real estate market and interest rates work on a cycle. If you postpone the enviable by continuing to pay the lender for an asset valued at less than the loan that you owe them, you will not be able to take advantage of the current low prices for houses or the current record low interest rates. Cheap payments might seem like a good deal but if you look at your lost opportunity cost it would likely be the most costly financial mistake in your lifetime. Real estate cycles are long term of at least 10 years. If you spend the next 10 years trying to pay your way out of this to get back to where you were, you will lose the opportunity to let the bank take the loss and for you to buy a deal of a life time at a price of up to 50% off of what it was a few years ago with a 15 or 30 year record low fixed rate loan. You only have a few years to buy in again which is just enough time to shed this debt and get your credit back in shape. Down payments are as low as 3.5% down with FHA financing. Then not only would you own a home with a MUCH smaller mortgage and payment at a low fixed rate (going forward towards retirement) but every monthly payment you make  will go partly towards principal reduction and you will be gaining appreciation. You will be spending the next 10 years building equity. This can likely result in at least a couple hundred thousaind dollars or more nest egg towards your retirement.

         The bank is trying to keep you paying on a bad financial investment causing you to give up your opportunity to have the best financial opportunity of your life. We will not likely see prices and rates this low again in our life time. Do you really want to miss that opportunity just for “cheap rent”? In the end under their plan you will have a large debt you can’t pay back preventing you from getting a home that is a good financial investment. You also may be facing a large tax liability.  Your home should be your biggest and best financial investment not your worst financial nightmare dragging you down and tying your hands preventing you from taking part in the best real estate buying opportunity decades.

         I have been in real estate for 32 years. I have the wisdom of long term perspective. I have made millions from my real estate over the years. But digging in and paying the bank for nothing is not how you do it. Timing in real estate is everything. You do it by pushing the loss on the bank since they are willing to take it on a short sale and buying back in at the bottom of the price and rate cycle so you can ride the appreciation tide back up while controlling the property with a low 30 or 15 year fixed rate loan.

         Yes it is easy to do nothing and take the deal but where does that leave you in 10 years? With nothing or with 200+K in equity? Believe me as much as you like your home you will love your new one even more especially the financial aspect of it. It will be one that someone else put their heart and money into it and lost to foreclosure. Today the way to get financially ahead with upside down home is to transition. Cut your losses and buy back in and hold on for a the greatest financial ride of your life.

        As you can tell I am passionate about real estate. I have owned close to 100 properties. And I have made all of my wealth through appreciation. During my 32 years in real estate I have seen this cycle 3 times. We went over the top in 1979 and in 1989. It was game reset each time just as it is now. Don’t miss your opportunity or fall for the bank’s trick to keep you paying on a bad investment just to make their books look good. They don’t need your help, they got bailed out with our tax dollars.

         Besides, on a short sale that I handle, you will not have any payments for 9 to 12 months giving you an opportunity to save more towards your next home. That is even a better short terms deal than the bogus mod “cheap rent” they are offering you. Let me know and we can set up an appointment for me to stop by and answer your questions about the short sale. I am happy to help you through this transition to a new home of your (financial) dreams.

Thanks