Florida Foreclosure Defense – Negotiating Loan Modifications With Banks Is Still Tough: Banks Try to Get Balloon Payments Instead of Cutting Home Loan Amounts and Reducing Mortgage Principal
Posted By Larry Tolchinsky on July 10, 2012
Florida has been hit very, very hard by foreclosure fraud and many Florida home owners, both facing foreclosure and those with underwater mortgages who are still making their mortgage payments, have been keeping their ears to the ground regarding the big mortgage fraud settlement that has been in the national news for months now. According to the news reports, the big banks (Ally, Bank of America, Chase, Citigroup, Wells Fargo) received a deal where they are not going to be sued by the State Attorneys General if they did several things: among them, taking approximately $10 billion in cuts to existing home loan balances.
In other words, reducing the principals on mortgages that these five banks have on their books. This, in theory, would help all the millions of home owners in Florida and elsewhere who have home loans much higher than the current value of their real estate: i.e., “underwater” mortgages.
We’re ninety days down the road and what is becoming clear is that after the ink has dried on the Attorneys General Settlement these five big banks are not forgiving anything. Instead, they’re doing something else — they’re negotiating new loan deals where the monthly payment goes down, which helps the home owner stay in their home, but doesn’t reduce the amount due by the homeowner or change the numbers on the bank’s balance sheet. They’re just sticking a balloon payment at the end of the mortgage.
For example, the Huffington Post expose uses an Orlando, Florida, homeowner who is 76 years old and entered into a negotiated deal with Chase. She’s lived in her home since 1985, and now she has a mortgage that makes her responsible for a balloon payment of approximately $200,000 in 24 years. That’s right: she will owe that when she turns 100 years old.
Larry Tolchinsky’s Tip:
There’s a name for these deals now being offered by banks instead of reducing principals: they’re called “principal forebearance plans.” Sometimes, this is the only option for Florida home owners facing foreclosure or juggling underwater mortgages: if they have home mortgages through Fannie Mae, Freddie Mac, the Federal Housing Administration, or the Veterans Administration, then principal reductions are not allowed right now under federal law.
It’s difficult to comprehend how, in light of the settlement, Florida home owners with underwater mortgages or those who are fighting a foreclosure against one of the banks that entered into that Attorney General Settlement deal, do not have the option of reducing the amount on their home loan. After all, this is part of the settlement benefit that the banks received: they were released from lots of financial liability in a settlement in exchange for reducing the principals on distressed home loans. They agreed to write off lots of money and they aren’t doing it according to the HuffPo report. Ignoring this is sorta like trying to have your cake and eat it, too.
This is another example of how important it is these days to have an experienced Florida foreclosure defense lawyer working with you in your fight with the bank that holds your home loan. Not only do Florida foreclosure attorneys know the particular characteristics and reputations of various lenders (remember, the settlement only applies to five lenders) but they also know how savvy they are and the tactics they are using to try and keep their advantage. More and more, Florida foreclosure defense law firms are offering financial arrangements (like ours) that recognize the current economic realities facing all of us. Don’t assume you cannot afford a Florida lawyer to help you fight foreclosure – investigate your options. And hang in there!
If you have questions or comments, please feel free to Chat with Larry in the comments below, at email@example.com or (954) 458-8655.