Expert: Dick Dennis - 4/12/2010

Question
Mr. Dennis,
Thanks for your answer regarding my situation.
Being away from the Country I read your advise 2 months after it was received.
I leave in NCal, and Chase refused my Home Modification with this letter:

"Chase Fullfilment Center
Statement of Eligibility for Loan Modification
Dear Mortgagor
...We are unable to offer you a  Home Affordable Modification because your current monthly housing expense, which includes the monthly principal and interest payment on your first lien mortgage loan plus property taxes, hazard insurance, and homeowner's dues (if any) is less than or equal to 31%  of your gross monthly income ( your income before taxes and other deductions). Your housing expense must be greater than 31% of your gross monthly income to be eligible for a Home Affordable Modification.
If you feel an alternative modification program we offer you is unacceptable and your intend to retain the Property but cannot cute a delinquency, one of the following workout options may be available for you to consider:

- FORBEARANCE PLAN: A temporary reduction in your current payment to provide time for you to improve your financial circumstances.
- REPAYMENT PLAN" An agreement structured to cure the delinquency offer a period of months while continuing to make contractual payments.
- REFINANCING SETTLEMENT: Use of an external lender to pay off the Loan, possible for less than the full amount owed.

If you do not intend to retain property...
- SHORT SALE of the Property...
- DEED-IN LIEU of Foreclosure,  whereby deed the Property to your servicer in exchange for forgiveness of all or a portion or the Loan.

If you are interested in discussing these possible alternatives, please contact us immediately.

Forgiveness of debt may have federal tax consequences..."

Could you please guide me in what direction to take?
My credit score before the Home Modification Trial was 840, today is 718. We were in trial for about 9 months. All my bills are paid on time. To start my home modification with Chase, I had to be delinquent for 3 months.

 Your help will be highly appreciated.

  Joao

Answer
I would hate to see your credit score drop drastically, Joao, but that is what would happen if you let the property go into foreclosure or give a deed in lieu (they are both the same as far as your credit score is concerned) to the bank. However, you wouldn't have as much a drop if you sold your property with a short sale. But it still would be a drop.

It is my belief the bank is not willing to work with you on a forebearance or repayment plan because you have apparently been current with your monthly payments and your other bills have been on time. They get serious about helping you when all those are in arrears.

A client of mine wanted to reduce his monthly mortgage payments. He was behind on his credit card bills. I suggested that he write to the bank to tell them he will let his mortgage go if they don't work with him. They did not reply. The client then stopped making payments. After three months of not receiving any payments from him they called HIM up. They worked out a deal in which his mortgage payments were reduced a whole bunch and his interest rate was lowered drastically, too. I should point out that the client was behind in his credit cards and his obligations were a lot more than that 31%.

That was a year ago. The client has been on time with his payments since then and worked out a payment schedule with his credit cards. He has had no problems since then . . . and he got rid of his credit cards! He uses only debit cards. I don't know if any of this is applicable to you, but it might give you a suggestion or two. I do wish you well.

Dick Dennis
Dixiedee13@aol.com