Bank Won’t Work With to Keep My $2.33M New Home. – Mark

I apologize in advance for the short response. I am currently away on vacation with limited internet but wanted to give you an answer as soon as possible. Steve

“Dear Steve,

I currently own two homes, my primary house and a new one I built. The new home is the one that is the issue. It’s a great house. It’s 7500 square feet with all the luxuries. The lender initially appraised it at $2.8M. The plan was for me to sell my old house which at that time I could have netted out around $200k, then move to the new home. I would live there a few years and then sell it making a large profit.

Well, it didn’t work out that way. The Real Estate market went bust. I couldn’t sell my current house. I lost all of the equity in it also. I am underwater on the old house. The accessed value on the new house is now $2.33M. I have been trying to sell it for around 10 months with no luck. I am running out of money to pay both of these mortgages.

I have continually asked the lender for help to give me a better interest rate, etc. They will only give me 7.5% on a super jumbo. I would need them to cut their interest rate on that loan to less than 4% for at least two years so I could work things out or wait until the market stabilizes. The loan I have with them for the new house is $1.82M. It’s a portfolio loan for them. I asked them if they could give me a second mortgage for even $100k and they said they might, but never did. They wanted to see if they were going to be able to sell this loan to Freddie Mac thus relieving their debt.

The lender did supply with the paperwork to do a loan modification. I haven’t filled it out yet. I will do it, but I was wondering what advice you could offer.

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The main reason this all happened was that my builder took 21 months to build the house when he was supposed to finish it in 12 months. Due to the extra time all of the underwriting changed and I could not get the loan I needed.

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Dear Mark,

I suppose you have a couple of options. First, if the builder broke the contract and created a situation that created financial harm, I guess you could always go after the builder for damages.

If the bank is offering a modification, I’d complete the paperwork and follow that process through.

Finally, let’s say the lender agreed to some loan modification, can you still afford to carry both homes for an indefinite period of time since it is uncertain if either home will sell in this market? If not, we need to look further ahead to deal with this growing mess.

A loan to refinance this is a really long shot so next option would be bankruptcy, you’d need to talk to a local bankruptcy attorney to see if they think a cramdown on the second mortgage is possible in a bankruptcy.

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