Posted by LaDetrica Wells on 7/12/10 4:45pm
Msg #344651

Loan Modifications, Credit Checks and New Loans

I have a friend who is currently awaiting a response/approval to a loan modification from Bank of America. But now she needs a new or gently used car because her current one broke down and need LOTS of repairs. She believes she can obtain a newer and smaller vehicle with a more reasonable car payment. So she asked me would it be wise to let a car dealer or finance company run a credit report and extend her a new car loan while she is still waiting on a response from the mortgage company?

Normally, I have all the answers, but this one stumped me. So can any of my fellow Notaries help us on this?

Reply by Calnotary on 7/12/10 4:48pm
Msg #344655

I don't know the answer to her dilemma, but I wouldn't do anything till my modification is done.

Reply by MikeC/NY on 7/12/10 5:52pm
Msg #344665

It's probably not a good idea. The bank WILL see that she has taken on new debt, and that could sink the loan mod.

The whole purpose of getting the mod is because you can't afford the current payment given your income and expenses, so how and why would anyone in that position take on a new car loan? And if she's behind in her mortgage, the chances of anyone extending more credit are pretty slim.

Maybe she could get help from friends or family to resolve the car issue. She might want to discuss this with an attorney who is familiar with loan mods (a legitimate one...). Tough position to be in, but if she makes the wrong move she could end up making it even tougher....

Reply by RedBaron/IN on 7/12/10 7:19pm
Msg #344679

As a Real Estate Broker for 20 years I always tell anyone applying for a mortgage loan to do nothing that would cause a hit on their credit report. Nothing. They have to bit the bullet until the loan is approved.

Reply by Shoshana/AZ on 7/13/10 1:55am
Msg #344709

Debt to Income Ratio will definitely be scrutinized.

They want to be sure that you can afford the new mortgage. How long has she been waiting for a response? My loan mod has been in the works for 18 months now (with Wachovia/Wells Fargo). B of A has a lot of backlog due to the loans from Countrywide and Taylor Bean Whittaker that it took over. I wouldn't hold my breath.

Reply by Linda_H/FL on 7/13/10 4:34am
Msg #344712

Does anyone else think this is absolutely ridiculous??

Not YOU, Shoshana, but the whole process...you request a mod to make your loan more affordable for you and, possibly, help you keep your home, and you're still waiting 18 months later??? Aren't mods supposed to be streamlined to HELP the homeowner, not run them through the mill for a year and a half??

I mean, jeez...am I missing something here??

Reply by MW/VA on 7/13/10 8:20am
Msg #344725

Re: Does anyone else think this is absolutely ridiculous??

Yes, it is ridiculous. I've heard this same scenario from a # of people. It seems to be a stall tactic & appears that the major lenders weren't a bit interested in doing the mods. In the meantime, people are left hanging.
There was a story on our local TV news last week. A woman had lost her husband to cancer.
When he got sick they lost his income & fell behind. She applied for a mod with GMAC. They stalled & stalled, finally came across with a "temporary loan mod", pending a "permanent loan mod". After all that, they notified her that she didn't qualify for the permanent one, returned all the payments she had been making to them, accessed about $50K in additional interest & penalties, and forced her into foreclosure. It was heartbreaking. The kind of story we hear all the time in America--someone gets sick, medical expenses, etc. & you lose it all. She had a teenage daughter that had called the TV station in desperation & they were all crying on TV.
Heartbreaking--they lost their husband/father & were now going to lose their home. At least GMAC got a lot of really bad press on that one!

Reply by notary4az2 on 7/13/10 1:34pm
Msg #344769

Re: Does anyone else think this is absolutely ridiculous??

I do not think your friend should do anything that will affect the current status - they will turn her down for the loan mod. because the banks are not interested in helping anyone. I have closed loan mods that are taking up to 14 months. It is ridiculous! My husband died 2 yrs ago and have asked Bof A to refi or loan mod me since to no avail. I refuse to stop making payments to qualify for a loan mod- so they said they could refi my current loan at 1% higher than what I am paying now with closing costs of $2,300. All the low interest rate advertising, I believe, are propaganda.

Reply by Shoshana/AZ on 7/13/10 3:11pm
Msg #344794

Interest rates are REALLY low right now.

The only problem is that the borrower has to qualify for those rates. They are making that more and more difficult.

Reply by Shoshana/AZ on 7/13/10 3:08pm
Msg #344792

You have to understand that....

everything is done with a purpose in mind. They drag it out and keep on asking for more and more documentation ad nauseum because they really only want to wear down the borrower. If the borrower drops out, then they can foreclose. Mortgage and real estate perofessionals in the industry know this.

Reply by LaDetrica Wells on 7/14/10 10:26am
Msg #344890

Re: You have to understand that....

Thanks everyone. After I sent this question out, my friend decided that taking the bus for a while was nothing compared to loosing her home. She said now she is gonna become a thorn in the side BofA for the loan modification only because they kept pushing her to seeking help and kept on sending her documents to modify her loan (which I told her this was something she should have done last year). So she's hoping they REALLY REALLY want to help her keep her home with a more AFFORDABLE payment.

Reply by jba/fl on 7/14/10 11:50am
Msg #344911

Your friend is to be commended for taking the

'cheapskate' route. Not that she IS a cheapskate in a derogatory sense, but that she realizes the importance of financial well-being in her life. That is admirable.

Takes guts and gumption to stick with it and I wish her a successful road. Congratulations need to be conveyed for me....

Here is a link for you all - I highly recommend it to everyone:

http://www.debtproofliving.com/Help/ManageMyAccount/EverydayCheapskate/tabid/210/Default.aspx