Refinancing an interest only modification loan into a conventional
Modification was into I/O for 24 months which is up this November. Modification was due to deaths in the family and all payments have been made on time. They are being told that since they only made interest payments that what they did not pay on principal must be added to the principal balance now and the appraised value doesn't cover that. I have done many regular I/O refinances in the past (not modified loans) and have never heard of such a thing. Can anyone out there shed some light? by deb.rutherford18 from Dublin, Ohio. Feb 22nd 2017
John Regg (jregg2005)
#78 ranked lender in Ohio - 12 contributions
That does sound correct on a loan modification to add the interest on once complete. I would be happy to look at the scenario and see if I can be of assistance without pulling credit or any costs or obligations to you. Please give me a call 513-265-7770, John Regg, Peoples Home Loans
Guess I wasn't clear. My question is that the new loan amount is the current balance (meaning the principal as it was when the I/O payments started). I have never heard of adding the unpaid principal that would have been paid prior to the I/O modification to the new loan. In other words, if balance was $200K and you paid the I/O for 24 months, the refinance would be of the same $200K principal balance starting with new interest at whatever rate you locked in. Correct?I appreciate your quick response and thank you for you offer to assist but if I am correct, I can do the loan myself as the Branch Manager of Caliber in Columbus. I just had an inexperienced loan offer trying to refinance and I don't think he understood the information he received.
Joe Becker (joe@beck5financial.com)
#29 ranked lender in Ohio - 5 contributions
Deb,What were the terms of your modification? Within the Modification Agreement, was there any reference to principle payments, or that you accepted responsibility for the principle not paid to be added?How badly did the new appraisal deteriorate, if it did? (If you are talking about a larger sized mortgage balance, and if 24 months of principle were added on, it could make sense that your adjusted mortgage .vs. your appraisal might come in "under water".With the additional principle added to the previous balance, (if being enforced), I would think that your lender would offer to at least recast a new amortization on the higher loan amount. Of course, this would have to be acceptable to both parties.Your lender may have already decided, however, to force the loan out of their portfolio, encouraging you to find new financing elsewhere. If this were the case, working with them for a resolution might be very difficult.
William J Acres (William_Acres)
#74 ranked lender in Arizona - 8,728 contributions
Without looking at the modification agreement, it's hard to advise you.. it's possible that the I/O payments were not sufficient to cover the actual interest owed each month (negative amortization).. It's also possible that the modification agreement only charged you interest on a reduced amount.. Example:.. you owned $220,000, but your I/O payments were based on a balance of $150,000.. interest deferred to the end of the loan/payoff.. Again, without looking at the complete terms of your modification, it's hard to advise you.. This I will say though... assuming you did not have a modified loan, you are correct.. if you borrowed $200K, and did interest only and were trying to refinance after say 5 years, then your outstanding balance would be $200K plus about one month's unpaid interest.. I'm a preferred Lender with Arizona and California being my primary markets. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com NMLS# 226347 / RPM Mortgage NMLS 1541014 / AZMB0121893
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