Mr. Mortgage is right this is bad loan mod. However if the borrower has a strategy the borrower may be planning on doing a short sale or he or she may cease making to the second into the opening move of a short payoff.
Mr. Mortgage’s Guide to the TRUTH! » Mr Mortgage: Actual IndyMac (Exotic) Loan Modification: "If they would have had these loans out during the bubble years the housing bubble could have grown twice as large.
This borrower is not as bad off as many in the bubble states - they are only 44% or $370k underwater in their home. Their present first mortgage is only slightly higher than the value of $475k. But when you add in the $345k second mortgage that the IndyMac modification lets stay in place, they are $370k upside down.
This modification makes the borrower a renter and debt-prisoner for life. This is not a financial solution for the borrower, rather a structure that lures the borrower into a terrible financial decision because it is cheaper to stay than walk away and rent. All of these new proactive loan modification plans by the law makers, regulators and bank are designed to do just this. A ’solution’ where the borrower still owes $840k on a $475k home and will never be able to refi or sell, should send them running.
While some will take this offer, I am hopeful that the typical home owner is not this ignorant. That is a lot of debt to carry around for life. On the other hand when you have nothing to lose and your only alternative will be foreclosure 6 months down the road, you may just"