Modifying My Million Dollar Loan

by Tim

Quick Facts on subject proproperty:
2nd home now rented ($70k net)
$1 million loan balance
Purchased 6 years ago for $1.375 million
worth $650k to $700k today
condo property with no available lenders
5/1 adjustable rate - interest rate today is 3.5%P&I
My DTI is approx 40%
gross monthly income = $25k/month
Divorce and reduction of income
Note is owned by Deutsche bank
I have missed two payments (credit is not important)
I want to modify my loan to a fixed rate and get my DTI under 38%, otherwise it does not make sense to keep it.

Do I have a chance for an in house loan mod with Deutsche?

Income properties are viewed differently when evaluating for modification and most lenders are more pragmatic and will make business decissions.

With that said if $70k net means after debt servicing, Condo Assoc Dues, insurance, taxes plus 12% for maintenance, repair and vacancy then there is no chance for a modification, that is a lot of positive cash flow from the investment.

Now if $70k is negative cash flow after debt servicing, Condo Assoc Dues, insurance, taxes plus 12% for maintenance,repair and vacancy you do have grounds for a modification/forbearance.

3.5% does not leave much room for a reduction but you can propose several options.

This really depends on what your objective is financially. Obviously ideal scene is a positive cash flow and at the minimum stop negative cash flow.

For a modification you can request that the current rate is fixed and the mortgage is extended to 30 or 40 years. There is not usually much benefit past 30 years but if we have the objective of positive cash flow there may be enough benefit and can be attractive to Deutsche Bank.

For a forbearance you can ask for a number of years (ask for a minimum of 5 yrs) of interest only payments which should provide positive cash flow. At the end of that time you can decide to short sell or not based on the current market and market values. Another option is to request principal forebearance of the unpaid principal balance above market value being made into a no-interest balloon payment due on sale or mortgage termination.

You are not likely to see equity before 5 years (it will be a bonus if you do) if then so your goal is positive cash flow and if that cannot be achieved to short sell. That is the way you would propose any modification to Deutsche and then act on that plan.

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