| A non-performing loan is a loan that is in default or | | | | The answer is simple, lack of communication and the |
| close to being in default. Many loans become | | | | inability to properly negotiate through these |
| non-performing after being in default for 3 months, but | | | | non-performing loans. They are just trying to collect a |
| this can depend on the contract terms. | | | | debt and they' they only know one way, a |
| "A loan is nonperforming when payments of interest | | | | forbearance agreement the borrower can't afford! So |
| and principal are past due by 90 days or more, or at | | | | you have to ask yourself why can't they just take the |
| least 90 days of interest payments have been | | | | past due amount and put it on the end of the loan then |
| capitalized, refinanced or delayed by agreement, or | | | | have the borrower just continue to make the |
| payments are less than 90 days overdue, but there | | | | payments? There are several reasons why this is not |
| are other good reasons to doubt that payments will be | | | | practical. I mean really, these borrowers think they got |
| made in full" | | | | screwed and many of them are right! The rates went |
| What is secured debt? | | | | up with the cost of living, the property values went |
| Debt backed or secured by collateral to reduce the | | | | down with most home owners income, and some got |
| risk associated with lending. An example would be a | | | | a double whammy trying to leverage their home with |
| mortgage, your house is considered collateral towards | | | | an Option ARM home loan or equity line. |
| the debt. If you default on repayment, the bank seizes | | | | So what's the answer? |
| your house, sells it and uses the proceeds to pay back | | | | Loan modifications...If you want to negotiate with your |
| the debt. Assets backing debt or a debt instrument are | | | | lender then hire a pro. Hire an Attorney! |
| considered security, which means they can be claimed | | | | Having the knowledge and know how necessary to |
| by the lender if default occurs. Obviously unsecured | | | | facilitate a successful resolution is what they do... While |
| debt is higher risk, and as such lenders of unsecured | | | | most individuals have the ability to negotiate |
| money typically require a much higher return. | | | | face-to-face with another party, the terms of the deal |
| What is unsecured debt? | | | | must be properly memorialized in a contract in order |
| The concept of unsecured debt is easily understood | | | | for them to be legally binding. Attorneys can do that by |
| when its opposite is considered. A good example of | | | | not only negotiating on your behalf, but also making |
| secured debt would be a mortgage. The bank loans | | | | sure that the contract adheres to all state laws as well |
| out money to a lender who uses it to buy a house; the | | | | as addresses any specific issues that might affect the |
| house becomes the asset backing the loan. In the | | | | future use of the property while keeping their client's |
| case of unsecured debt, a lender loans money without | | | | best interest at heart. |
| the security that an underlying asset provides. For this | | | | For example, in New Jersey, the law stipulates that the |
| reason, unsecured debt carries more risk for the | | | | buyer and the seller have three days to review a real |
| lender, which in turn makes the loan more expensive. | | | | estate contract signed in conjunction with a realtor |
| The more additional risk that a lender must take on, the | | | | before it becomes legally binding. Some home buyers |
| higher the rate of interest a borrower must pay, | | | | sellers aren't aware of this. A lawyer will not only |
| making unsecured loans subject to higher rates. | | | | make the client aware of it, the attorney will also |
| So what does this mean to a lender who holds a | | | | review the contract for any legal glitches, make any |
| non-performing secured note on an upside down | | | | necessary changes to it, and insert any contingencies |
| home? | | | | that you might have. In addition, if you have a subprime |
| If a lender is holding a note on a home that's worth | | | | or option ARM loan the Attorney can threaten to |
| less than the amount on the loan then a portion of that | | | | rescind the loan if they find TILA or RESPA violations |
| note is basically unsecured. If a lender is in a 2nd lien | | | | and use these violations as leverage in negotiating a |
| position on a secured loan and the loan defaults there | | | | loan modification on a secured debt. |
| must be enough equity to pay off the 2nd after the 1st | | | | Bottom line... If you're in trouble, facing default or |
| is paid or the 2nd lien holder becomes an unsecured | | | | foreclosure you may need to hire an Attorney to |
| creditor. | | | | handle the negotiation to save your home from |
| If a home owner is behind on mortgage payments or | | | | foreclosure. A skilled Attorney may be able to |
| in default and owes more than the property (secured | | | | negotiate your interest rate, principal balance and the |
| debt) is worth then what makes the most sense to | | | | terms of your loan. A "make sense" offer to the lender |
| the lender? | | | | with supporting criteria showing them how bad it could |
| One would think the lender would be encouraged to | | | | be for them if they don't modify the existing terms of |
| work out the loan or take back the property and write | | | | your mortgage may be the best solution for both |
| off the losses... Like they need more write-offs! | | | | parties. The loan performs for the lender and the client |
| So why do we have such a high rate of foreclosures | | | | keeps their home. |
| and the lenders work outs not working? | | | | |