hi,

I have an interest only loan for $200K which I took out with Bank of America 4 1/2 years ago. I haven't missed a payment but have been struggling to make them (have borrowed from HELOC on occasion). the property is now worth less that 100K. This isn't the only mortgage I have with BoA. rather than just stopping payment on the loan I proposed that my payments from now on go directly to principal and that no further interest is accrued. I've payed over $45K in interest already so they've more than made a nice profit on this. What I got from the person at BoA was a complete unwillingness to work with me. I found it a hard pill to swallow especially since they have their hands out to us taxpayers to save them yet turn their back on me. I just can't see continuing to pay down interest on a loan which is 2 times the value of the property.

Why wouldn't BoA take something rather than nothing?

But your message says you are "struggling" to make even the interest payment. Unless your incoming funds have changed dramatically, the current value of this property is, technically, irrelevant. Let's say the value of the property dropped to $100. That might tick you off, but, assuming a fixed interest rate, it should not affect your ability to pay.

Unless you were looking to quickly turn it around and make some cash, the property's value should not really bother you that much.

I wouldn't call it "profit". I would call it the cost to you for them giving you money at a specific time and allowing you to pay it back with money that becomes worth less and less as you go out in time. Whether or not they make a profit on that depends on how they run their business.

The minute you stop paying interest and still owe them principal, they start losing money. The money you give them in the future is worth less and less as you go out in time. Remember, you still haven't paid them a penny towards the original loan. You would have the use of their money, interest-free if they accepted your offer.

The property is something. It's physical, final and perhaps better, at least in terms of this particular loan. If history shows the borrower cannot make just the interest payment, why should the bank think the borrower could handle a restructured loan?

Contriteness might help out here. Have you considered attempting to renegotiate a lower interest rate and start paying on both interest and principal?

You might pay an interest rate that is much higher than what is available now.

Refinancing your mortgage could be an option if the interest rate is at least 1 percent lower. But have a look at the extra refinancing costs too.

I suppose you want to stay in your house. Use the saved money because of the lower interest to make extra payments to pay off the principal.

Now you can start to pay off your mortgage. After the principal gets lower because of the extra payments, you have to pay less interest so more money is available to pay off even more.

You will be able to pay off your mortgage step by step.
Good luck.

The value of the property may be $100k now, but in 10 years time it could be $300k.

My neighbor had a similar situation, so she just told them she is not making payments. After about 6 months after they hounded her with nasty grams, they listened and changed around the terms. The bank has no benefit getting stuck with propery that has lost all that value, they are better off getting you to make payments on modified terms.

they will not negotiate as long as you pay

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"I just can't see continuing to pay down interest on a loan which is 2 times the value of the property"

the question becomes.... when will it be worth 200k


you know the answer

They are not going to negotiate with you as long as you are 'struggling' to make the payment. The fact that the property worth less than what you owe on it is irrelevant, lots of people are in the same boat. When you take a loan on, it isn't binding when only when your house is worth more than the loan. I think your only option is keep struggling or let the note go into default and hope that they don't want to take the house (which it sounds like).

If you got the loan 4 1/2 years ago on an interest only loan, is it going to roll to a interest/principle payment soon? I don't know what modification the bank could do if you can't afford the interest only payment.

Situation sucks, I would look at it, and determine if you could afford the payment after a loan modification, if you can't, stop making the payment. In that time hoard cash for the impending forclosure. Try to short sell in the mean time.

It comes down to this: Will it cost them more to foreclose than it will cost them to agree to the terms you have proposed. From their perspective, they did not cause your property to drop in value. All they did was decide that you were credit worthy enough to advance you the money you requested with the thoughts that you were likely to pay it back. It was strictly a business decision then, and it remains a business decision now. If taking a loss on the mortgage now, through foreclosure, short sale or deed in lieu will allow them to make more money in the long run if they lend it to someone else who performs on the loan, they would rather take the immediate loss.

The interest you have already paid in was simply the expected return on an investment. It has already been spent. Now they have $200,000 sitting out there that potentially will not be performing. For a loan modification to be attractive to them, it would have to bring in at least as much as the alternative. What you are proposing is that they make nothing at all on that $200,000, and wait forever to get it. They can probably do a lot better with a performing loan for half that amount.

That said, you might want to find a HUD approved housing counseling agency in your area that specializes in foreclosure prevention (loss mitigation). They have the knowledge and expertise to review your situation, see if there is a workable plan to save your home, who to speak to and what to say. They also know the specific LOCAL market conditions that could lend credence to your proposal. More than likely, because of the size of BOA, they probably even have specific go-to people that they work with. You can find a list of agencies on HUD. gov website

I guess it is better to stay off bank loans at find a private loan lender from the comfort of your home.There are many out there.

Stop saying that they owe you the taxpayer. I seriously doubt you pay much in taxes, so your few thousand dollars does not entitle you to many more thousands off in interest. You bought a property and agreed to pay back a loan on that property so grow a spine and do what you said you would do.

BoA will not negotiate, they will make a lame excuse of negotiating and then dump the whole thing, they are the worst in terms of "bureaucrazy". Their track record is the worst of all the banks in regards of solutions for upside down mortgages

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From what I have seen I think BofA is very hard to work with, and they seem to take forever to get things rolling. Now if you are current on your payments, that will make it extremely difficult to negotiate. (If you can and are willing to take a hit on your credit, try going 1 month without paying (keep a 30days delinquency) or you start sending in payments you can afford (reasonable) and then you must call them 2 times a week (try to get to some people who are managers, they might be more flexible) Seems like if you bug them enough they might budge, however if you can't show financial hardship... you might be out of luck. As for the property being upside down (getting them to lower the amount you own them would be nearly impossible, my opinion) There are many ways to go about this, but non are easy and I don't know you whole situation, but a consultation with a real estate lawyer could be beneficiary. Also be aware of people who say they can easily get you a loan mod or something as they tend to get $ out of people and do nothing.

Wish you luck

Talked to a real estate guy last night and he said: That now if you want to do a short sale on your house the bank will work with you even if you have not missed a payment (before they wanted a delinquency of 30-60days) and if you are that much upside down you could have options. Make sure you get opinions from different professionals and make sure that anything you do that the bank can't get a deficiency judgement againt you.

(I am from AZ)

have you tried the new work out programs?