Last week I received a curious package via UPS at my doorstep. I hadn't ordered anything so I was surprised that somebody would overnight something to me.
I opened the package to find a giant over-sized envelope that read "Don't Delay. Return your modification agreement today!" Hmmm...I don't remember ever requesting a modification of any of my mortgages. Here is the cover letter I found inside (click to enlarge):
This particular loan is on an investment property we own. It appears they have sent us this package just as our ARM is due to start adjusting. The question I have is why would CitiMortgage offer this? One of my favorite real estate industry blogs is CalculatedRisk. I emailed Bill (CR) and posed this question:
When I called CitiMortgage, the gal on the line confirmed this approach. They are more concerned with loans staying current and performing than they are with interest rate risk. I accepted their terms and we should be well on our way to a recasting of amortization and a rate reduction.Hi Jeremy, I've heard similar stories (but with different details). This sounds like one of those blanket mod programs with the bank offering to modify all loans that meet certain characteristics (like ARM, non-owner occupied).
Citi has probably decided that the losses will be less for the loans as a group if they offer this program.
Also - Citi might be able to sell the loan easier after this mod (seems weird, but it could be).
Here is a copy of their agreement they sent me (click to enlarge):
I find it interesting that they make a fuss about the property needing to be in my name and not sold to another party as would be the case if I had sold it in a seller-financed transaction. Most mortgages have an acceleration clause regardless of this modification agreement. I find it interesting that they recognize the possibility that I may have seller-financed the property to a buyer and therefore cannot qualify for the modification but they don't threaten to call my existing loan either. Perhaps this is recognition on their part of a credit deprived housing market?
Another interesting side note here is that because our loan was interest only, I have been paying about $100 a month more on the loan to pay down the principal. If I continue to do this with the new rate and term in place, the mortgage payoff on the home goes from 30 years down to about 20 years from the present day. This modification will save me 5 years! Wohoo!