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Wrap Contract, Possible Short Sale

Posted on: 18th Jun, 2009 01:29 pm
I have a 1st and 2nd through GMAC on a home in Oregon. We moved to a new state two years ago, and were not able to sell the house due to the declining market. We ended up executing a Wrap contract on the house in 2007 in order to cover the existing mortgage payments.

Unfortunately, the party who holds the contract is now in a pretty bad way as he is upside down on several investment properties. He would like to sell the contract to someone else, but the catch is that the contract will have to be renegotiated in 2010 when my existing loans adjust. My fear is that when the loans adjust from interest only in a year, the payments will increase, and renegotiating the contract could end up in us having to cover some of an increased payment.

The total loan value is $150k, current market value is somewhere around $120k.

The question is, should we start looking into short selling, loan negotiation, or another option now, or wait until the loans adjusts in 2010? What other options are there and when is the best time to get the process started?
hi oversoul,

once the loan adjusts next year, the payments are expected to increase. this means you will have to renegotiate the wrap contract. there is no guarantee that the person who the contract would be sold to, will be making the payments unfailingly. what will happen if he/she is in financial trouble and fails to make the payments?

is your loan owned by fannie mae or freddie mac? if it is, you may qualify for the new home affordable refinance program which allows owners of underwater properties a chance to refinance and take advantage of the current rates. if it does not work, then i believe you will have to go for either a short sale or a deed in lieu.
Posted on: 19th Jun, 2009 02:54 am
Jenkin7: Unfortunately the loan is not owned by either Freddie or Fannie.

Has anyone tried to negotiate loan terms, not owned by Freddie or Fannie, before going into default? I saw on several posts that lenders would not entertain loan modification until after payments are missed, but those were mostly from 2008. How has the climate changed?
Posted on: 19th Jun, 2009 02:09 pm
oversoul7 , climate is still not yet changed rather I will say that until and unless there is not any stimulus package from obama government to banks condition will remain same.

keep in touch........
Posted on: 24th Jun, 2009 03:34 am
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