Loan Modifications vs. Foreclosures vs. kiss your high credit score good-bye

I have always paid my bills. I am fortunate, and I don’t take it for granted. From College Loans to bad decisions on my credit card, I have paid. In 2005 I decided to diversify and invest in a couple rental houses, not to flip but to invest in a future. But between taxes and insurance increases at levels that didn’t match my original P&L, by 2008 they were a very bad investments. Yet I continued to pay and started asking for advice.

Realtors told me to hang on, that it would it would come back and that I didn’t want to turn away from my original investment and renovation costs. Then I started calling mortgage brokers to see if I could re-finance. One laughed at me, one spent a lot of time with a heart felt conversation saying he wanted to help but the loan amount and my 80% decrease in Salary, due to reduced sales in my business, just wouldn’t allow any other lender to take a chance. So I started calling my banks that held the loans.

Loan department personal must have gone through multiple training courses on how to be cold and uncaring. One by one they told me that they could not help me. One actually told me I should plan on losing my home. NO ONE understood I’m an S-Corp, that a personal tax return does not show the full story. My investment properties were all I had at risk.

I was given someone who worked as a middleman with homes that were at risk, but after many conversations, his angle was to represent buyer groups who would take on distressed properties. Even he couldn't see past the loans I had tied to the properties and advised foreclosure.

Then I heard about Loan Modifications and a client spoke of a women that was working miracles for her home. So I phoned this company in Atlanta. After a long conversation with the owner, I kept saying “it sounds too good to be true”…all the promises, the idea that someone else would take the weight of this and work with all the banks on my behalf.

Loan modifications only modify the terms, mainly the interest rate, to a place where the owner could afford making payments. However, the principle, the original bad investment will not change. And the chances of me making back my investment will take longer than I’ll be alive.
But the idea of keeping my life investment kept me pursuing a modification and getting loads of data to the company. Then, right before Christmas I was asked to make a payment. Both rental houses and my own home would cost well over $4000, and they wanted an installment.

With $1,400 in cash and the loan mod paperwork, I went to a local Bank of America to deposit it into the BOA account in Georgia. The deposit was made but I questioned the routing number. The teller got a bank officer who pulled me aside and told me that after reviewing the paperwork it was his professional opinion that I should NOT go thru with the deposit! A reversed deposit was done and I walked out with my cash in total disbelief and tears. Although later, people would tell me he did me a huge favor, at the time I was hyper-ventilating. For months I had poured all my attention into this option and now I was starting at square one. I thought.

Then, a friend told me about a local HUD service that worked to save homes and council people. All the material from the loan mod was transferred to them. After a long talk with another advisor and this service, it seemed like the only choice was to let them go, and face foreclosures.

Before all this, I pulled my credit rating on Experian. It was 917. Immediately the world seemed different. American Express lowered my $14,000 limit to $3000 even though they and all others had and continued to always be paid. Daily calls from Bank collectors, who took the same "mean" training as Loan Officers, and watching my credit fall...it's hard not to feel like I've failed, even though I realize how many people are going through this exact tragedy.

Countless nights of not sleeping and countless days of tears. But this can destroy someone or you can accept a bad investment, deal with it and go on. Dealing with it will continue. But going on is what I hope to do.

Asking for help, a new concept.

I have decided to ask for help. It’s something that I am not comfortable in doing. I’m single with no children. I’m fiercely independent and moved from Kansas to Florida when I was 23 with no job and $500 to my name. Everything I have was grown from a College degree and a lot of work. Now I stand watching everything fall apart. My life investments were piled into 2 wonderful houses I bought at the high point. I dived in and helped renovate them myself. I was determined to not be a slum lord but rent homes that I would want to live in. This would be my 5-10 year exit plan as Florida Real Estate was sky rocketing as was the rest of the country. But now, no math works. They are bad investments. They have terrible mortgages that an overly enthusiastic friend/mortgage broker had pieced together. Later I would find out this person had a cocaine problem.
I would ask everyone I knew if they could give me advice.
I called my friend Brad. Wanting to be direct I had my speech prepared: “He had investment property experience, I needed advice, can we get together”...but what came out was a babble of sobs and words and embarrassment that was as unexpected as it was barely decipherable.
The next day, Brad and girlfriend Katie took me out on their boat to a sandbar in the river the locals have fondly named Disappearing Island. We discussed the idea of me moving overseas and letting the job and real estate go. Brad has been self employed and owned multiple properties and has experience at several levels. Katie has a unique energy and as an Australian, has traveled the world. They helped me put my situation in perspective. There is a Big Wide World out there. Between the vodka and conversation, my tears rolled freely and I knew if I did this, there would be the monumental us task of unraveling 25 years of life in this beach town. It all seemed too overwhelming.

Then there it was, the Biblical symbol for hope: a Rainbow. Across the Ocean and over the Light House. I decided it was especially for me that September day.