Psst: Did you get your mortgage reduced?
This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.
Worth reading today:
An interesting and timely piece from Voice of San Diego exploring this thorny question: When a homeowner renegotiates a mortgage to a lower amount -- effectively reducing the price he or she is are paying for the house -- should the new loan amount be a matter of public record? Or should work-outs be private?
The article reports that mortgage workouts that reduce the amount of the mortgage can be kept secret -- unlike new purchase loans, or refinance loans that increase the total outstanding debt:
‘You would think that should be a requirement because all the other ones are public record,’ said Fred Eckert, a local title representative with Chicago Title. ‘If [a lender] records a modification, you have an accurate picture of what’s happening with that property. If things weren’t recorded, how would you know what’s happening on the street?’
... Unless a loan’s balance is increasing, the lender isn’t required to file a public change. Because the modification is between a lender and a private consumer on an existing loan, the lender is not legally required to attach news of the modification to the property record, experts said. In some cases, even when the balance is decreasing, lenders do attach a notice that the loan has been modified.
The result, though, is that information is kept out of the market, to the potential disadvantage of future buyers, who might base their offer on the last publicly recorded purchase price, when in fact the lender and the buyer know there is newer information: a lower price they have agreed on to keep the house out of foreclosure. More, from Kelly Bennett:
If a prospective buyer could see to what level a handful of homeowners on a certain street had just negotiated their mortgages, that buyer’s psychology could be altered and he might offer less for a nearby home than he would have otherwise.
Your thoughts? Comments? E-mail story tips to Peter Viles
-- Peter Viles
Hat tip: Guillermo, via e-mail, from Patrick.net