Principal Reduction Program Offers Hope to Underwater Homeowners.
Millions of American homeowners are "underwater" in their homes, meaning they owe more than their property is worth.
This unfortunate circumstance is at the root of so many financial problems today - from Short Sales, to Foreclosures, REOs, and the resulting lowering of property values and surplus inventories dropping prices further in a never-ending spiral.
Wouldn't it be nice if there was a way to extricate homeowners from this situation where all parties can benefit and stop this downward spiral of home prices?
In other words, is there a true, viable Principal Reduction Program out there?
Well, I believe there is and it is being offered by a company called The Guardian Group out of Phoenix, Arizona. Their mission is to try and help American homeowners who are underwater keep their homes by offering them a true Principal Reduction Program.
I became intrigued by this program when I learned of it just a few weeks ago, and began to do my due diligence because it sounded too good to be true. I decided to fly there at my own expense this past week to meet the Executive Team of The Guardian Group and to make sure it was a company I would be willing to associate with.
I am pleased to report that I found them to be incredibly smart, ethical, hard-working, and willing to incur a lot of expense in order to get their program up and running.
They began operations last summer, and are rapidly expanding their office space and personnel in the Phoenix area. They operate mostly on word of mouth and have opened a channel of distribution of primarily mortgage brokers like myself to help spread the word of their Principal Reduction Program.
With so many millions of homeowners underwater, it is not hard to find someone who could benefit from this program.
Here is what their Principal Reduction Program entails.
The Guardian Group is backed by a multi-billion dollar Hedge Fund, which is a fancy name for a Private Investment Group. With extensive capital resources, The Guardian Group is able to negotiate with existing lenders and using leverage, they are able to bundle Notes together for a bulk purchase and receive a discount. This is the key to the program. An individual would not have this leverage, as the lenders will require several million dollars at once to even begin negotiations.
Then, The Guardian Group can refinance the homeowner's property with a different lender, (or their private investors) and then resell the Notes at a profit.
As you will see below, all parties can benefit with this two step approach.
Most importantly, can the homeowner benefit?
Yes. The homeowner receives the most benefit as they can keep their home. They never lose title. The resulting refinance will be at 90% of the current market value, so they go from a "negative equity" position to one of 10% equity - hence, they achieve a Principal Reduction.
Their monthly mortgage payment is likely to drop significantly. Interest rates for a 30 year fixed loan wil be in the 5% to 7% range, depending on FICO scores and whether the homeowner is current, or behind in his payments. (FICO score is irrelevant to qualify.)
They don't need to Short Sell the home, there is no foreclosure, and property values in the neighborhood won't drop.
Also, and this is very important, the homeowner does not have any tax ramifications since the lender does not issue a 1099 because they are not forgiving any debt. As always, a homeowner should check with his tax adviser.
The existing lender also benefits from the Principal Reduction, interestingly enough, because they will net more money this way versus the high cost of going through a foreclosure and taking the home back.
The Guardian Group benefits when they resell the note at a profit. They make no money on any upfront fees, which are a relatively modest $1,595. This expense includes all costs of the refinance. As a mortgage broker, I can categorically state that I cannot do a refinance for that amount. Closing Costs as published on my website are at least $3,400.
The Guardian Group also has a very generous refund policy. To be clear, The Guardian Group's business model depends on a successful reselling of the note and the resulting refinance, so their goals are aligned with the homeowner. This is what separates them from a Loan Modification company.
The investment company benefits because they participate in any profits from the reselling of the note, and also the resulting income stream from the refinance.
For more information on how the Principal Reduction Program works, contact me below and I'll send you a 15 page presentation which may answer most all your questions, or just call me at 530-205-9145 or e-mail me at rick@upfrontmortgageplanner.com.
