Posted on 10/21/2009 9:27:58 PM PDT by Positive
My ex-wife died about two and a half years ago.
She had purchased a home in Southern California after our divorce for $250,000.
I can’t help but mention that some of the funds that she used were provided by me by order of the divorce Court.
Well, we have two children, one 18 the other 16.
Since she belonged to a cult religion that believes that there is no disease and that medical care is unnecessary, she therefore made no preparations for a possibility of her death. No Will, no Trust, no life insurance.
Well the kids asked me to come and be the parent….
Of course I felt compelled to do so.
I have been making the mortgage payments, through probate and beyond, approximately 28 months.
At this point I will end the personalization of this situation. I would like to just open a discussion of the mortgage crisis.
The house here is now in the name of the children.
The mortgage remains in the name of the deceased borrower.
The Probate Court Valued the house at $425,000 as of the date of death… Probate court and attorney fees were paid on the basis of that valuation.
I recently paid a certified real estate appraiser $275 and the appraisal came back at $200,000.
The balance on the loan is $230,0000….so the deal is about $30,000 underwater and I’m throwing $2000 a month into this black hole.
I have spoken with the bank about modifying the loan to make the payment substantially lower and they are stonewalling me.
I have spoken to some professionals in the industry and they tell me that if we were to let the house go to foreclosure (keep in mind that neither the kids nor my name is on the loan so no damage to our credit) the costs to the bank would amount to $50,000 to $75,000. That’s if they were able to sell it at the appraised value immediately.
Additionally, there’s the hit to their balance sheet. The non-performing asset becoming a liability and the risk that the property could decline substantially having been abandoned.
As a businessman, I just can’t understand why the bank doesn’t seem to understand that adjusting the terms of the mortgage is in their best interest.
Is there a catch here that I just don’t understand?
Let me mention that the bank is small and is losing money at an alarming rate… they may go under.
If we have experts here, I would really like to hear opinions, explanations and advice as to how to handle this deal.
It is a game of chicken. You don’t want the anxiety that goes with foreclosure proceedings and they want to use that against you to keep paying “for the children”.
If you are willing to go all the way, there is a good chance they will back down and modify the mortgage.
They want you to blink first. You want them to blink first.
I have a family member who is struggling with a mortgage payment. Fell behind, caught it up, fell behind again, caught it up. Talked to her about requesting a modification, and after speaking with her mortgage servicer, they are unwilling to even discuss it. When pressed, the response was that she had not fallen three months behind, and if she did, they’d talk to her then.
My guess is, they’re afraid of the dam breaking and everybody demanding a modification, if those who are not already in serious trouble are also permitted modification.
Very counterproductive in certain situations, such as yours. But, that’s what’s going on, imho.
If there is no equity in the house, and neither you nor your children would take a hit, I’d let it go, barring some sentimental attachment. There’s no legal or moral obligation to carry that note.
Not an expert, but I did stay at a Holiday Inn. . .
If the small bank writes down the loan, the “hit” to their equity might add enough to their other losses to reduce their equity below state requirements.
Or, they could be praying for a miracle to bump prices back up.
If mortgage is not in your name, you should be able to recover all or part of your funds from probate assuming any funds there.
parsy, who knows not your state’s laws
Stop. Immediately. Let Barry and the Sheeple pick up the pieces.
Remember, contracts and agreements touching land and real property are supposed to be in writing (and signed by them) to be enforceable. There are a few ways around this, but there usually needs to be some “reliance” on their promise. At least confirm stuff in writing if possible.
parsy
Seems the bank is bluffing you, maybe you should call their bluff.
Seems the bank is bluffing you, maybe you should call their bluff.
You sound like an upstanding member of the conservative community. I consider myself the same. I am divorced and remarried. Have kids. So I can place myself in your situation.
The bank won’t consider a refi since you are keeping the loan current. You need to stop paying the payments. This may be trumatic for the kids, but if they don’t want to live with you..there are lots of rentals available for $2000 in CA. Once the loan is past due by 60-90 days and the bank knows that they won’t get any more payments on the current loan..they may consider a loan refi or short sale.
But not until they aren’t getting paid. They may not foreclose for months and months..so your kids can continue to live there, but they will get lots of notices.
If you want refi..it will be difficult without an adult on the title/loan. So you will need to sign with the kids.
Good luck, but it is probably a lost cause..so just stop paying and make other arrangements for your kids.
Seems the bank is bluffing you, maybe you should call their bluff.
Remember, contracts and agreements touching land and real property are supposed to be in writing (and signed by them) to be enforceable. There are a few ways around this, but there usually needs to be some “reliance” on their promise. At least confirm stuff in writing if possible.
parsy
I agree. I’d stop paying but wouldn’t leave the house. Eventually, the bank will contact you and be willing to negotiate ...
Oops the computer keeps locking up.
I am not an expert, but it seems that banks in trouble are very reluctant to recognize any losses. On the one hand the FDIC may be poised to take them over if their situation is precarious, on the other hand the FDIC may be purposely looking the other way for the time being because they can only take over so many failing banks at a time. Or the regulatory regime is so gentle that the banks are not forced to truly account for their losses. Either way the decision makers at the bank are not motivated to take any active steps to clean up their books. There are many stories of homeowners in situations worse than yours (they have stopped making payments) who are asking to be foreclosed upon, but the banks won’t move.
What did she pay for the house at time of purchase? A 60% drop in value sounds high even in this market. What area is the house and has the house been maintained? If you can live with that appraisal then you should probably walk away on the other hand there are darn few houses on the market for $200,000 in most parts of Calif.
My grandson is trying to buy a very small home (850 sf) in a bad neighborhood for $130,00 in depressed Eureka Cal but he is waiting on a loan approval which I doubt he will get. This house is in probate also and I told him to see a lawyer NOW before he signs anything more...
Just stop paying them and see what happens.
Listen to Parsy, a wise man.
I’m sorry but I see she paid $250,000 for it but how many years ago?
The first question I would ask you is how emotionally attached are you to the house and there any issues BESIDES financial that you would want to keep the house?
The second question is was the loan to purchase the property or was the loan a refinance of the property?
Third can you rent a comparable house for less than the mortgage amount?
Fourth, are your sons expecting to have to take a large loan ie. student, car, house etc. out anytime in the next 3 years?
Finally have you executed a lease between you and your sons to allow you to live in the property.
__________________
By the way, my business is investing and developing commercial and large scale residential real estate.
So I’m not a real estate loan professional but then again I’ve probably got more experience in real estate finance than most.
One thing I can tell you as a CA realtor is that you should NOT modify the mortgage. To do so would likely convert the loan from non-recourse to recourse. In addition, from the math standpoint, virtually all mort modifications just add the “short sale deficit” onto the back end of the loan.
You should also check with the IRS or a tax accountant, because I believe that one who pays a mortgage payment is NOT entitled to take a mortgage deduction without being on title.
If that is the case, then there’s nothing to tie you to this house, which means you’re either overpaying for equivalent rent (probably) or not, OR, buying it starting from a $30K hole. Not to mention paying prop taxes.
So if you can rent the equivalent house for less, that would probably be the cheaper way to go. Whether you wish to disrupt your kids lives is something I can’t quantify.
Banks typically exhibit no cooperation at all without you shutting off the payments.
The first question I would ask you is how emotionally attached are you to the house and there any issues BESIDES financial that you would want to keep the house?
The second question is was the loan to purchase the property or was the loan a refinance of the property?
Third can you rent a comparable house for less than the mortgage amount?
Fourth, are your sons expecting to have to take a large loan ie. student, car, house etc. out anytime in the next 3 years?
Finally have you executed a lease between you and your sons to allow you to live in the property.
__________________
By the way, my business is investing and developing commercial and large scale residential real estate.
So I’m not a real estate loan professional but then again I’ve probably got more experience in real estate finance than most.
If I were you, I think I would at least spend $35 or so to get a prepaid legal membership which would, at least, give you free telephone consultation during the duration of your membership to discuss options.
If you are not familiar with Prepaid Legal Services, freepmail me and I can refer you to a friend who sells it.
“My grandson is trying to buy a very small home (850 sf) in a bad neighborhood for $130,00 in depressed Eureka Cal but he is waiting on a loan approval which I doubt he will get. This house is in probate also...”
If there are heirs to this estate, this is a classic situation where your G-son should try to get the heirs to finance the estate. If they are cashed out, they can get about 1% on their money. If they finance your G-son, they can get 5-5.6-6%. Secured a by a piece of property they know and can foreclose on. I suggest you suggest it to him. *Classic” situation.
Maybe there are just too many loans with the same circumstances and the bank can’t get all that paperwork done in time. You can’t imagine the many federal regulations which banks must follow.
If there are heirs to this estate, this is a classic situation where your G-son should try to get the heirs to finance the *estate*.
This should read “....finance the *house*”. Sorry!
The bank might ALSO have notes on other properties in the area, if this one goes under, it will hurt valuations across the board!
Now why in the hell didn’t think of that! I have bought several properties with owner financing...
Let the foreclosure process begin.
Have a Realtor or an attorney approach the bank with an anonymous offer.
Buy the house out of foreclosure!
The bank won't know it is YOU until the last minute, at closing!
(If you don't have cash, you will, of course, have to find another lender willing to play this game, keeping the idea from the current lender, until the last minute.)
What if there are no heirs and the county is the receiver or a 501c3?
Here’s the deal. Before the bank will do a “mod” generally they require the mortgage to be 90 days in arrears. The local bank may or may not actually own the mortgage. They may have sold it off and retained the servicing rights. What they will attempt to do, is to cut your payments and increase the balance of the mortgage accordingly. They may cut the rate to 3 percent. Your best bet is probably to walk away from the house. You are 15 percent upside down and the house, unless it has some value that is not recognized is not worth retaining.
Your other option is a short sale. If you can get a mortgage, you sell the house to one of the non-owner kids or yourself for 200k. You then tell the bank you have a short sale. The bank either accepts the deal and reduces the mortgage debt at closing to 200k or they get jingle mail—return of the house keys in the mail.
This is a classic case of the debtor owning the bank. You just have to know how to play them.
dont mean to be not sensitive by why do you deserve a modification?
He’s just a yout—he needs your grandfatherly input!
Last property I bought I bought directly from the owner. Just wrote a $30K check for 10% (took nearly every dime I had) and started making payments directly to her. No “loan”, no bank. I had lived in the property as a pay-on-time renter for 10 months, so she had a good idea that I was responsible. I cannot tell you how angry the escrow company was at me, their fees were under $650 on a $300K transaction.
Seems to me that the bank is taking advantage of you since you’re making payments on a mortgage that you’re not obligated to pay. Like some of the others have suggested, maybe you should call their bluff. Walk into the bank and tell them you just can’t keep paying on the mortgage indefinitely. Tell them your’re moving out of the house next week, and “who do I need to see about turning over the keys to the house?” They might change their tune. Maybe the lawyer you used for probate could give you some cheap advice?
BTW - If you knew your ex was so irresponsible, could you not have purchased your own life insurance policy for her? This might be a teachable moment for others that might be in a similar situation.
You can wind up using the house for free for at least a couple of years, possibly up to 4 depending how clogged up things are. If you have no equity, you hold all the cards. It will be a long, long, time before you have to legally vacate.
I am not the originator of this thread.
I am NOT asking for a mod.
However, I think, in this situation, where the person paying the mortgage can not get the lender to cooperate -—
That the lender should be forced into starting foreclosure -— then the home could be purchased OUT of foreclosure by the method I described, above!
“What if there are no heirs and the county is the receiver or a 501c3?”
I’m not really qualified to answer that/those permutations. A 501c3 is a form of non-profit, isn’t it? Such an entity could *buy* it, I suppose, but I can’t see why your G-son would form a N-P for purposes of buying a house.
Most likely, if there are no heirs and no will, then the property will revert (proper legal term is escheat) to the State of California. The county is prob out of the picture. Probably goes into State-owned property where it gets ignored for 2-3 years, falls into major disrepair, becomes a crack house, then is bought by an insider for $100.
In that case, possibly the only hope is for there to be a mortgage on the home, hopefully with a very low outstanding balance. There might be an angle to snag the home that way, but more likley, again, some bank insider will figure out a way to buy the home for next to nothing.
Your G-son needs to get the property profile (via a realtor whom he is friends with or whom he might have to pay & contract with so the realtor doesn’t steal the deal)and tax records before putting another erg of effort into the situation. The unfortunate news is that there are half a dozen ways for the house to be stolen out from under him by others.
Judge Long has just reaffirmed his March 26, 2009 decision in which he overturned two out of three foreclosures brought by Trustees of securitization trusts.
The first half of his decision recounts the history of these cases and ratifies his statements of fact and conclusions of law. The second half, beginning on page 11, goes even further and discusses the "securitization paradigm" that I placed squarely before the Court on April 17th when I filed a Motion to Intervene In the Public Interest and submitted the first of two expert reports laying out the fatal flaws that permanently impair these securitizations.
The importance of this decision cannot be overstated. This is monumental and it provides a roadmap – MY ROADMAP – for challenging standing and "real party in interest" rights as well as establishing how the Notes and Mortgages have been bifurcated through the securitization of residential mortgage transactions over the last decade.
THIS DECISION HAS DIRECT AND POSITIVE IMPLICATIONS FOR VIRTUALLY EVERY HOMEOWNER FACING FORECLOSURE BY A TRUSTEE OF A SECURITIZED TRUST.
Publicity regarding this decision, and my seminal role in articulately presenting these issues before the Massachusetts Land Court, is about to take the national stage.
CIGA Marie
Marie McDonnell
Truth In Lending Audit & Recovery Services, LLC
Mortgage Fraud and Forensic Analysts
Marie.McDonnell@truthinlending.net
30 Main Street, Rear
P.O. Box 2760
Orleans, MA 02653
Nam Vet
PS If the recorded mortgage holder is a company that is 3 letters starting with "M" , I believe. This means they can't enforce the note. Link to judgement is:
http://jsmineset.com/wp-content/uploads/2009/10/October1509-Judgment.pdf
It's further my guess that the loan is controlled by MERS and has been sliced and diced with other mortage loans and sold as mortgage-backed securities.
Demand to see the original note before you make any more payments. My guess is they can't produce it.
Nam Vet
First, I’d have an experienced real estate agent that farms that neighborhood come look at the house and give you their opinion on what a sales price should be. Appraisers are notoriously jumpy these days and are prone to low ball. The house may be far more valuable than the appraiser’s opinion and you could sell it and walk away with some cash, or keep it. I guarantee you the market will come back. A $230,000 house in Southern California? It’s unHEARD of, even now, with the market depressed.
And second, just a note about the bank taking a hit. They’re not taking any kind of a hit. They’ve made their money and MORE, all those payments that have been made are INTEREST. The bank is sitting in the cat bird seat. You guys walk away from a house valued at, well, we know it’s at least worth $200,000, the bank has been collecting those payments for YEARS, and they’ll get another $200,000 at a foreclosure sale.
I’m sorry to hear about your loss. It must be terrible for all of you.
I would say great minds think alike - but knowing my mind I'll just have to say that your mind is twice as great.
Remember, contracts and agreements touching land and real property are supposed to be in writing (and signed by them) to be enforceable. There are a few ways around this, but there usually needs to be some “reliance” on their promise. At least confirm stuff in writing if possible.
parsy
It isn’t a singular reference of fixing a non-performing loan.
It is another asset, which in banking terms is a liability.
They can write the value of the original loan off and take the house, resell and make a net profit.
Ooops. Didn’t mean to post twice. Thanks for compliment. Also, these mortgage companies are careful not to put their promises in writing. I have noticed that you can’t even get an email from them about the terms often. So if legal in your state, record the conversation and try like the dickens to get the promise in writing. Also check out MERS stuff and make sure they have a legitimate mortgage.
parsy, who says contact me by private mail if any q’s
I was referring to a 501c3 as the receiver of the proceed of the property or the county guardian which most cases is the coroner. My GS is going through a well know reality firm owned by a member of our Church and I am letting his parents guide him but something is not right as the slumlords haven’t bought it yet as there is room for a triplex on the large lot?
There is a foundation here that holds about 75 million in bequeaths and about 7 million of that money is left to cat and dog welfare?
I don’t quite what to say...there is no beating local knowledge and it sounds like you are at a distance, both geographically and to the extent of your desire for involvement. There could be room for a triplex but if it isn’t zoned for one, then that’s that, without a variance, and variances are ALWAYS at the pure discretion of the local bldg authority.
If GS is working with a realtor that you trust, that’s probably the best approach to whatever can be worked out. The realtor *might* be able to divert the home away from being dumped into the unclaimed property of the state and if he/she is diligent, *might* be able to make some kind of personal contact with whatever bureaucrat from the state who effectively “intakes” the house. CA would undoubtedly prefer to have $$ than a junky house, but you never know how these things will go. Also, the realtor has very low incentive to delve into this as whatever commish is going to be paid will be very small. Again, most likely, your wonderful state official has someone who he flips these houses to in exchange for a bump.
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