Posted on 06/08/2011 8:01:42 PM PDT by Jim 726
PANAMA CITY BEACH — Lindsay Hall took out a $200,000 loan in 2005 on her paid-off beach house with the understanding that her $600 monthly Social Security check would cover the mortgage payments.
When her interest rate jumped more than a year ago, it raised her mortgage payments to $1,500. At that point, Hall started the fight to save her home.
“I want to say I did my best to fight for the American dream,” said Hall, 70.
Hall has negotiated with her loan servicer, IndyMac Mortgage Services, to modify her loan payments multiple times. Each time she negotiates payments within her $600 budget, the modification is rejected and the mortgage payment jumps back to $1,500 a month, she said.
To begin loan modifications, lenders often advise or suggest homeowners miss three payments to send up a red flag and initiate the modification talks. When payments are missed, loan modification talks may begin, but banks, meanwhile, also will start foreclosure proceedings.
After loan modification talks failed, Hall tried to change her loan through the Home Affordable Modification Program (HAMP) offered by the U.S. Department of the Treasury. For the past three months, she was able to make payments of $585. Hall, who continues to work, received a letter informing her that she no longer qualifies for the program based on her income and that her payments will jump back to $1,500 a month.
“I’m back on hold; I’m waiting for the lender to let me know what I need to do next,” Hall said. “This is the first time I have thought it’s over and I’m going to lose the house.”
The bubble burst
Hall purchased her two-bedroom beach house in 1970, paying $38,000 for the property with the income she generated from owning and operating a dance studio in Dothan, Ala. At the time, her mortgage payment was $103 a month. When Hall semiretired in 1994, she moved to Panama City Beach as a full-time resident.
Hall took out a $50,000 loan in 1994 to update the property, which she paid off. In the 2000s, Hall’s elderly mother moved into the home, and in 2005 following the advice of a friend, Hall took out a $200,000 loan on her beach house, which was valued at $400,000, to convert the garage into a mother-in-law suite, add central heating and air, reroof, pay off credit cards and purchase a vehicle.
“I didn’t have a fixed rate, which I know all about now,” she said. “I’m one of those dummies that should have known better. Now, my $400,000 house is worth $180,000 — if we were lucky.”
As her mortgage servicer kept increasing her monthly payments, Hall took her work ethic to the phones and started calling her lenders and representatives. She calls her lenders every Monday and logged her discussions and paperwork.
“I’ve just bugged the heck out of them,” Hall said. “I wanted this settled. I’m not trying to get out of making payments. I just want to pay what I can pay. I’m not going to die over this and I just don’t want to be sleeping on a park bench after working my entire life.”
The News Herald wrote a story about Hall and several other local individuals dealing with foreclosure in March 2010. After the article appeared, Hall said her borrowers started calling her and working toward a loan modification, a task that has yet to be completed.
“I goofed up and borrowed more money than I should have,” Hall said. “It would be much easier to give up. I need some help, people.”
IndyMac was acquired by OneWest Bank in 2009; officials from the bank said last week they would look into Hall’s situation.
Delaying, preventing foreclosures
A common problem or misperception for many homeowners in trouble happens when borrowers try to get a loan modification. Lenders often require borrowers to go into default, missing three payments, before engaging in a discussion about modifications.
“If you miss three payments, the bank passes off the case to a law firm to begin foreclosure proceedings,” said Florida foreclosure defense attorney David C. Hicks. “People are getting a false sense of security from banks.”
Mediation, like in the case of Hall, does not typically produce a positive outcome for homeowners.
“What we have seen is that mediation has not done a great deal,” said Hicks, who is based out of Tampa. “For one reason, there’s no principal reduction, so if you are upside down in equity there is no way to get out from under it.”
The federal government has two programs aimed at helping homeowners. The first is HAMP, a loan modification program designed to reduce delinquent and at-risk borrowers’ monthly mortgage payments.
“One of the problems with HAMP is that there are guidelines for who is eligible and it can be a catch 22 for many homeowners,” Hicks said. “You have to prove income, and for many people they don’t have enough money or they have too much money. HAMP does not really help.”
The Home Affordable Foreclosure Alternative Program (HAFA) was created to provide an option for homeowners who are unable to keep their homes through HAMP. HAFA exists as an exit strategy when homeowners know they will lose their property and they want to avoid a deficiency judgment, Hicks said.
Both HAMP and HAFA are voluntary programs for lenders; they do not have to agree to allow the loan holder to participate. When a homeowner knows they will lose a property, the best thing to do, according to Hicks, is to make sure there is no deficiency judgment.
Hicks explained that homeowners are still responsible for the outstanding loan, even if a property goes into foreclosure and is sold. Banks and collection agency have a window of several years to try to recoup the balance on a loan.
“The biggest mistake you can make is getting a deficiency judgment,” Hicks said. “The loan follows the person, not the property. The property secures the loan, but that does not stop banks from being able to garnish wages and other assets.”
A big misunderstanding with loans is that the institution to which a mortgage payment is made out does not own the loan; it is servicing the loan. In many servicing agreements, there are clauses that allow banks to make more money on a foreclosure than on servicing a 30-year loan, Hicks said.
“They don’t care about loan modifications,” Hicks said.
In the cases where loan modifications are granted, 60 percent of the homeowners are in default again within nine months, Hicks said.
“You want someone negotiating on your behalf from a position of strength,” Hicks said. “It might sound like a sales pitch, but you should hire an attorney. Most homeowners are not educated on the process.”
Hicks recommended legal aid or hiring a professional attorney.
“Victory depends on the equity status of the house,” Hicks said. “You can’t expect miracles. … Do not expect the federal or state government to help.”
See what real estate does over the next 30 years, as we Baby Boomers croak in a thunderous avalanche of rottenness heard across the universe. It’s going to get interesting.
Hmmmm. The previous article reads just like this one and was written in March of 2010. Something weird here. Ages and properties not adding up. Will do more hunting in the AM.
I think you are correct. It was probably an interest only loan. My dad went that route about the same time. He now has to pay the catch up rate. He is 84 and he thought he would be dead before the piper came due. He had initially asked me about it and I told him NOT to take an interest only loan.
My wife and I are trying to sell his house. We pray we get what is owed on the loan.
>> but why should people who refrained from such foolishness be required to bail her out?
We’re in bigger trouble when we point our fingers at the gullible and give a pass to those that scammed them. Furthermore, bailouts have already been given to the scammers.
I pity those who thought they were working within a viable, trustworthy system. I condemn the scum Congressmen and opportunists that seized on the unwitting prey.
Stinking cataclysm tag line test. ;-)
Granted, a 30-year old adult should have the mental acuity not to get caught in such a trap. But they do, anyway. But when someone 64+ trusts a loan officer to find a loan that stays within her SS payment, and that trust is broken by making an ARM with big points for the officer, that is elder abuse.
Likely the loan officer didn’t inform her there was an empty MBS trust he needed to fill up because they had already sold the certificates to the investors. As a result, her loan went in late, if at all, and so the trust never acquired the beneficiary interest and collected her payments anyway. When the loan defaulted, Fannie Mae paid it off at the original loan amount, then sold it back to OneWest, who is collecting on it a second time through foreclosure.
If you don’t believe or understand what I just wrote, then you don’t deserve to own a home, either.
I know what OneWest got from the FDIC in that deal, but, the loan officer probably had no idea at all the workings of the MBS side of things.
That's right. And We the People have no obligation to help you.
What the hell are talking about.
She got a teaser rate for awhile and now the rate went up as stipulated in the loan agreement.
The bank is following the conditions of the loan. She’s not. She’s trying to weasel out of the agreement SHE made. Obviously she thought the teaser rate would last forever... Duh...
She signed the papers to get $200k. She had every opportunity to read them...and chances are at least 99% she knew the risk she was taking. The other 1% could be pure delusion.
but we can bail out the banks with trillions tax payers dollars. All seems fair to me /sarc
Well...
Either they’re idiots or brilliant...
“Brilliant” as in getting all the goodies and then walking away from the debt and letting someone else pay for it all...
The sad truth about those with paid off homes, is that they take out equity loans to update their worn out homes, or just to try to make it between social security checks. Now THERE’S a subject to talk about... Social Security - a nearly bankrupt program that was run into the ground over 15 years ago when money was taken out of that fund and never put back. Now seniors and the now aging baby boomer generation are going to suffer in the near future as that program will collapse in on itself. What does this have to do with the subject at hand? Simple - they cannot keep up with payments with dwindling incomes so these loans go into default and their now paid off home is going into foreclosure. A 70 year old woman is going to lose her home she bought in 1970!!! Paid for it through years of work, now will have nothing to show for it. THAT IS PITIFUL! OUR GOVT SHOULD BE ASHAMED OF ITSELF! Instead, they are not looking too concerned about the rise in foreclosures, the shrinkage good available jobs and a failing social security system. THIS IS SAD! Grandma’s and grandpa’s all over are living in homeless shelters that are already over capacity. At no time in U.S. history since the Great Depression has our economy been in tatters like this.
No sympathy.
Next.
Sounds like a “reverse mortgage” might be the only option left to her at this point. Her family won’t get the nice beach house, but at least this way no one will be buried by a bad mortgage later on. Yes, it’s another loan on top of a bad one, but in the end, this might be a way to stick the bank, since they’ll be left holding a much-devalued property in the end.
So what was the 200k for, where did that money go?
Yup. There are plenty that will live large and stiff the creditor when they die.
Welcome to FreeRepublic, troll!
This lady should ask for the lien documents applying to the note. I’m sure no legal documents exist since her loan/mortgage was sold to wall street. Then she should just stop paying on the loan. Then go to court and ask for a quiet claim of title in her name.
Yep. Obviously a NegAm loan.
And you are quite right about mods. HAMP Trials are nothing but a another fee churning scam.
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