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Ely
Ely, Counselor at Law
Category: Legal
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Experience:  Private practice with focus on family, criminal, PI, consumer protection, and business consultation.
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I own a home in my small upstate NY hometown. I currently

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I own a home in my small upstate NY hometown. I currently rent in VA where I work. I purchased the NY home a number of years ago so my widowed Mom would have a place to live and so that I had a place to retire. I will retire there in two years and currently spend several weeks a year there where our entire family gathers for Holidays and other events. Because I am not there all the time I have a renter in a small upstairs apartment who helps look after my mom, climbs the stairs to check on heat settings, shovels, brings in groceries etc. The renter, a woman my age that also grew up in the same town, pays a nominal amount of rent which barely offsets my utility costs. Banks I have spoken to tell me this must be considered an investment property for refinance purposes. This seems wholly unfair to me. What does the law say?
Submitted: 1 year ago.
Category: Legal
Expert:  Ely replied 1 year ago.
Hello, my name is Ely. Welcome to JustAnswer. Please note: (1) this is general information only, not legal advice; and (2) my function is to give you honest information and not necessarily to tell you what you wish to hear. Note: there may be a slight delay between your follow ups and my replies.

I am very sorry for your situation. On this website, I do not always get to give good news, and I am afraid that this is one of these times.

This seems wholly unfair to me. What does the law say?

You are right - this is not fair. However, the bank has the right to do so. You see, refinancing is not a "right" but a privilege. Essentially, what refinancing does is that it has the bank throw out the contract that governs the current mortgage and write up another one, at rates more favorable to you.

They do not have to do this. They offer to because foreclosure is costly and lengthy, and they much rather work it out peacefully and possibly simply change the terms of the contract (i.e. refinance).

However, they do not have to do so - this is something that they must agree to do. As such, they hold all the "cards" in this scenario, and they can use their own administrative rules to determine what they see as your income and investment assets when determining whether or not to refinance.

There are no laws in Virginia or NY that mandate how a lender is supposed to view finances when there is a refinance discussion, since this is a private contract matter.

Ergo, they are free to determine this however they want - now, you do not have to agree with them and try to talk them out of it, but again, it is their choice whether or not to refinance, and as such, their decision on how to calculate whether or not this falls into their program.

I am very sorry.

Surely, you prefer that I tell the truth rather than what you wish to hear. Because it reflects very poorly on me unless you press one of the top three faces, keep this in mind when rating my and please do not punish me for being honest. I understand that this may not be easy to hear, and I empathize.

IMPORTANT: Please use REPLY button to keep chatting, or RATE my answer when we are finished. Kindly rate my answer as one of the top three faces before submitting the rating, because this is how I get credit for my time with you. Rating my answer the bottom two faces does not give me credit and reflects negatively on me as an expert, even if my answer is correct. I work very hard to formulate an informative and honest answer for you; please reciprocate my good faith. Do not worry, you may always ask follow ups free after rating. My ultimate goal is your complete satisfaction.
Ely, Counselor at Law
Category: Legal
Satisfied Customers: 89072
Experience: Private practice with focus on family, criminal, PI, consumer protection, and business consultation.
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Customer: replied 1 year ago.

Ely,


 


I don't mind getting information I don't want to hear but you only answered half of my question. I realize I presented a somewhat hayseed scenario but I am a well educated person never the less. No need for sympathy, just truth. You have told me that the banks have the right to make these determinations and to offer and approve me for their products. Got it. Along those same lines do they not have the discretion to treat my NY home as a second home and not as an investment property if they choose too? Are they legally bound to consider my home in NY an investment property under the circumstances I articulated?

Expert:  Ely replied 1 year ago.
Hello friend,

Thank you for your follow up.

but you only answered half of my question.

My apologies! Please allow me to rectify this.

You have told me that the banks have the right to make these determinations and to offer and approve me for their products.

Right.

Along those same lines do they not have the discretion to treat my NY home as a second home and not as an investment property if they choose too?

Yes. They do not follow any state statutory law which states what may or may not be considered for refinance, and how. This is their call, and they decide what to see the second home as. Regardless of how the second property is seen by the IRS or otherwise, here, this is their decision.

Are they legally bound to consider my home in NY an investment property under the circumstances I articulated?

No, they are not, due to the above.
Customer: replied 1 year ago.

Now that was I what I was looking for. I had been "informed" otherwise by a third party. Thanks Ely. I have given the bank all the info they asked for. Now I guess it's in the hands of everybody's favorite person..the dreaded underwriter. At least if they tell me they had no choice but to offer me the much less optimal terms of an investment property refinance I'll know it was their call. When I was first told that they had no choice I asked to have the USC reference or something regulatory and I got a smoke screen until they finally referred to their "guidelines". Then I asked to see the guidelines and that's when we finally started to have a conversation. I will let it play out.

Expert:  Ely replied 1 year ago.
My pleasure - good luck.

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Ely
Ely
Counselor at Law
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Private practice with focus on family, criminal, PI, consumer protection, and business consultation.