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Law Pro
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Category: Real Estate Law
Satisfied Customers: 24040
Experience:  20 years extensive experience in real estate law, foreclosure, finance, and landlord tenant law.
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Hi - I own a duplex where I live and rent the other side. When

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Hi - I own a duplex where I live and rent the other side. When I bought the house they told me that payments would be around $1900, and when I started making payments they were at $1948. Two years go by and then my note went up $1200/month because the loan service company forgot to add in my flood insurance and taxes and I'm $24k in the hole. So we scrimp, use credit cards, and pay out of that hole and we finally get back to about $2,100. Then three months go by and we are now back to $9k in the hole and I look and they forgot again to add in the flood insurance. I know it's a "service" and there is no truth in lending issue, but we simply can't swing it this time. There's only one flood insurance provider in New Orleans and we already fought to get our taxes down. Do we have any leverage at all with the bank? Should we hand over the keys?
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  Law Pro replied 1 year ago.

Welcome to JustAnswer! My goal is to do my very best to understand your situation and to provide a full and complete excellent answer for you.

My name is XXXXX XXXXX I'm going to assist you with your question.

Please bear with me if you believe my answer isn’t coming fast enough because I’m also working with other customers too. I apologize for any seemingly late response.


Sorry for your situation.

What is the property worth now as compared to when you bought - worth more or less?

Are you current in your mortgage payments?
Customer: replied 1 year ago.

Yes we are current. Which assessment? I think the house appraised for about $450 and now its closer to $500. But with our high credit balances very difficult to refi. We're in a lawsuit on a car accident and we're hoping the settlement will be coming before we lose the house...we should know in the next three months. We own two other duplexes...right now we are $500 in the hole with all the houses combined, with the proposed "make up" on the escrow account we will be about $1000 in the hole.


 

Expert:  Law Pro replied 1 year ago.
Have you hear about the Obama HAMP and HARP programs?

HAMP = home affordability mortgage program

HARP = home affordability refinance program

HAMP was designed to let homeowners avoid foreclosure by subsidizing mortgage lenders' modifications to borrowers' home loans. To qualify for a HAMP modification, you must:

Use the home as your primary residence
Have a mortgage less than or equal to $729,750
Have gotten your mortgage before January 1, 2009
Have a housing payment including principal, interest, property taxes, HOA dues, and insurance that exceeds 31% of your gross (before tax) monthly income
Have a documentable hardship -- either a significant reduction in income or increase in expenses that was beyond your control
Have a stable source of income sufficient to make a modified payment

If you meet these criteria, contact your lender and start to gather your paperwork. You'll have to document your income, debts, assets, and hardship before you can get a trial modification, and ultimately a permanent one. The average modification under this program saves homeowners about $500 a month, so if you are eligible, make that call to your lender sooner rather than later.


HARP was created to let creditworthy homeowners who are underwater (mortgage is greater than home's value) on their mortgages refinance to the lowest available mortgage rates. You don't have to be cash-strapped or at risk for foreclosure. To qualify for HARP, you must:

Own a one- to four-unit home
Have a mortgage that is owned or guaranteed by Fannie Mae or Freddie Mac
Have no late mortgage payments (more than 30 days late) in the last 12 months
Owe no more than 125% of the value of your home (on the first mortgage; combined loan-to-value ratio can be higher -- only first mortgage is refinanced).

If you meet these criteria, contact your loan servicer about a HARP refinance. Only a servicer can tell you if you're eligible, but you can go to any Fannie Mae or Freddie Mac lender for your refinance. However, if your application does not get approved from an automated underwriting service, you have to get your refi from your current servicer. In addition, using a different lender from your current one may make it difficult or impossible to get mortgage insurance coverage. If you have a second mortgage, you can still refinance a first mortgage of up to 125% of your home's value -- as long as the holder of the second lien agrees to subordinate it again to the new first mortgage.


It would appear that you are only eligible for the HAMP program.

Who is your lender?

Have you contacted them and told them you're having problems?
Customer: replied 1 year ago.

Thanks for all that. Wells Fargo, and we went through the Obama program last time and didn't qualify because our debt to income ratio was too high, and that was because we had to use credit cards to live in order to cover the "shortages in escrow" because we had a false understanding of what the total note would be in the first place. Its bullshit that the P&I portion of the note is locked down under law but the T&I portion is "consumer beware." I think we would get more "help and understanding" if we just stopped paying the note, with our balances so high our credit is doing us no good, or more correctly it is used up.

Expert:  Law Pro replied 1 year ago.
OK, I didn't know that.

Too, you only get 1 chance to apply for either HAMP or HARP. So if rejected for 1 you can't apply to the other and get accepted. I don't know why (it doesn't make sense whatsoever) but those are the rules of HAMP/HARP.


So, if you can't qualify for those - your options are limited.

The most common, but not all of the available alternatives, to foreclosure through loss mitigation include the following:

1. Forbearance: Used after a temporary loss or reduction of income. The homeowner begins making monthly payments again plus adds a little extra each month to make up the delinquent amount owed.

2. Loan Modification: Modified terms of the loan to lower the payments when the homeowner has encountered an unexpected difficulty.

3. Deed-in-Lieu of Foreclosure (consent foreclosure): Homeowner releases the deed of the home to the lender if they agree to not complete the foreclosure. The lender skips the time and cost of a foreclosure and the homeowner protects their credit. (similar is a Consent in Foreclosure) Uncontested foreclosure is where the debtor/owner agrees in writing not to contest the foreclosure or the eventual sale. This is a contract whereby the debtor/owner gives up rights to contest or defend the foreclosure.

4. Short Sale: A short sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property, and the property owner cannot afford to repay the liens' full amounts, and whereby the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt. Any unpaid balance owed to the creditors is known as a deficiency. Short sale agreements do not necessarily release borrowers from their obligations to repay any deficiencies of the loans, unless specifically agreed to between the parties.

5. Short Refinance: This is refinancing of the home out of foreclosure at a reduced value. Sometimes there is not enough to payoff existing mortgage, pay closing costs and have a low enough loan-to-value ration to close a new loan. Maybe the home's value has even dropped. On some occasions lenders may be willing to accept less money on a refinance. The homeowner closes on a new mortgage to pay of the loan that is in foreclosure.

6. Partial Claim: This is an interest free loan available on FHA and HUD homes. The original loan must be less than 12 months delinquent, but more than 4 months delinquent. The partial claim is paid off after the original mortgage is paid off.

7. Deferment: This puts off or postpones the mortgage payments until a later time - usually up to a maximum of up to six months.

8. Obama HAMP/HARP plan: The main components of Obama's foreclosure-avoidance plan are home loan modification and loan refinancing. The provisions of this plan have created a chance for millions of people to re-finance or modify their present mortgage.


9. Bankruptcy: a Chapter 13 debt restructuring. This does NOT modify the loan but allows an individual or couple up to 5 years to become current as to any outstanding mortgage arrearages.



Your only options are for a refinance through WF, deed-in-lieu of foreclosure, short sale, or bankruptcy.

I would think that WF might modify the existing loan if you contacted them and said it's an either we modify the loan or we file bankruptcy.


Although WF is difficult to deal with - they are sometimes agreeable if the market is down and they have a good owner/debtor they are dealing with.


I would contact them and see if they are willing - otherwise your options are limited to a short sale, deed-in-lieu or bankruptcy.

A short sale isn't a problem - but would give you an out and they would probably agree to that.

They don't want you to file bankruptcy because then they will own the property or be stuck dealing with the issue for 5 years.


So I suggest you contact them and see if they themselves won't modify your mortgage.


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Customer: replied 1 year ago.

Two quick follow ups and I'll be out of your hair...


 


1. You say on the HAMP/HARP programs you can't file the other if you've been rejected by one. But can you reapply for the SAME one if your financial situation changes?


 


2. How would you start that conversation with WF...should I come in and tell my story, or should I get some kind of letter of bankruptcy filing notice. What has maximum effect?


 


Thanks,


Matt

Expert:  Law Pro replied 1 year ago.

1. You say on the HAMP/HARP programs you can't file the other if you've been rejected by one. But can you reapply for the SAME one if your financial situation changes?

 

NO, you can only apply under the program once - if you get rejected - you can't apply again for either one.

 

 

 

 

2. How would you start that conversation with WF...should I come in and tell my story, or should I get some kind of letter of bankruptcy filing notice. What has maximum effect?

 

 

You will only get a letter of bankruptcy filing IF you DO file. So that's a last resort.

 

How would I start the converstation?

 

I would contact them and ask who have the power and authority to make loan modifications? Then, once I got to talk to that person, I would get their name and information (address, title, phone number) and ask them to give you a reference number to correspond to your discussion with them.

 

Then I would lay my cards on the table AND stated if you can't/won't modify within 2 months - we're gone and will file bankruptcy. Don't threaten to move out - you shouldn't move out until after the sale if they do foreclose. Make them evict you after they foreclose. That way you can stay there for months and not pay anything but utilities.

 

Make it an either or - then it's up to them to either assist you or you're going to default.

 

 

 

 

Law Pro, Lawyer
Category: Real Estate Law
Satisfied Customers: 24040
Experience: 20 years extensive experience in real estate law, foreclosure, finance, and landlord tenant law.
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