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ScottyMacESQ
ScottyMacESQ, Lawyer
Category: Real Estate Law
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Experience:  Licensed General Practice Attorney, Texas
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I have a personal line of credit owing $99,000. The bank has

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I have a personal line of credit owing $99,000. The bank has offered me a Modification for 1/2 that amount for 10 years @2.77% for a monthly payment of $203.01. The other half is a mortgage modification for 30 years at 0% interest. I'm told it sits in the background. Does this make sense?
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  ScottyMacESQ replied 1 year ago.

ScottyMacESQ :

Thank you for using JustAnswer. I am researching your issue and will respond shortly.

ScottyMacESQ :

Just to be clear, this is presently an unsecured line of credit? What is your current interest rate on it now? And is the 2.77% rate fixed for the 10 years?

Customer:

My house is on the line. It was a 10 year line of credit for interest (2.75%) only. My 10 years are up and total amount owing is due. The 2.77% rate is fixed.

ScottyMacESQ :

And would half of the total (99k) be forgiven? I am calculating that $203 monthly for ten years (120 months total) equals a shade under $25,000. What happens to the other $75,000?

ScottyMacESQ :

Is that entire amount rolled up into the modification?

Customer:

I was told the $203 per month would pay off half the balance. After that, the other half would kick in with terms of the original contract. which had a variable interest rate.

ScottyMacESQ :

If $99,000 is owed on the line, $203.01 for 120 months would pay $24,361.20, so unless there's some debt forgiveness as part of the agreement, I don't see how it could pay "half" of what is owed, and I would question their calculations. Now it's possible that it's a partial modification, but it's rare to see such a partial modification in practice.

ScottyMacESQ :

Can you tell me if you had a history of struggling to pay what's owed?

ScottyMacESQ :

Did you seek the modification, or did they offer it to you?

ScottyMacESQ :

Did you see my follow up question to your issue?

Customer:

I had a problem paying after my husband passed. I am a senior with ss as my only income. I had talked with home savers and they offered the modifications.

ScottyMacESQ :

Thank you. And this is being offered through your bank (the one that you had the line with)?

ScottyMacESQ :

Or is it another modification company?

ScottyMacESQ :

(that would be financing the modification)?

Customer:

Offered through the bank I had the line with

ScottyMacESQ :

It's not unusual that a bank will do this to minimize its losses. Since social security is exempt from garnishment, and the foreclosure market is abysmal, the bank could be seeing this as the best option. Now the bank should give you a "Truth in Lending" disclosure, meaning that they will tell you how much in principal and interest you will actually pay in the end (at least at current rates for the adjustable one).

ScottyMacESQ :

Again, I would question the calculations and specifically ask if there's a debt forgiveness component of this.

ScottyMacESQ :

The fact that they say that "half" of what is owed is $24,361 (after interest) would indicate that something is not being disclosed OR there is a forgiveness of some of the debt.

ScottyMacESQ :

(because if it really was half of what was owed, the "full" amount that would be owed would be around $48,720)

ScottyMacESQ :

Now if they do indicate that there is a debt forgiveness aspect of this, and that the total principal that will be owed is this much, or less, then that would "add up" and then make sense.

ScottyMacESQ :

But it's also possible that they could be rolling most of it into the 30 year mortgage, so it's something to carefully look at, particularly the Truth in Lending disclosure.

ScottyMacESQ :

Again, it would not be unusual if they were to do this. Since they're the original lender, it's more feasible for them to forgive part of the debt to ensure the other part is paid.

ScottyMacESQ :

Their only other recourse would be foreclosure, and like I said the foreclosure market in Michigan is such that it probably would be worse than the option that they're offering to you now.

ScottyMacESQ :

(worse for them, that is)

ScottyMacESQ :

And that's why they're doing it. But again, I would first make certain that you understand everything that you will be asked to pay, if anything is being forgiven, etc... before you actually sign. Just make sure that it "adds up" in the end.

ScottyMacESQ :

Hope that clears things up a bit. If you have any other questions, please let me know. If not, and you have not yet, please rate my answer AND press the "submit" button, if applicable. Please note that I don't get any credit for my answer unless and until you rate it a 3, 4, 5 (good or better). Thank you, XXXXX XXXXX luck to you!

Customer:

You've given me a lot of advise. My children were asking a lot of questions. If I hit the "save & exit" button, will I have a copy of your information?

ScottyMacESQ :

I'm not sure. I do know that if you rate this (which I ask that you do so that I get credit for the time and effort I spent on this answer) it will switch to Q&A, which you can then print off, or copy and paste the words into an email program, word processor, etc...

ScottyMacESQ :

Did you have any other questions before you rate this answer?

ScottyMacESQ :

Are you there? Please note that I am still here, awaiting your response.

ScottyMacESQ :

Should I continue to await your response, or may I assist the other customers that are waiting?

ScottyMacESQ :

Hello?

ScottyMacESQ :

Please note that this answer IS STILL OPEN and I cannot assist other customers while I am waiting for your response.

ScottyMacESQ :

My apologies, but I must assist the other customers that are waiting. If there's nothing else, please rate this answer. Please note that I don't get any credit for the time (~40 minutes) and effort that I spent on this answer unless and until you rate it a 3, 4, 5 (good or better) AND press the "submit" button, if applicable. If you feel that I have gone above and beyond in this answer (my average answer is about 10 minutes) bonuses are greatly appreciated. Thank you, XXXXX XXXXX luck to you!

ScottyMacESQ, Lawyer
Category: Real Estate Law
Satisfied Customers: 12106
Experience: Licensed General Practice Attorney, Texas
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ScottyMacESQ
ScottyMacESQ
Real Estate Lawyer
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Licensed General Practice Attorney, Texas