Mortgage Loan Modification
Our bank wants to add $36,000 to a $100,000 mortgage on a property now worth $46,000. What are my options?
We brought our Florida home in 10/06 with the correct ins/and docs for income. The mortgage was for $100,000 in 6/07 (property was worth $132,000). We were told that "wind" insurance was needed to a cost of 3600 a year putting our escrow account -7000 BOA gave us 2 choices pay the -7000 or have our mortgage increase from 989 to almost 1400, both weren't an option as we only make $45,000 a year. BOA started foreclosure process in 4/08 we are still in the process, BOA is now offering us to try a modification ( we moved out in 1/08 at bank's sale date we were told was 3/08, we have now learned that was false). My question is should we try for the modification and add $36,000 to our loan amount on a house that is worth $46,000 (current market value)? Is the 5-year statute of limitation on the actual foreclosure or our last mortgage payment, which was 8/07? BOA wants to add our default amount on to the loan and stretch the loan term to 40 years (if approved).
It appears you made your mortgage payments for approximately one year. You do not indicate what option you chose to pay for the windstorm insurance, thus I assume you did nothing about the windstorm insurance. You indicate you ceased mortgage payments in August 2007, moved out of the property January 2008, and the Bank of America started foreclosure procedures four months thereafter.
You are currently not living in the property, the house has not sold, and foreclosure proceeding have not been completed. This is a complicated situation, especially since you vacated the property more than two years ago.
Natural Disaster Insurance
In states with frequent earthquakes, floods, hurricanes, and other foreseeable natural disasters, lenders or legislatures require homeowners in risk-prone areas to buy insurance to cover these disasters. Depending on your insurance company and lender, the premium may be added to the escrow account to be paid. An escrow account is also used for property taxes. These funds are collected monthly from a mortgage payment so that when the invoice is presented, there are funds in the account to cover the amount due.
You mentioned you reside in Florida. Florida homeowners are required by Florida State Statues on Windstorm Insurance section 627.712 to have coverage unless the mortgage company provides written permission to exclude windstorm coverage. Every state has different requirements for homeowners and insurance companies. An insurance agent or a real estate attorney in your state would be best qualified to answer detailed insurance questions.
Statute of Limitations
The statute of limitations refers to the final date when an injured party can file a lawsuit. In this case, the lender files for foreclosure or sues for the deficiency balance in a foreclosure proceeding. Your lender has already filed for foreclosure in a timely manner (within eight months of your last payment) so the issue could potentially be a deficiency balance. In researching the Florida statutes, I was unable to find a specific deadline. Contact a licensed attorney in your state to verify any actual statute of limitations on collecting a deficiency judgment.
Foreclosure
Bills.com has written extensively on foreclosure terms, process, and types of foreclosure.
If a home is foreclosed upon, the mortgage lender usually auctions the property at a foreclosure sale, applying whatever amount is received at the foreclosure sale to the debt owed on the mortgage. In many cases, the sale price at auction is not sufficient to cover the mortgage and other secured liens on the property, such as home equity loans; the difference between what you owe on the property and what the lenders actually receive is called a deficiency balance.
In Florida, under Florida Statute Title XL chapter 702 mortgage lenders can pursue borrowers for deficiency balances resulting from foreclosure on mortgage and home equity loans.
Bankruptcy
Though you may not choose to file bankruptcy, having the information available gives you options and information if you need to discuss your case with an attorney or bank official. Bankruptcy is a complicated process, including Chapter 7 bankruptcy and Chapter 13 bankruptcy options for consumers seeking to get debt relief. Bills.com has a "how to" for filing bankruptcy.
Home Loan Modification
It appears the bank is wanting to work with you. It is unfortunate it is choosing to offer a mortgage modification two years after you vacated the property. This would be a comical set of events if it did not concern so much money and your home. A mortgage modification is where the lender is willing to change the terms of the original contract, such as the loan terms, interest rate, or payment. Bills.com has information on loan modifications covering the affect on your credit score to determining your home value.
Making Home Affordable Program
The Making Home Affordable program is part of the Obama administration's Home Affordable Modification Program (HAMP). You may also qualify for the HAMP Program sponsored by the Federal Government. To see if you are eligible for the home affordable modifications the federal government has created an easy questionnaire to help you get started.
Recommendation
Send a letter via return registered mail indicating that you vacated the property as per the bank's order in 2008, and you have not occupied the property since January 2008. The bank may not realize the property is vacant. It is a good idea to find the appraised value of the house or get market research done by a real estate agent to determine the value. You need to have that information to make an informed decision.
If, as you suggested in your message, the property has a fair market value of $46,000, it makes no economic sense to add $36,000 to a $100,000 mortgage for a property you have not occupied for more than two years. The bank's offer is, in a word, terrible. A short sale or deed in lieu of foreclosure is the only economically sound course of action I see for you in your situation. Have a Florida attorney review any contract for a short sale or deed in lieu of foreclosure to make sure the creditor does not require you to pay the deficiency balance.
I hope this information helps you Find. Learn & Save.
Best,
Bill
www.bills.com/