2 properties and stuck without an option? Do I qualify?

[QuayzyCrazy]

Here is my case. I know this message is quite long but I want to get everything out so someone can provide some good information.

I have under my name 2 apartments in the same condominium. Both loans are under my name only because I was the one with the decent job. I consider myself a careful and responsible homeowner and I just hate to be caught in the middle of this entire crisis and to accept that I’m about to lose everything I have in life is killing me. My credit score is still decent after all the circumstances, 720, but now after 2 paycuts (and possibly out of work in about a month) and a few other personal problems, I know ’m at risk of imminent default. I don’t know what to do anymore.

A couple of years ago, due to some family circumstances my husband and I decided to get a bigger place. We weren’t going for a much bigger place. We just needed an extra room. Our intent was to Sale Property A and buy Property B. We closed on Property B 2 years ago and our apartment A has been in the market since then. We have lowered the price many times and now the situation is to sell it for whatever we can get, but our realtor says that there are no calls at all. We were 1000% positive that 2 years ago we had a buyer for our Aparment A so we went thru buying Apartment B. Buyer for Property A wasn’t approved. Real State Boom Market exploded right in the middle of our transactions. I closed on Apartment B but didn’t get to sell Apartment A, and since it didn’t sell immediately, I ended up with 2 mortgages. I managed to rent Apartment A after 8 months of not being occupied. That sucked up all the little that we had as savings. I’m renting it but expenses are definitively not being covered.

Porperty A is 1200 sq ft: Loan is current and I have never been late
Bought for: $135K 6 years ago. Paid Cash upfront $30000, over 20% for down payment. It was originally one of those weird loans (pay interest only) but 3 years agoI was able to change for a fixed 6.570%, 30 years.
Market Value of property has gone down to as little as $90000
Balance of Loan with Wachovia $91000
Line of Credit with Bank of America: $21000. Taken to do fixes and upgrades for property B and since husband lost his business, as a back up for living expenses. ( Bank of America has been recently suspended due to lower price of property. So no back up for us and now I can only pay towards the balance)
Line of Credit Monthly Payment $321
Loan Monthly Payment + Escrow+ Taxes: $800
HOA fees $1000
No Citizen insurance
Actual use: Rented $1500
Cash flow -$600 (after paying Loan +Line of Credit)


Property B is 1300 sq ft: Loan is Current and I have never been late
Bought for $310000 2 years ago - it seemed to be a fair price as the market value analysis said that it was $350000. Paid Cash and points upfront $150000 Loan with Countrywide. The intent was that with the sell of property A to finish paying property B. Rate 6.125% fixed 30 years. We wanted to make sure that I could afford the monthly payment (so we put in this property everything we had in life)
Market Value of the property has gone done to $110000 (plenty of similar foreclosed units in our building)
Balance of Loan, now with Bank of America:$152000
Loan Monthly Payment + Escrow + Taxes: $1580
HOA fees: $1300
Citizen Insurance $150
Actual use: I live there

CC debt: 20500, Minimum monthly payments : $1680
Utilities + Car expenses+ Gas: $1040 + $200
Food + medicines Budget: $800

Salary after 2 paycuts in the last 3 months $ 48150 annual
Actual money I bring home: $3062 monthly (after cutting husband from my company’s family plan insurance)

Husbands business is practically non-existing anymore. After being laid off he became a Commercial Realtor, just right before the market went down. Worked for a few years and after the Real Estate collapsed, everything else went down as well. He is doing little odd jobs to make some money. Has a child support obligation of $1100 so all what he makes is to be sent to his kids as his #1 priority. He ends up not contributing much or nothing. He doesn’t make $1000 dollars a month.

My credit rating is still good. My loan is Fannie Mae backed; I have aggressively been trying to get information from my lender – Bank of America (since they bought Countrywide) about how to apply for a Home Affordable Modification. I checked the Obama plan and I know that if I'm current but at imminent default I still qualify. I believe I qualify for MHA programs. I have listened to over 150 recordings of all the wonderful things supposedly this bank is doing for the people with the bailout money, our money. But so far I cannot vouch for those words, and I have not met the first person who has. When finally I got thru a real person, after weeks of listening to recordings and plain waiting, I was told that I am qualified for a special Refinance but that they are not currently working with the Loan Modification program. I don’t have PMI, but according to them I still don’t qualify for Phase I and Phase II was not available. Instead I was offered an expensive Re-finance option. I insisted that this could not be accurate because I had been doing my homework and I knew that I should qualify under the MHA Loan Modification program or refinance program, and that Bank of America was backing up this program, as per what their website claims. Very politely the Loan Officer said that this was all that they could do. Offered to put me thru a supervisor or a Home Retention officer, but instead he put me thru the same recording that I’ve been hearing for the last couple of months.

I believe I qualify for the MHA plan. I also checked on NACA and it says that if I have 2 properties, I need to almost forget about 1 property and to contact them after we had disposed one. They can only help with the one roof over my head. I just don’t know how to do this. I called this week and stopped the automatic debit payments from my checking account to pay for both mortgages. The impression I have is that if I stop paying for Loan and Line of credit of property A, my credit score is going just South and I will not be able to Refinance Propery B. So I’m not sure what is the best approach and what my optionsare.

I just don't have the money anymore. I'm in the construction business so after succesfully avoing several rounds of laid offs in my company, I fear that mine is coming. I don't want to get into the trap of getting money out credit cards to make the whole bigger.
Shall I stop making payments for Property A so as to get the bank to allow me doing a Short Sale? What happens with my credit there?
Shall I stop making payments for Property B so I can get the back to start some type of Readjustment process?
Shall I go for Refinance or for Loan Modification?
Everytime I call Bank of America, whoever I speak to gives me different answers and I just need a clear and sound answer and a path. I'm totally overwhelmed over this. My husband is not helping much. We are on our way to get separated/divorced.I know I’m not the only one on this road, but that doesn’t make this whole ordeal easier. My American Dream is long way gone. I’m so desperate and frustrated… Please provide some good advice if you have some.
Thanks.

[morainac]

Do you want to stay in the house? If so pick one that has the least expense. Due to the hoa fees the property probably wont sale. As far as the mha plan, go to boa website and fax the paperwork they request. If you can go through naca for one property that would be great.

[Evan Bedard]

Hi quazycrazy,

Welcome and thank you for joining the forum..

Do you want to try and keep both of these properties and just get a monthly payment that will be affordable for yourself?

Or are you trying to figure out the best way to get rid Prop A with doing the least amount of damage?

[Moe Bedard]

Hello and thanks for sharing your looooong story!! lol Actually that is great that your provided so much information on your situation. Now we can get a clear picture of what is going on.

OK, let me see if I can help guide you or open your eyes to some avenues or roads you may have not thought of.

It is obvious that you are finally "starting" to come to grips with the "reality" of your situation and what you need to do. What you need to really do is except this with no shame or remorse because based on what you laid out here and everything you have done over the years, you were very responsible.

This is now about surviving, eating and paying the real bills that need to be paid. You are just figuring out what you will pay and what will go into default and that is what you need to do. You may want to make a list of exactly what you need, such as one house, one car, this Credit card or nothing at all and then make a plan to systematically default on each one so it has the least impact on your life.

Shall I stop making payments for Property A so as to get the bank to allow me doing a Short Sale? What happens with my credit there?

You could and that is your judgment call. Your credit can drop 100-300 points.

Shall I stop making payments for Property B so I can get the back to start some type of Readjustment process?

Again, your call there. But most likely you will not get help until you are late. You fit the classic consumer role of "PROTECT MY CREDIT AT ALL COSTS' and they reps are trained to use that against you. Meaning they can pull up your profile and they will see that you are a typical A borrower and you will do anything to keep your scores high. So, that means most likely, no loan modification when you apply.

Shall I go for Refinance or for Loan Modification?

Personally, I would go for a loan modification and use your rental income and the negative cash flow as your hardship. Maybe tell them sternly that you are walking away if you don't get this mortgage modified.

Everytime I call Bank of America, whoever I speak to gives me different answers and I just need a clear and sound answer and a path. I'm totally overwhelmed over this.

Take a deep breathe and try to remain calm. You can only do so much and you are only one person. B of A can be a nightmare to deal with and so are most lenders because they are soooo busy.

The good news is that you have time. Lots of time to work on this and you seem like a total go getter. A woman who gets things done. Get that woman back and tell her to not let her circumstances affect who she is.

You will get through this and action with knowledge plus some hope will help you make it through this!

My husband is not helping much. We are on our way to get separated/divorced.

That sucks and I see it all the time. It is tough to go through this and not have support. I think you both are confused and scared. Mad at each other, when really the best thing would be to come together and support one another through this tough time. Love is needed when we are down or we just feel more down and helpless. Maybe you need to go out on a date with the old guy you knew and kiss him until you find the spark you used to have. Try it

Your answers will come and it will not happen over night. You will be at peace when you find a plan to exit this misery and a plan to start a new improved debt free life. I know because I went through this in 2002 with a divorce, for closure etc.

It took 2 years of tough times and the only thing that really helped was action and empowering myself to learn new skills to pay the bills. But I am so glad I went though it and now understand that credit and debt suck!!!

I rent, lease or pay cash in my life.

What doesn't kill us will only make us stronger. No pain, no gain!! You will be such a better person and woman when you get through this. I promise!!!

Please let me know if you have any more questions and I truly wish you the best!!

[Marshall Rosenbach Esq.]

Quazy - it sounds like you need to pursue a modification with B of A. Find out why they are claiming you don't qualify for the MHA program. It's possible they are misinterpreting what you submitted, or not using the correct numbers. If I were you, before you blow up your credit, why not keep pursuing the modification while your credit is in tact. It does help to have a lawyer but if you cannot afford that, you have to be persistent with B of A.

If they tell you your "income" doesn't qualify for the program, ask why and then maybe you can go over your #s again, modify your budget, and make it work. Of course if you stop paying on the mortgages, you would probably be in a better position to get a loan modification although that is not always so.

Oftentimes I will see the banks become angry with a borrower who clearly, intentionally defaults in order to try to get a loan modification. I think it can benefit you to show that you have spent your life savings to keep your mortgage current. It shows that you really do have your mortgage as a top priority. So in my opinion, it makes sense to try now, while your credit is still in tact. If you get to the end of the run and it is clear they won't modify you, then we will discuss further....but for now, call up B of A and get some answers.

If you get sent to the recording again, ask for a supervisor to get your answers. On your other property, I know B of A will offer very low rates for a second mortgage. On one of my client's files, they lowered the rate to 0% for 3 years. See if you can get similar relief.

Alternatively, maybe if you have a little bit of money saved up, you can offer to settle out the HELOC for a fraction of what is owed. The bank will be amenable to this because you are upside down. On the first mortgage of Property A, you are just going to have to be persistent to get the modification approved.

[QuayzyCrazy]

Originally Posted by morainac

Do you want to stay in the house? If so pick one that has the least expense. Due to the hoa fees the property probably wont sale. As far as the mha plan, go to boa website and fax the paperwork they request. If you can go through naca for one property that would be great.

I do want to stay in my house, but not necessarily the least expense. I can't go through NACA because I have the rental. I want to foreclose the rental ($91000 loan owned by Wachovia) that also has a line of credit against it ($21000 loan owned by BofA), but I'm not sure how to do this. To continue putting money there is a waste because I owe more than what the apartment is worth, and I need the little money I still get to pay for my primary residence. I'm reading this entire forum to see if someone has a similar case. Please help me save my home...

[QuayzyCrazy]

Thank you all for your responses. I'm digesting your words. I'm going to put a list of questions of the things that I don't understand, so I better sit down and analyze each, word by word.

Evan, I actually don't know what makes sense anymore. All I know is that both properties are eating my money and they are worth less in the market than what I owe to the banks. I need a roof so if I have to chose I prefer to keep one property (B). Because when I bought both properties, I paid a big percentage in cash I had plenty of equity. Just to see that now I'm back to the roots or even worse, perhaps better to say -3 feet below ground, makes me feel sick. I'm with my hands empty and my heart and pocket totally broken.

[QuayzyCrazy]

Personally, I would go for a loan modification and use your rental income and the negative cash flow as your hardship. Maybe tell them sternly that you are walking away if you don't get this mortgage modified.

Moe, am I understanding you correctly? Basically, I'm getting that if you were me, you would try to contact Wachovia to defend Property A with a Loan Modification. According to what I read in the loanworkoutfactssheet. pdf by fannie mae, a modification is a change in the terms of a morgage loan to make it more affordable. See below.

Description

A modification is a change in the terms of a mortgage loan to make it more affordable. Typically, a modification involves making one or more of the following changes:

1. Change the mortgage loan type (ARM to FRM)
2. Extend the mortgage loan term (e.g., from 30 to 40 years)
3. Implement a below-market step rate for 2 to 3 years
4. Capitalize delinquent P&I into the loan balance
5. Implement a temporary or permanent reduction in interest rate

Eligibility

A borrower is eligible for a loan modification if he/she:

1. Has a permanent financial hardship
2. Has expenses that exceed current income but not following the modification

Terms and conditions

Fannie Mae approval is required by submitting a request via HSSN – Workout Profiler.
MI written approval is required.
A modification does require an MBS loan to be removed from its pool:

1. A loan in a "special servicing option" pool must be reclassified prior to modifying it
2. A loan in a "regular servicing option" pool must be repurchased by the lender in order to modify it

In order to remove a loan from its pool for purposes of modification, the loan must have been in a continuous state of default for at least four consecutive monthly payments
To execute the modification:

1. Prepare the Loan Modification Agreement (Form 3179, 3161 or 3162, as applicable) and obtain the signature(s) of the borrower(s)
2. You may only sign the Loan Modification Agreement for an MBS loan after the loan has been reclassified
3. Obtain subordination agreements from junior lienholders and record the modification if required by Fannie Mae in its written approval of the modification
4. Submit original agreement to document custodian within 30 days

[Moe Bedard]

I would definitely try to do that first, but remember it will be VERY difficult to get any help before you are late. Some don't ever get help if they are never late. It will be your call to see how much money pain you can go through before you must be late to live.

A have seen many modifications on rental homes with negative cash flow as hardship coupled with other hardships. Most often these borrowers were in foreclosure and represented by a lawyer because they were non-owner occupied properties and those are much harder to process as opposed to a primary residence.

[QuayzyCrazy]

Thanks for your responses again...

What I get is that I need to stop paying to Wachovia for the rental Property A (putting on the side those $800), and just continue paying my primary residence loan on Property B while I can. If everything is logical, Wachovia will try to enquire what's going on after about 90 days, and perhaps by then we will start having some type of negotiations on what to do to not foreclose. At that moment I will start suggesting a short-sale if possible. They will try to make some very silly offers and I need to stand steady until the accept to give me the green light from the short sale or perhaps a loan modification. I hope this is what you meant....

Will it be a good practice if let's say today I call Wachovia to warn them that I'm not going to be able to pay due to some financial hardship? Or is better to send them a certified letter with an explanation, so as to have a precedent of my good intentions? Honestly, deep down, I would love to keep the rental property if the loan and the HOA fees are fully paid with the income from the rental, perhaps by having a better rate or other more reasonable option than just throwing away money like I am, but if not, it just doesn't make sense.

This leaves me with the need to take care of the $21000 Line of Credit against the rental property, debt that I have with BofA. Do I stop paying that as well? I'm not sure you implied that. It really doesn't sound like I should not pay that debt, but it's just that I have to pay about $300 a month... money that I don't really have...

What about property's A Homeowners Associatoin fees? I'm in Miami and what I have heard from neighbors around me is that I should continue paying those HOA fees because that's a different pool of lawyers than the bank's, and after 30 days late, they will send me practically to the wolfes, who may, of course, try to foreclose on my property if not paying. For obvious reasons I prefer to not have to deal with additional problems than the ones I already have but those are $1000 that I could find some good use under the circumstances.

In the mean time, I need to be doing everything possible to survive and continue paying on time on my primary residence while the situation allows. Once I had sort the property A sorted out, and depending on the circumstances, I will need to apply for a MHA Refinance program.on Property B. The part that I really don't like at all is that my credit is going to be destroyed from the late payments on property A. I read that one needed to have a decent rating for a refinance possibility. That's were I get that I may be missing a lot more than what I'm inferring from your words....

Please be so kind to clarify...

[QuayzyCrazy]

I have an additional question. Our family has always helped us in making these payments. Unfortunately, due to circumstances they will reduce this amount substantially. And I'm totally underwater with these 2 properties.

I want to do all these calculations like DTI, etc. When I'm asked for household income, if the loan is under my name, are they asking for my personal income or also for my husband's and mine and any other family contributions? Here are what I understand my income numbers are again:

48150 my new salary after paycuts
1000 approx monthly husband's income
1400 monthly contribution from family side
1300 monthly contribution from husband's family side

Unfortunately I was recently told that we will not be able to get the contribution from husband's family side anymore, so that puts us on a worse shape. We lost all the equity that we had. Right now my calculations say that our LTV in Property A is 136% and in Property B is 122%.

If the Front end PITIA target is 31%, I just don't see a way out. Am I totally suicidal with these numbers here?... What am I missing here?

Even if I doubled my income, my numbers don't seem to work or have a positve outcome and even if I reduced my credit cards debt to 0 it seems that my DTI is too high. Does that mean that I don't have a chance to be considered for refinance at all? I don't get a positive number. I'm trying to access that FDCI excel to calculate all this but apparently that web site is not working. Please clarify...

[QuayzyCrazy]

Someone, please take a look at my numbers.... I really need good input and a clear path. to approach this problem. Not even if I had another job with my same salary and paid all my credit cars to 0 balance, I get a positive number. I don't want to lose everything because of ignorance. Something is not right. My numbers don't seem to work and I don't know what to do. I have always tried to pay everything I owe in this life on time... Now, I just want to keep my home.
With the rental property, all what I can say is that I don't want it to hurt me more. Short sale is an option but with no buyers here in South Florida, I'm stuck. So then, what? Foreclosure cannot be the only answer left to me... And then, I still need to deal with the 2nd I have on that property and last but not least try to save my Primary Residence.
Everything is underwater and sooo upside down! I'm drowning....