Ask The Money Coach

Posts Tagged ‘homeowner’

Q: My Mortgage Company is Giving me the Run Around. I’m in Foreclosure But Can’t Get a Straight Answer About My Options or Payment Plans. They Say I Owe $5,300, but They Say I Have $2,400 in Money That They Have Not Applied and $3,048 That’s Up in Their System Through Western Union Payment That They’re Sending Back Because It Wasn’t the Right Amount. What Should I Do?

A: My best advice is to keep very detailed records of all your transactions, conversations, payments and all correspondences with your lender. Sometimes, mortgage companies and banks will refuse partial payments. And rather than cash a check that they deem to be less than the full amount due, they’ll return the entire check. It sounds like something to that effect may have happened in your situation – at least with that roughly $3,000 payment they’re allegedly going to return. I noticed that the full amount of money in dispute — that $3,000, plus $2,400 that supposedly has not yet been applied – actually equals a little more than the $5,300 that they claim you owe.

I know it’s frustrating to get the run around and to not have clear answers. But I think you really do know (or should know) if you are in arrears or aren’t. You said you’re in foreclosure. And I assume that’s because you’re behind on your mortgage. Are you behind solely because of these disputed payments, or is there something else going on? If your payment delinquency is only due to these outstanding payments that you’ve made, but have not yet had credited to your account, then I would get some legal help in dealing with this matter. Reach out to a free legal aid clinic in your area, or turn to a reputable foreclosure prevention group for additional help. One good anti-foreclosure group is NeighborWorks (http://www.nw.org).

NeighborWorks is a national non-profit organization that employs a team of mediators to act as go-betweens for lenders and borrowers. NeighborWorks counselors often work out deals for homeowners. They also run the popular toll-free foreclosure prevention line: 888-995-HOPE.

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Q: My Husband is Relocating to Another State. We have Bought a House in Florida. The Market is Down and We Don’t Know What to Do About the House or What Questions to Ask Concerning the Relocation. Any Advice?

A: Start by asking your husband’s employer what relocation benefits, if any, they are willing to provide. Some companies will do just the basics: like paying for moving costs. Others will offer more assistance, like reimbursing you both for house-hunting trips, putting you up in hotels during temporary stays in your new state, or even paying for meals and local transportation during the transition period. With really generous companies, they may offer to fund some of the cost of buying a new home (like providing money for a new down-payment), or may consider buying your existing home, or perhaps reimbursinig you at some level if you have to take a loss to sell it quickly. Relocation packages vary greatly based on the industry, region of the country and, of course, the specific employer involved. But you should ask about any or all of these options. Also inquire about neighborhoods and the cost of living in your new region. Do some basic online research, yet ask your husband’s soon-to-be boss or his colleagues about desirable communities and where there are good schools in your new state. This later area will be of particular importance if you have kids. Ask too about taxes in your new state. Not just property taxes, but also ask whether or not your husband’s employer may consider “grossing up” his income to cover some of the taxes you’ll have to pay if he gets a cash relocation stipend or bonus.

Regarding your existing house, I don’t have to tell you that it’s a buyer’s market – particularly in Florida. Without knowing any specifics about your home or your particular neighborhood, I can only really tell you to price it agressively (i.e. make it attractive to potential buyers) if you want to move quickly. Also, if you need to sell your current home in order to afford a new home (as most people do), then you might as well get the ball rolling and put your home on the market as soon as possible. Ask for referrals or drive around your current neighborhood and look for signs to find a local, experienced real estate agent. Then call that person and have him or her come by your house to do a complete market analysis and tell you what your house is likely worth. Good luck!

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Q: I Had to Take out a Very Large Loan to Pay for One Year of My Son’s College Education. I Anticipate it Taking a Minimum of 5 Years to Repay. I am Also Repaying a HELOC loan. What is the Best Way to Handle This Debt? Should I Try to Pay Them Off as Quickly as Possible Reducing the Money I Would Put Aside for Savings, or Do I Pay What I Can and Make Saving a Priority? I Have a Bit Put Aside for Emergencies, but Nothing Substantial.

A: This is a classic case of “which should I do first – pay debt or save more”? The answer isn’t really a matter of either/or. It’s a question of how to do both simultaneously because that’s the best approach. You need savings to avoid going into debt. After all if you don’t have a cash cushion, the slightest emergency – like a flat tire or a leaky roof – will send you heading for your credit cards. Also, you should pay off debt as soon as possible because you don’t want to pay unnecessary interest charges and be prevented from saving money for other future goals. The good news for your situation is that both of the loans you’ve taken on – school debt for your son, and a home equity line of credit – carry relative modest interest rates. You didn’t say when you got your HELOC, but I assume it’s in the single digits (i.e. less than 10%, and probably significantly less if you got the loan in the past couple years). Ditto for that student loan. So divvy up the available cash you have and work at meeting both objectives: knocking down that student loan balance and your HELOC and also adding consistently, month after month, to your savings nest egg. If I had to prioritize, I would say slash that HELOC debt first and put more emphasis on that than the student loan debt. If it’s a federal loan, the student loan debt may be subsidized (meaning the government is paying the interest on the loan while your son is in school). Lastly, because the healthcare reform bill recently signed into law by President Obama includes student loan reform as well, you can expect college loan costs to come down significantly. For instance, starting in 2014, student loan repayments will be capped at 10% of a borrower’s income. That means even if you can’t pay off that loan in five years, your son can start working on it — and it’ll be relatively affordable for him to do so.

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Q: I am Single and Work One Job. My Mortgage is Upside Down. The Mortgage Company Keeps Tacking on Fees Other Than Late Fees. Is it Legal for a Mortgage Company to Send You a Late Notice and Charge You Even When You Know You’re Late?

A: Yes, a mortgage company can send you late notices and tack on late charges to your mortgage when you don’t pay on time. Unfortunately, those fees can add up, because sometimes they include penalties, added interest, collection costs, and maybe even attorney’s fees if they have to get lawyers involved. It doesn’t sound like you’re at the point of foreclosure, but clearly you are in a very difficult financial predicament. Based on everything else you said to me, it seems that you bought your home in 1990 when you children lived at home, but now they’re gone. You described a roof problem which will take $3,000 to repair, and you also have the added financial burden of having recently taken in 3 of your grandchildren. I think you need to be realistic about your circumstances and consider whether or not you can afford to live in the home you currently have. Chances are, the home is too big for you all by yourself. Also, I recommend that you begin the process of telling your adult children that you can not afford to take care of their children. I admire the love and selflessness that you have shown in taking care of your grandkids, but this entire situation sounds like simply too much. Unless your children are providing significant financial support for you to keep their kids (which I doubt), I think you should unwind that situation and simply tell your family that you are being buried under a mountain of bills. You said that you have a car note, as well as credit card bills, some of which have been sent to collection agencies, so that tells me you are really struggling to keep your head above water. Since you are working, talk also to your mortgage lender and see if they have any options to offer you, such as a forbearance or deferment on your loan, or perhaps a loan modification. Also look into the Obama plan, www.MakingHomeAffordable.gov and see if you qualify for that program. Good luck!

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Q: For the First Time in 22 Years I Can’t Make My Mortgage Payment. It Will Get Paid Via a Little Help From the Mortgage Company But I am Very Concerned. I Am Living in the Red by About $400 Each Month. When Do I Say Enough is Enough and Stop Paying Certain Creditors to Pay Other Debts? I Have Credit Scores From 730 to 760.

A: I’m sorry to hear that you are in a financial bind. But you’ve definitely taken the first step to turn things around financially, which is to recognize that you do indeed have a big problem. Maybe you were in denial in the past, or maybe your economic fortunes simply changed recently for some reason. Whatever the case, you seem to acknowledge that things can’t go on the way they have been. Not with you living $400 in the red each month.

If you’ve had a home for 22 years without missing any payments, I would hate to see you lose your house, so I hope you’re not talking about skipping payments on the home. Probably not. Since it sounds like you’ve reached out to your mortgage lender and received at least some support. I assume you are considering not paying other creditors, like credit card companies or perhaps your auto lender, that kind of thing.

I would suggest you take two steps. The first is to do an honest assessment and overhaul of your budget. Even if you get some relief from your creditors, it won’t do you any long term good if you are deficit spending. Go over your spending with a fine-tooth comb and see where you can cut back. Surely there are some areas/expenses you are willing to sacrifice or slash in order to keep your home, maintain your very good credit rating, and have financial peace of mind. Read this post about how to create a proper budget and this article on overhauling your budget too.

Additionally, before you simply stop paying creditors, contact each one directly and see what options, if any, might exist. Perhaps some of them are willing to put you on a deferred payment plan. You suggested in your email that a six-month reprieve from certain payments would give you some breathing room. Tell that to your creditors. If you make small token payments, that may show a “good faith” effort on your part, and it may keep bill collectors and creditors from hounding you. But those partial payments won’t necessarily stop creditors from reporting you to the credit bureaus. Anytime a debt is not paid as originally agreed, the creditor has the legal right to report that information to the major credit reporting agencies: Equifax, Experian and TransUnion.

If your creditors won’t offer any relief, and there’s nothing else in your budget to cut, yet you find yourself still in the red, then yes, it’s time to “cry Uncle.” At that point, I would make strategic decisions about what bills get paid first and which are second and third-tier obligations. See this TV interview in which I explain how to prioritize bills when you can’t afford to pay everything. Good luck!