BiggerPockets

Did they not recently go bankrupt?
If this situation is an example of the way they handle things, I can certainly see why.

My grandmother, I recently found out, has managed to establish an escrow account for TI .. they told her on the phone that she had no choice, so what does she do, she signs and faxes a form letting them do it.. I don't know if they could have forced her to do it, probably.. it was because the tax bill was not paid in full.

She is always late paying the taxes, but they get paid before they go very far.

So I would assume that they did have the right to force this on her. I'm sure it was in the loan doc somewhere. Right.

So her payment jumps to $671 from $399.. And she's already going without medicine and food half of the time struggling to pay utility bills... And I have not been able to help her, lately.. She never even told me how bad things were until this happened

So they paid the taxes, in full.. Despite the fact that she gets a homestead exemption check which pays half of it. PLUS they got her to check the box for insurance on that form, too, so they paid her policy up for one year. It's always paid on a ten pay, never late.

So they have the escrow account paying out $1200 for taxes and $800 for insurance.

Now I am trying to understand how them paying $2000 makes her have to pay $3300 over twelve months. I hear that they try to make you pay a shortage amount, so there'll be money in the account next year.. or some thing? Please help me to understand this!

I've tried everything to get them to cancel this idiocy. If she pays that higher payment her utilities are shut off. It's that simple. And like I told them I can't allow her to stay here without them.

So basically they're being stubborn and pricing her out of her home.. all the while making a note go bad that is probably a good 125% LTV... for the love of god.. and banks don't want houses ANYWAY...

How can I explain this in a way they'll understand?!?!
I tell them, look, you do NOT want this note to go bad, my grandmother does NOT want to lose her home of fifty years..

I mean it's not really like that - she has $400 in CC debt payments she makes. If it comes to losing the house I will force her to get rid of that. House comes before CCs. Period. She throws a fit when I tell her this but it just has to be.

Is there ANY way to get these incompetent morons to delete this escrow account? And PLEASE help me understand why she's going to pay $3300 over 12 months when the account paid out only $2000!!!

YES I know that they probably have the LEGAL RIGHT to do this and it is my grandmothers fault.. Especially since she went right along with it and let them talk her into signing those papers. I just can't stand the fact that they're dumb enough to sour a note just to go by the book. This will NOT pay off for them.

Sorry for the long post.
THANKS GUYS!!

Thanks for your detailed response.. I understand that they have to protect their security.. It just seems like they're doing alot of protecting at that seemingly excessive dollar amount.. They need to pay more attention because alot of people, especially older people, are stretched to the breaking point as it is.. when a $400 payment goes to some $670, man, that's a big deal to someone who's choosing between food and medicine.

And it's not as if I expect them to care about her troubles.. business is business... I'm not one of these idiots who complains about the big bad bank coming to get peoples homes. If someone is dumb enough to owe more than their value, it's their own fault, and I know that the bank doesn't want your house even if it's worth $150k and you owe $100k
I think that they could possibly work with her on this for their own good, but like you said, they can't let the property start having tax liens and whatever else.

You're right that her situation needs a closer look. I've done all I can do for her for a long time now but she desperately needs a bankruptcy.. I am willing to do what I can for her.. wherever I am at, no matter what town or state I am in, if she need me, BLAM.. I've always been right here..

But I feel like a real fool for it because she owns another home free and clear. Worth well over 100k. And my crooked cousin has been in it eight years. So bankruptcy is impossible! He just moved in eight years ago "took care of" my uncle who died soon after they moved in.. now he's been by to see grandma every few months.. back turned

Twice in the past five years they've given her some expired junk to eat.. The first time it was expired in 1994 that was in 2007.. recently they gave her some food that was at least recent as 2008!!

Can you imagine driving your Lexus truck up to your grandmothers home every few months .. and giving her some expired trash to eat every few years .. while living in her only real asset? Can you imagine?!

It has been tough, because they have the nerve to look down on ME for not doing more.. you just wouldn't believe how many of my days I've spent on the phone with her or here with her talking her through being so upset! Sigh! Every time I have extra money I anything I can to help her, but the past five years have been tough for me, too, so I can't always do that much.

It's a crazy situation.. I know that I should take power of attorney, sell her other house, sue this clown for "rent" he never paid for eight years, and be done with it.. . . but that would put my grandmother in the ground. She gets so very upset, it would kill her, she's funny about my cousin because her daughter and his mother got killed in 1983.. and it seems to stay with her, even now, so she can't even say a cross word against this guy..

Poor little thing. I love her so much. I know I probably should be angry because I've done it all and been there through it all and he's in that house I always loved. But I just love grandma so much!

And I think she is scared of him, too, he is a big powerful man physically and financially. Sigh. I told her grandma do not be afraid, if you want to sell that house so you can pay off all of your debts, I will come stay with you for a year and I even told her I would borrow back the shotguns I use to have and keep her safe. But she is just stubborn and old.
Sigh.

SORRY FOR VENTING
KNOW IT IS NOT THE PLACE FOR IT
BUT.. your response was so detailed and coherent, I really appreciated that and it got me to thinking.. again, I am sorry for venting!!
Thanks guys!!

to answer tod's question....yes

this is an escrow shortage and what will happen is that future payments will be applied to the escrow shortage first and then p&i. if she keeps paying the same amount, she wil dig herself further and foreclosure will occur.

personally, after reading the situation, it seems as if your grandmother needs to have this escrow account. you made comments about 'THEY got her to check...' and 'THEY are pricing her out of her home' yet you say that you are 'not one of the idiots against big bad banks'.

john is right on (as usual). this seems to be just the tip of the iceberg. her having a $400 monthly credit card bill and has lived in the home for 50 years and has a mortgage leads me to believe there is a spending/income problem.

if she cannot come up with the extra few hundred a month, i don't see how she would be able to come up with the money herself to pay those bills in lump sum (or even 10 pay on the insurance as opposed to 12 pay).

Certainly sounds like a complex family situation here. That's no fun. If she owns a house free and clear, yet has a mortgage on another that is about to default, then something is seriously messed up.

The mortgage company is not making your grandma pay something she does owe. Well, if they're paying the incorrect amount for the taxes, perhaps they are. But that should be an issue that's correctable, and once corrected you should be able to request the escrow analysis be re-run.

Without actually seeing the escrow analysis, its hard to say what going on. If they have in fact paid an over due tax bill, they're essentially giving your grandma a no interest loan. Whatever the exact situation, I'm sure they're not having her pay in $3300 over the next year if their outlays are only $2000. Your state may allow some buffer, but I'm sure its far less than $1300.

The mortgage company and the escrow account is not the real probably here.

If you really want to resolve these problems, you may well need to takeover her finances. You may need to get a power of attorney and sell that other house. Use the proceeds to pay off that credit card debt and the house she lives in. Give her a spending allowance each week or month. Take away the credit card. Be sure doctors, medicine and food are coming first, house second, and anything else after that. If she still can't afford her situation, you may have to look into alternatives.

Thanks for your responses.. I'll definately go and talk to the local assessor about the things you've mentioned. I did try to protect the outrageous taxes one time, but, you have got to pay the tax IN FULL right then and there in order to do that.. Even if you're paying semiannually.. and on time.

The whole thing I can't get my head wrapped around is the extra $1300.. Like you say, it should not be that much.. Now that they've paid the insurance for a full year, that's not something that they can undo, I mean what are they going to say hey xzy insurance company, please send us a refund? LoL over here.
So the shortage amount went up alot because of that $800 they sent off to them, and it would be alot less expensive on a monthly basis if she'd have just continued to make the $75 monthly payments? Also they've paid far too much in property tax. She already has one of the exemptions you spoke of. "homestead". It gives her $400 off of the tax bill (they somehow send her a check for that which goes to the taxing authority ??)

So see I THINK if we could, even though I doubt that we can, unwind the big insurance payment they've made.. and have them understand that the property tax is $400 less than they think it is... wouldn't the shortage amount decrease in that it's based on anticipated expenses for the coming year??

If she does need this escrow account.. which is a possibility.. she definately needs it with the right payouts being made to the right people in the right amounts at the right times. .

We'll be able to correct the property tax part of it, but I just don't see the insurance company saying oh here you go here's your lump sum yearly payment back so that you can pay us monthly.. That kind of thing doesn't happen, does it?

As far as taking power of attorney and selling her other home.. you're darned right. There's someone in it who drives up to where my grandmother lives, in a vehicle which cost more than her house is worth, not giving a darn if she starves to death! For goodness sakes. I'd do it in a heartbeat if it wouldn't kill my grandmother. She will just completely lose her mind and be in the ground if I do that. Doing so would vastly improve my personal situation, but grandma would be dead of a heart attack.. Sigh!

She's always spent money like water .. I remember being barely old enough to talk and watching her burn credit cards down. She use to have the money to just go and cash in a CD every time the cards got full. It went on for 30 years. Sure is over now :roll:

I also agree that food and shelter will come first. Those credit card companies, some she's been with 20+ years, are still charging her 20%!! Even while she still had excellent credit and a perfect DTI!! Now they're down on the rates, because she used some debt counseling service. . But all they do is "negotiate the rate" and then take a big huge chunk of the money she sends to them. She sends them $400, they disburse the funds to the credit card banks, and they take $20!!! That's obscene!!

Does anyone know anything about debt reduction? Does it actually lower the balances?

Thanks guys, you're so good to be so helpful :mrgreen:
Another thing that will help is that she's up for loan modification.. her rate is 707..
Is it okay to apply for the loan modification ourselves?
This one guy wants $1000 and another one who assures me that he's an actual attorney wanted $2500... they both promise a rate of 3% "or maybe 4"..

Sorry to be asking so many questions and taking up your time, folks.. If I would not have wasted the last five years I'd just have plenty of extra cash and just buy her out of it.. and make sure she could never charge again.. I've made alot of progress this year, more than in the past five, but that won't happen overnight.

They have it insured for some insane amount.. something like 160% of the value.. and the insurance company refuses to lower it, and my grandmother is scared to death to change companies.... I can not understand her explanation of WHY.. ... . This is part of the problem, you know how it is, you offer someone solution after solution and they balk and sputter and make things worse for themselves.. Even if I had plenty of cash, and though I love her, if she doesn't start working with me I would NOT just feed the beast, as it were, throwing a little money at something she's just going to make worse again, it would do nothing :roll:

(3) Insurance the only 2 things I can say is what do they have for a replacement cost for the dwelling (remember if the Tax Office changes your Grandmother's value then you will want to notify the Insurance company). Another option is to maybe increase her deductible this will reduce the payment amounts. I hope this information can provide some relief for your Grandmother's situation and your worry. Last but not least your cousin should be paying some form of rent.

you can't protest previous tax assessments, though you certainly contest the current years. see when it was last evaluated.

why is the insurance company refusing to lower the coverage? that makes no sense (otherthan to keep a higher premium). call around and get quotes. 160% of replacement is nuts! get that fixed. IF you do decide to go with another insurer or IF you get the current insurer to lower the insurance, the refund will probably be sent to you. if the insurance co. sends it to the lender, the lender will forward it to you as they can legally only have so much cushion in the escrow acct.

i think the maximum is 3 months. i would think that a 3 month escrow cushion would be sufficient to the lender which would mean about $500. i'm wondering if the other $800 (bringing it to $1300 total) is due to back payments to get you out of shortage.

it doesn't really sound as if a loan mod is going to help the situation. changing even the rate 3 points on a small loan like this isn't going to do mch on the p&i payment. you are far better off lowering the insured value, increasing deductibles (still staying comfortable), and getting the taxable value of the home looked at.

I have the payment going from $400 to $270 if the rate drops from seven to three... a big big deal to her..
That's a 30% savings!!
Unless I'm missing something..

$58000 note.. 25 years.. 7.07..
$400 payment as it sits..

you were typing this as i was typing my other response. $130 is ASSUMING that they will drop 3 points. not gonna be easy and an incredibly long process. my point really is is to focus a great deal of attention on the escrow and getting that in order. :)

Oh Lord... we were typing simultaneously again!! My last post is in part irrelevant, now :D