Help to get refinanced before foreclosure starts

21 Replies

I have owned our house for 12 years. VA loan, as I am a vet. I was a stay at home Dad with a part time job at nights. My wife worked a full time job days. about 18 months ago, she wanted out of her job and start her own business. Boys were old enough, and I got a day job and kept my part time job. Her business hasn't produced the numbers we hoped.

Since then we started struggling. We called our mortgage company (PNC) to see what we could do before we got behind. They told us they couldn't work with us BECAUSE we weren't behind. So we skipped a month and called them back. Six months and 700 faxed pages later, they said there was nothing they could do. it wasn't in their best interest to refinance. we had been making payments, albeit each one a month behind, as we thought it would all work out.

Now our credit report shows seven months of late payments and no one will talk to us about refinancing. They say to wait until we show only two late payments out of the past 12 months. Our house would sell for about $225k and we only owe $150K. But to wait until February is not an option, as we will not be able to make Novembers payment at this rate.

QUESTION:  I know the usual....Friends, Family, loan.....  They have either been tried, tapped out or denied.  Any ideas on who can help us.?  If we pulled $50k of equity out to pay off debt, there would be more than adequate funds for monthly mortgage.

Your thoughts on this are appreciated.

John,

Here are a few details from your local VA Benefits Center...

"When serious financial troubles arise, it is obvious that living expenses must be cut to the bone. Most of the luxuries previously enjoyed, and even some things which may have been thought of as necessary, may have to be dropped for a time.

In order to help veterans in serious financial trouble, VA Regional Loan Centers have technicians available to conduct financial counseling. This counseling is designed to help you avoid foreclosure. If you want this assistance, call 1-877-827-3702 to reach a Loan Service Representative that can assist you."

Best to you!

TM

Hi John,

Sorry to hear about your situation

Have you tried exploring the option of a modification? This might give you some short term (maybe even long term) breathing room. The VA is not always easy to deal with, but depending on the household financial situation it might be a fit. Who is servicing your loan?

Originally posted by @John Baker :

@Lyonel Katz

 PNC mortgage

Thank you for the quick response. Have you tried being reviewed for a modification?

This post has been removed.

Your chances of a refinance do not exist at this time based on your post. Also, you failed the first tier in the waterfall test for a loan modification, equity. While its not what you want to hear, one legitimate option of getting out of financial trouble is to sell the home. You have significant equity and, while I understand that tapping into that equity to pay your bills seems like a good idea, you've already demonstrated that you can't handle the balance as it is. How are you going to handle it at a higher balance? We (lenders) call this, "Kicking the can down the road". You are only prolonging the inevitable.

As a side note, your wife tried something that didn't work financially and career wise, and now you are asking the VA to subsidize the failed endeavor with a loan modification. You say you can't wait until February because of the rate? What's the rate? It's a VA loan so, when you originated the loan it was at market rate. If it's fixed, you need to earn more income and somehow make up the arreages. If it's variable, indexes haven't jumped so, at least for now and for the past few years your loan rate has either gone down or, stayed at its floor and has not risen so, in my opinion there are some flaws to your logic that tapping into the equity would be the answer to your concerns.

Sell the home and rent something you can afford while your wife works to increase her book of business and income or, risk losing your home to foreclosure.

Hi @John Baker ,

Sorry to hear about your situation.

However, from what I understand of it, your best option is selling the house. Even if you could refinance the house, contracting debt to pay off debt is a very bad idea. Yes you could pull 50K, but what happens when you run out of money again and you have no more equity in your home? There you fall again and you have nothing left to support you.

I know it must be a really hard situation for you and I won't pretend to fully understand what it feels like..but here's what I'd do to get out of this (at least until your wife's income becomes better). 

I would sell the house as soon as possible, take that 50K and buy myself a multi-units, lets say a 4 plexes. Live in one unit and rent the 3 others. This will probably help you get financing (the bank will take into account the rents as income) and you'll probably be able to live in the quadplex for free. I know living in an apartment must not be the most inviting thing compare to a home...but maybe the fact of being able to not worry about next month payment can make up for it. You know, sometimes you have to do what you have to do, no matter what it is.

I wish you best of luck !

Kevin

Thank you all for your advice. It is sincerely appreciated.  

Maybe I misspoke, or didn't clarify.   Our financial situatio, in my mind, COULD be resolved.  Hypothetically,  if the mortgage is $1000 and all bills are $500, by paying off the debt of the $500 bills entirely, that debt is gone and we have an extra $500 each moth.  To me, that means if we were able to refinance and our new mortgage was  $1250, we would have an extra $250 to put into savings each month. 

@Ron S. when I said "at this rate, I wasn't speaking "terms", I meant "by the way we are going." Also I was confused by your post. You said we failed the waterfall test, equity in on sentence. The later said we have significant equity. Maybe I don't understand the waterfall test. As for asking the VA to subsidize a filed endeavor, WOW. That seems a little rough. I seem to remember a time when the government bailed out banks when they got over THEIR heads. Regardless, a career choice was made that didn't work out. I'm sure this is not the first time its ever happened. (Sorry for feeling defensive).

Selling the house IS an option we have talked about.  We are looking at our options.

Again thank you all for your advice.

This post has been removed.

John: I think that the comment towards the equity was gearing towards the fact that since you have equity the servicer and investor would push you to sell. Please correct me if I am wrong.

Have you tried to do a loan modification it might be worth a try either way so at least you can put a pin in it and know what the response is. You can also try midway to try to obtain an offer on your home during the modification process if it does not work out in an effort to avoid wasted time and possible loss of additional equity. It might sound like more work and you will find that it is, but it might be worth it.

I just want to echo what @Kevin Bellavance  said. I think selling and downsizing is a solid option. While it may be extremely, emotionally difficult, selling the house might be the way to go. I'm in a situation right now, while completely different from yours, might require me to move into a smaller, less appealing place in order to take an overall big step forward toward my goals. I have to be honest, it kinda hurts my pride just thinking about it. But when I look at the big picture, this will set us up really nice in the long run. You're in a great position as far as equity is concerned. There is a lot you can do with that money after you sell your house. It could start a snowball that could set you up for life. Yes you might have to downsize your lifestyle a bit but you'll likely be better off in the long run. You've learned a lot about real estate in this process and with that knowledge and a fist full of cash you could do some damage. Best of luck, man. 

PS: Kudos to you and your wife for trying a new business venture. Those kind of things take guts.

First, talk to a good mortgage broker.  I can provide the name of one I trust in Denver if you need. I used to be a mortgage broker and unless things have changed, what you currently have on your credit is what is called a "rolling 30". Still not good but could be way worse. A mortgage broker has access to way more programs than your bank will and different motivations. The answer may still be no but it will be a more justified no than your bank can provide.

If the answer on a cash out refinance is no then you should probably sell. Take the proceeds and live out in Bennett or Strausburg. While the commute will be a pain I am sure you can find way cheaper rent out there. If you let this property go 90-120 days late, it will probably be 3 years or more before you can get financing to buy another house as many banks will consider that level of late to be the same as a foreclosure proceeding. If you sell, then 6-12 months from now you can probably buy again (a good mortgage broker can also help you with that). This will also give you some cushion and allow for your wife to either make the business work, or get out and find something else.

@John Baker personally I would advise against selling. You are going to be way behind the curve. Even if you pay off the home and the outstanding debt you will be looking at a significant lifestyle change. That change being living in much less of a home or having a very expensive and dangerous commute. Driving 100 miles (living in Bennett) a day takes 3 hours a day away from  your family and costs you another 50 dollars a day. 50 dollars a day translates to another $1,000 per month in transportation costs. Sure you can do it for a year or two but eventually your high milage car will break and you will need another one. 

Renting in close is very expensive as well. A 3 bed house is easily $1,500 per month. You are jumping from the frying pan into the fire. Do a quick search on Craig's List for what similar homes are renting for and you will see that you are in for some serious sticker shock.

You need to get some financial counseling and follow it. Your current home is your cheapest housing by far. Figure out a way to cut other costs so you can meet your financial obligations (rarely is more debt an answer to a financial situation). After that, look for some more employment to pay down your debt. Put your kids to work. You wife should go back to work as well. You made some miscalculations with starting the new business and now you need to dig out. 

I don't think selling your home with it's low payment is a good idea. I also don't think that a refi will do anything more than buy you some more time. 

If you are willing to rent a smaller place or try the live out in the sticks approach. Rent out your home and do the change. Your home will likely rent for more and cover at least some of your other payments as well as the mortgage. You absolutely must have a reserve account if you take this route.

Finally I admire you for sharing your situation in a public forum. It's not easy and in that light I've tried to be as straight forward as possible and hope it doesn't come across as too harsh. 

@Bill Hamilton - At the risk of hijacking this thread, I'm not sure what motivation a broker has that a bank doesn't have and/or what programs a broker has that a bank doesn't have. A bank has abilities a broker does not have. A bank has the ability to portfolio a loan that doesn't meet an investor's guidelines. A broker does not so if a loan is borderline, you have a much better shot of getting it approved and funded with a bank then you do with a broker. I admit, I love the comment that the broker will give you a "Justified No"! While I think that is the furthest thing from the truth, I do find it amusing.

I understand the intent of your message though. As a former broker (In Denver) and currently a banker, I believe the programs available to both tranches of originators is very similar. The only difference is with a bank, you get a quick yes and a quicker no. The programs available to a broker are the same programs available to a bank. A broker can't portfolio a loan unless they are a correspondent broker with a warehouse line and if they would fund a loan and keep it on their line just because, they wouldn't be in business long.

So there are two kinds of debt at play here - secured (home and car) and unsecured (pretty much anything else). So by taking an equity loan on your home, you are taking that unsecured debt and converting it into secured debt - that's usually a bad idea. 

Make payments on the secured debts, and forego payments on the unsecured debts if you don't have sufficient income to pay all debts. What would happen to you should you choose this approach, since only you know the nature of the unsecured debts?

Ron Scribner

 I probably should have been more specific about what motivations might be different between bank and broker. In this case I meant a bank that already holds a loan which the borrower is making payments on. As the OP said, they told him it wasn't in the banks interest to refi the loan. A broker on the other hand (or another bank possibly in this case) has the motivation to do business. Also, a bank is limited to the programs they have access to internally in most cases (although some will let their LO's try and broker a loan if the bank does not want it). And although this isn't 10 years ago where brokers had access to 100's of different programs, a good broker still knows there are banks and companies that portfolio and what they like to do.  While I haven't brokered in a number of years, I still keep some track of which banks do unusual things. Sometimes Regionals will take on things the big ones have no interest in. Especially construction loans, land loans etc. And that some will now do Self Employed Stated again, which many banks would laugh at you if you asked them for that. And which banks like Rural Development loans. Lots of banks want nothing to do with them because they make them uncomfortable and don't want to have to retrain underwriters. 

@ Bill - That clarification helps! Thank you.

US Army here,   There are ways to work with the bank, to get things over and resolved. You don't need the pressure of everyday not knowing what will happen. The best thing to do is  SS.

@Kevin - once again, you failed to read or at least understand the OP's message. Short sale? Seriously? There is $75,000 in equity. There is no short sale! Everyone of your posts that you've posted finishes with, "The best thing to do is a SS". Your motives are obvious. I would recommend the best thing for you to do, if you want to contribute quality advice to the board is to read the posts thoroughly before opining.

Hello,

My company assists home owners in modifying their mortgage when in foreclosure, pre foreclosure or even from a sale date (at least six weeks out).  Please advise on the status?    

Not sure why this was bumped, but anyways....

For the lurkers, if ANYONE tells you to skip payments or that "I can't help you until you miss payments," or similar, I don't care who they are or in what capacity they are working, write down their name, license number if applicable, the date and time those words were uttered, and to the best of your knowledge exactly what they said word for word, if you want 'extra credit' pop on down to a notary at FedEx or whatever and get your signature at the bottom of this statement notarized, and immediately contact the Consumer Financial Protection Bureau.

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