Seeking a solution for a borrower

3 Replies

Hey BP community,

I am looking for a solution to my friend's mortgage problem.

The story: She is 77 years old, has paid her mortgage payment diligently and on time for the last 25 years. She has 16 years left on her loan and she missed one payment back in Nov 2013. The reason she missed the payment was due to a medical bill she needed to pay. Medical bill is paid but mortgage payment has grown worse.

Now, her lender is making her life hell. She was told she couldn't get a loan modification after being on a forbearance plan for the last 5 months. She is now delinquent 4 months payments which she will not be able to bring current now that she is at the end of the forbearance plan. The options are that she bring the loan current or the lender grants a loan mod. Her only income is her social security and a pension fund. She's being denied a loan modification because her payment is "affordable" compared to her income.

Possible solutions: Her mortgage balance is roughly 125k and her home is worth about 270k. Her monthly payment is $900 and current interest rate is 5.5%. She is bound and determined to stay in her home and willing to explore creative solutions.

I've run some numbers using a purchase price of 130k and a sale price of 260k. If she were to keep making her 900 payment in perpetuity until she passes the only variable would be how long she would be living in her home.

Here are the results:

5 year IRR: 18.02%

10 year IRR: 12.60%

20 year IRR: 9.78%

I've also considered a subject-to transfer, but I need to figure out how to keep her in her home with that option.

I appreciate any and all suggestions and please ask more questions so I can fill in the gaps. Will social media help out our homeowner? I'm ready and willing to find out!

Thank you bp community,

Collin

With all the legislation coming down the pike on home owners and the fact the owner is 77 years old ( sound mind and body claim entering into contracts) I just wouldn't touch this.

Since their is a ton of equity it looks like the lender just wants to foreclose and get rid of the problem.

Might be better if she just sells at market pricing and down sizes to another property and keeps her cash as a reserve.

If she is on fixed income maybe have some family stay with her and pay rent so she can catch up the mortgage.

No legal advice.

Have you considered a reverse mortgage? If you are correct on the value of the home she should be able to borrow enough to retire the first mortgage plus get a lump sum or a monthly payment whichever would fit her situation best.

She could get a reverse mortgage. She could sell the property and retain a life estate. I think she's barking up the wrong tree trying to get a loan mod. She shouldn't do anything without consulting a CPA about the consequences of selling or refinancing. She should be doing some estate planning if she hasn't already, making sure to look at her heath insurance, and whether or not there is a long term care policy in place.

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