This is my first post here at Biggerpockets and I first want to say hello to all members of this incredible, resourceful site. After spending days researching solutions for my unique problem, I stumbled across this site. I desperately need some advice! I currently live in Philly but originally from upstate NY. Here’s my story:
Last week I called home to say hello to my mother who lives in upstate New York in a 2 family house. She wasn’t there but my Step dad answered the phone. He didn’t sound so like his normally happy self so I asked what was going on. He didn’t want to tell me but he finally broke down and explained to me their situation.
So, a few years ago, my Mom and stepdad had a private mortgage on their property that was thru a good friend who passed away 2 years ago. The friends estate reached out to m Mom and stepdad and told them that they owed the balance on the home. They were in shock because they made payments to their friend for a few years, but unfortunately, did not keep track of what they paid the friend ( I know, pretty naive move but this how they did business). To make a long story short, they went to court and lost because they had no proof of payments being made. The home was going into foreclosure.
They somehow made an agreement with this friends estate (another private mortgage) which includes the 2 family house they live in AND the home next door that they also own as an rental investment. They’re paying over $1500 in interest only payments with a balloon payment of $135k due in 5 years (15% interest). One mortgage, both properties.
Needless to say, I was crushed to find out that they're in such a deep mess. They get rental income from the upstairs unit in the home they're in PLUS rental income from the home next door. Their credit is fair and they have limited reserves. I looked into a VA loan (Mom is a veteran) but the rental income reserves are too much. I tried a couple of mortgage lenders but they're not able to help much. Does anyone have an idea of a refi program that might help them lower the rate/ payment? Any help would be appreciated - it's such a complex situation, that I'm completely stuck!
One more thing - the homes are in good condition but I’m not sure how the whole appraisal situation would work with 2 properties under one private mortgage. Not much equity in either home...
If the rents will support it, you could sell both houses as a package to an investor and have your parents rent back their apartment. You may also have better luck calling local banks and credit unions that hold their own mortgages, rather than brokers who can only do conforming loans.
If they are in the capital region I may know some banks to check with or can assist with valuation. What town are they in?
Three units, two of them rented, and they can't get a simple loan? That tells me this isn't a good deal.
If it were a good deal, they should have no problem finding a lender that would finance the property, pay off the original seller, and allow them to stay.
I'm sorry they lost their money but this sounds like something they should walk away from.
what is balance of the loan ? what is value of each property ? is the one loan secured by both properties ?
Hi Al. I know an investor in my local REIA group who buys small multi families upstate. If you'd like to PM me more info, perhaps I can put you two in touch? Hope it works out well for your family.
@Al Davis I would definitely try to refinance each property separately, but do both loans at the same time with the same lender, that way you will be able to pay off the blanket mortgage. Have they been reporting the rental income on their taxes? Do they have leases? It sounds like they should be able to do something. I have a contact at Trustco Bank - what area of upstate NY are they in?
This sounds like something they should just walk away from, sell and start over before things get worse.