HiThere~I attended your class in Beaumont and loved it. I have several questions that I did not get a chance to ask.

We bought our home in May 2007, we got an interest only loan on a stated income. Our first mortgage is $281,000 at 6.125% and our second is $68,000 at 8.00%. Almost immediately after we moved in my husband lost his bonus checks and we were unable to pay all of our bills. We do not have our property taxes on an impound account. The first year we put the taxes on credit cards, the second year we have not paid. We currently owe $7000.00 just in property taxes along with several other bills. We cannot afford to stay in our home. My questions are:
1) How long can we go without paying our property taxes before legal action is taken?
2) With loan modifications do they do any assistance with property taxes?
3) If we decide to do a short sale, is a family member able to purchase the home?
4) If we stop making payments on the house to try to catch on bills, can we still do a short sale? If so, what type of time frame is there as far as staying in home and not paying while it is on the market?
5) My name is on the title of the house along with my husbands name, however my name is not on the loan. How will this affect me if we do a short sale or foreclose?
6)If we rent out our house to a relative and are unable to make the payments, is that relative still eligible to stay in the home for 1 year under the new renters foreclosure law?
Thanks for your time and any advice you can provide!

cjacobs71 Miscellaneous

*Posted with permission*
My house went into foreclosure in August 2007 and it was sold. My question is do I have to pay for any back taxes that are still owed on the property?

Chris Miscellaneous

*Posted with permission*

I have a mortgage with interest only payments for the first five years, i think it is coming up on the fourth year, and it will then adjust to about $400 or $500 more a month. We can afford our payments now, but not when they go up. Are we eligible for some of these refinancing deals? We have been current on our payments, but had to go bankrupt a few months ago on credit cards.

Chris Miscellaneous

I have a short sale going.  The lst, GMAC, has accepted the package and is willing to pay the 2nd, National City Mortgage, $3,000 (2nd is $63,000).  National City Mortagage will not respond.  Can they force me into a foreclosure?  Note:  It was a 2nd, but they say it was a equity line.  They wanted me to pay $13,000 + $3,000 they would get from GMAC.  But since I told them I can’t, they will not respond.  Both loans were re-financed to a lower interest rate about 2 yrs. ago.  No money taken just  lower interest rate.  They did tell me they would come after the $63,000 if I did not agree to the offer. 

Theresa

tyasment Short Sale:Seller, Tax Issues

Hi Chris,

I attended your presentation in Cathedral City last week, and it was incredibly informative.   I can’t thank you enough.  Building on what I took away from that, I’ve come up with a few more questions for you.

I mentioned to you that my wife and I may (or may not) have to relocate within the next 2-3 years, and that we’re interested in buying now primarily because we’re tired of renting, and asked if buying would be a good choice for us.  We’re motivated to buy because the owner has defaulted on the condo we’ve been renting for the past 8 months, so we need to find a new place to live.  We don’t like the prospect of having to move every 6-12 months because other people can’t pay their mortgages.  Moving takes time and costs money.  Owning a home now would give us the security of knowing that no one can make us leave unless we miss our payments.

We understand that it’s not likely we’ll be able to sell a home 3 years from now and break even, but what if we plan to rent it out after we leave?  If we were to buy a condo in our area today and rent it out immediately, the margin between ownership costs and rent payments would at least come close to covering the costs associated with vacancies and maintenance.  However, I don’t know much about rental markets, so I can’t project what will happen 2-3 years from now, and I don’t know if this is a solid justification for purchasing a home right now.

My long list of questions:

1.) Is purchasing now with the intent to rent ~3 years from now worth considering, and is it a good bet that home prices will return to current values within ~5 years, or is there too much uncertainty for this to be worthy of consideration?

2.) I understand the overall market will continue to fall in the short term, but is this limited to high value properties, or are condos/townhomes/etc. also likely to lose 10%-20% over the next few years?

3.) If short-term resale value and/or rental prices are a primary concern, should we be aiming for the absolute cheapest property for our area (~$100k), or something in a more upscale neighborhood (~$150k)?  Do you think the higher end (even within this specific segment of the market) is likely to continue to fall more than the lower end, or are the differences likely to be negligible?

4.) Though the $8000 federal tax credit has to be returned if we move out within 3 years, is it true that we can keep a portion of it if we sell the property at a loss within 3 years?  I’m having trouble finding documentation on this.  Can I assume this tax credit hedges the risk of depreciation regardless of whether or not we sell within 3 years?

5.) I desperately want the stability of ownership, but I want to be confident that I will save money, or at least won’t lose a whole lot of it.  Do you think it’s likely I will be able to break even by selling within 3-5 years, even if I don’t occupy it the entire time?

I figure the savings in monthly housing costs alone will offset the cost of closing within 18-24 months, and if my down payment is large enough and prices don’t fall more than another 15-20%, then I won’t end up underwater.   Is my logic flawed?

I wish I could have stated all of that more concisely;  I’m just worried there are considerations I’m not taking in or don’t fully understand.  Thanks again for all your help!

Brandon Miscellaneous

This question is for Chris or Mike: My husband and I received a modification on our home in March. The loan documents were signed on March 11, 2009, and sent back to the lenders (Saxon). The problems is the lenders are not honoring the new loan docs. The first statement which was for May 1, 2009 was correct showing the mortgage amount to be $2323.35 and the total amount of $2991.06 ($629.71 escrow amount. Then they send us another statement saying there was an escrow shortage and we owe $4114.43. this effective for May 1, 2009 also. This one shows the principal and interests as $3135.83 with a shortage escrow amount $2710.33 a total payment of $4414.43. Then we received another statement, this one for June 1, 2009 for $3875.82 with the principal and interest for $3135.83. We know there is a escrow shortage of $1278.60 which we know we have to pay, but why is the principal and interest reflects the old one of $3135.83? I called the loan modification department Monday May 18, 2009 and talked to a loan rep here in northern CA. The young lady’s name was Donna (id! 17918). She told me that the computer had to catch up, it takes a FEW MONTHS so she said. I like to know if it takes the computer a few months how come the first statement was correct and the next consecutive ones incorrect? The next thing I talked to this rep about was our modification: our modification (a very good one) state a interest rate of 2.450% /Interest rate change date 4/1/09/Payment due date 5/1/09/ Monthly Principal & interest payment of $2323.35 until the loan is paid in full. She told me it was only for five years but the loan docs said until it was paid in full; July 1st, 2037 (the Maturity Date). I offer to fax a copy of the docs over but she told me she didn’t have fax machine. I think we are getting a total run around with the lenders. Please help us, we are at our wit end. Thank you in advance for helping us in this matter. Sound like we need an attorney?

Chris Miscellaneous

*Commentary from Chris Sorensen*
This 75 year young lovely person attended my class in Cathedral City. She and I both learned from Assessor/Recorder Larry Ward, that the State has done away with a program which allows for a deferal of property taxes until the sale of a seniors home or until their passing. It is this professionals opinion that this is a mistake and must be reversed. This women purchsed her home in 1959 and it is owned free and clear. All she wants is to be able live out her remaining years in the home she has occupied for FIFTY YEARS. A society that will tax its seniors into foreclosure and into a tax payer assisted living facility is one which lacks character and should be ashamed. This is my personal opinion and may not be shared by others who are associted with HELP. Here, in her words, are her concerns:

“I have been qualified & on the Tax Deferred Program for yrs, but have been notified that altho my paperwork is still registered, there are no funds for 2009. Since I have no funds to pay Riverside County Property Taxes, how long will it be before my home is taken from me to pay this current property tax yr. My income is $13,300 per yr and I’m 75 yrs of age.”

Mr Ward let us know that this is a State program and that our Governer just recently agreed to cut it.

Foreclosures based on unpaid proerty taxes normally do not occur until five years of uncollected taxes have passed. My hope is that the segments of society who have lived well within their means, will not be forced out of their homes in order for the State to appease those who would cry the loudest that their needs outweigh this poor womens.
We can do without much the State is being asked to keep by special interest groups, this program is one that morally must be put back into place. We must protect our Seniors.

Chris Miscellaneous

I read, a lot. This by far was the best quote I’ve read in a while. The Ivy League, with their Doctorates, in finance and mathmatics have led the way for far too long. Perhaps, now, finally, ones character and morals will come into question as opposed to simply creating complex financial vehicles that confuse even the supposed sharpest minds.

“There is so much that’s false and nutty in modern investing practice and modern investment banking, that if you just reduced the nonsense, that’s a goal you should reasonably hope for,” Mr. Buffett said. Regarding complex calculations used to value purchases, he said: “If you need to use a computer or a calculator to make the calculation, you shouldn’t buy it.”

Mr. Buffett said: “If you stand up in front of a business class and say a bird in the hand is worth two in the bush, you won’t get tenure….Higher mathematics my be dangerous and lead you down pathways that are better left untrod.”

Chris Miscellaneous

*A friend of mine sent this to me and I agreed with him that this truly does explain, in brief, what happened. It would be funny if it were not so accurate.

This explains everything. At last, what we’ve all been waiting for, an understandable explanation of derivative markets…
Heidi is the proprietor of a bar in Detroit .. In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).
Word gets around about Heidi’s drink now pay later marketing strategy and as a result, increasing numbers of customers flood into Heidi’s bar and soon she has the largest sale volume for any bar in Detroit .. By providing her customers’ freedom from immediate payment demands, Heidi gets no resistance when she substantially increases her prices for wine and beer, the most consumed beverages. Her sales volume increases massively.
A young and dynamic vice-president at the local bank recognizes these customer debts as valuable future asset s and increases Heidi’s borrowing limit. He sees no reason for undue concern since he has the debts of the alcoholics as collateral.
At the bank’s corporate headquarters, expert traders transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities are then traded on security markets worldwide.
Naive investors don’t really understand the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics. Nevertheless, their prices continuously climb, and the securities become the top-selling items for some of the nation’s leading brokerage houses who collect enormous fees on their sales, pay extravagant bonuses to their sales force, and who in turn purchase exotic sports cars and multimillion dollar condominiums.
One day, although the bond prices are still climbing, a risk manager at the bank (subsequently fired due his negativity), decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi’s bar.
Heidi demands payment from her alcoholic patrons, but being unemployed they cannot pay back their drinking debts. Therefore, Heidi cannot fulfill her loan obligations and claims bankruptcy.
DRINKBOND and ALKIBOND drop in price by 90 %. PUKEBOND performs better, stabilizing in price after dropping by 80 %. The decreased bond asset value destroys the banks liquidity and prevents it from issuing new loans.
The suppliers of Heidi’s bar, having granted her generous payment extensions and having invested in the securities are faced with writing off her debt and losing over 80% on her bonds.
Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 50 workers.
The bank and brokerage houses are saved by the Government following dramatic round-the-clock negotiations by leaders from both political parties. The funds required for this bailout are obtained by a tax levied on employed middle-class non-drinkers.
Author-Unknown

Chris Miscellaneous