THIS WEEK IN MONEY MATTERS, I WANT TO ADDRESS WHY UNDERSTANDING HOW A HOMEOWNER WENT INTO A DEFAULT ON THEIR HOME IS SO IMPORTANT TO THE HOMEOWNER.
Perry Mason, was an attorney in a television series back in 1957 to 1966. He took on clients that always needed to be defended in court for murder usually. This is a different type of murder case here in Chicago, IL that I tried to figure out exactly what had happened to the homeowner that they would have to do a Chicago Short Sale.
The Case opens up with a Chicago Mother of five children lost her husband to cancer years ago. She realized that she needed to sell the family home and downsize. And so she did. Everything seemed to be going along fine as this Mom put 20% down on her new home, a condo.
That was three years ago and today she has defaulted on her mortgage. I ask for the usual documents required by the banks/loan servicers when getting ready for submission into the loan servicer for review. I saw that this Mom had a loss of income and while that should be enough the previous two years she was stable in income and when looking at the file, there are ways that she could have and can tighten up to possibly make it work, if she didn't breath.
I called two lenders today and asked them one question based on these statements: She paid "x" amount of dollars for it. The down payment was 20%. The real estate taxes are "x" a month. Her monthly assessment is "x" a month but she got slapped with a small special for 6 months this past year. She was making "$x" gross a year with no other debt. Could she afford her Chicago Condo three years ago?
The Answer from two Chicago lenders: Yes, but she was at her max on mortgage amount.
Then I told them "But three months later she pulled a equity line out on her condo to equal the full down payment. She said that they told her it was only 3.5% interest. CATCH: What this mother didn't know was yes, the rate was 3.5% interest but it was 3.5% interest per day. Instead of a payment of $120 a month, her monthly payment for that second mortgage was $475 a month! OUCH!!!!
There Answer: She's dead. That line of credit regardless of the rate and terms, automatically sent her into foreclosure from the get go because of her income.
So, the case has been solved. The homeowner now knows that she shouldn't have been approved for that second mortgage/HELOC as she didn't qualify for it. Granted, I have suggested that she go get some counseling to understand her finances better as she also maxed out her credit cards in order to survive.
Sometimes, while some may think it is not necessary to understand the background of a file, I have seen the emotional side and self-destruction that homeowners put themselves through when defaulting on their mortgage. Just like a car accident, there are certain percentages of blame that are involved and while this homeowner is guilty, herself, it does stop alot of the guilt so that the file can move forward.
Do I do this with every Chicago Short Sale file? No. Only the ones where I see them beating themselves up.
I want to Stop Foreclosure. Sometimes, understanding a file helps me to make to get the Chicago Short Sale closed.
