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Valued Contributor
IOBA
Posts: 2,697
Registered: ‎08-13-2009
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Lump sum or drag...it...out...

A friend of mine is behind on his mortgage.   His math and logic are very different from mine.  For example, if he misses the January 2012 payment, but makes a February 2012 payment, in his mind, he still owes January.  In my mind, he just paid January, but he still owes the late fees, interest, etc which is a balance carrying forward.  So technically, he's still short on January payment.

 

I am not sure, based on his math, how far behind he actually is on the mortgage.  I do know that he lives in fear that the Sheriff is going to show up any day now and serve him foreclosure notice.

 

He finally got some money.  It is equivalent to two months worth of REGULAR mortgage payments.  

 

I had suggested he give the bank a lump sum asap!

 

He says no way!  He's going to drag it out....feed them a payment this week...and maybe another one in a week or so.   He's trying force their hand on a mortgage modification that reduces his principle and his interest rate.   He's been trying for a mod now since 2009?  He's been turned down for numerous reasons, but he's not giving up hope becuase the gov't "owes" him.  (Right...and he owes the IRS bucko bucks.)

 

Asking for opinions on four different things:

 

1.  Is he better off doing a lump sum payment or breaking it down to smaller sums?

2.  Will teasing the bank with little bits of money help his case for forcing a loan modification?  (He's been turned down for having super bad credit and for not making enough money to be eligible for a reduced payment.)

3.  If the bank forecloses on the property, what happens to the IRS lien that is currently on the property?   Does it go away?  Will the bank have to pay the IRS?   Will the IRS find other ways to haunt him?   (The IRS already garnishes his wages and intercepts his tax return in addition to the lien on the property which is jointly owned.)

4.  How will the S.O. (signficant other) be affected by the foreclosure and the IRS lien?   (SO doens't care about late payments, etc that are showing up on credit, so it was jointly financed.  SO has no issues with the IRS.)

 

Thanks!

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FrugalRican
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Registered: ‎02-02-2012
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Re: Lump sum or drag...it...out...

I'll try to answer what I can and have some knowledge of.

 

If he is behind January and pays in February, he didn't make February's payment. The payment is applied to January and he still owes February. I have no idea where he gets this idea that he is paying February and not January, the system doesn't work like that.

 

The late fees and interest do carry forward and it's rolling into a giant ball of money that he owes on the side, but technically, all he "owes" is the next payment. The late fees could technically keep rolling forward and depending on the bank's policy, end up just additional payments. Of course, this isn't going to look pretty for him if he does that. I've seen plenty of customers just roll the late fees forward.

 

I'd suggest him go to make a lump sum payment, just to get caught up. He sounds like he's just one emergency away from losing his house altogether.

I'd make the payment and then try again for the mod, but I don't know what has changed between now and then that makes him think he'll get any different of a treatment from his bank. "The bank" isn't going to care if he pays every week or not, it's the same thing, just adding more interest.

 

Just for being scared that a Sheriff could come and make a visit, he definitely needs to stop playing around with the payments.

 

As far as your others questions, sorry, my knowledge stops there.

 

But they seriously need to get their finances in order, they're playing with greek fire.

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IOBA
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Re: Lump sum or drag...it...out...

FrugalRican - I agree with your math.   His math doesn't make reality.  But that is the way he is and he has not accepted or embraced my math.  He wants to stay in the home but on his terms.  

 

I had suggested the lump sum.  He said no.  

 

Thank you for sharing your opinon.  :smileyhappy:

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drkaje
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Registered: ‎07-25-2008
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Re: Lump sum or drag...it...out...

Why would your friend believe himself in a position to negotiate?


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StrateUp
Posts: 233
Registered: ‎02-02-2012
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Re: Lump sum or drag...it...out...

Sounds like he's already lost the house, he just doesn't know it yet.

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IOBA
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Re: Lump sum or drag...it...out...

drkaje - He lives in "Denial Reality, USA" population - millions.

 

UPDATE - I talked to him yesterday and he hasn't given the bank any money yet!!  He said was too busy, maybe tomorrow!  I know, seriously?  He already has had 10 yrs added on to his mortgage from a few years ago of being late.

 

I hope he doesn't loose the house becuase he loves it there.   But I don't see many alternatives if he won't throw money at the bank.   And his choices of not paying when he could have made him unable to refi for a lower rate.  :smileysad:

 

I just found out my neighbor has received her "cure" letter from the bank to be foreclosed on.  She doesn't even begun to deal with the possibility of moving.  As far as I know, she tries.   And the stress of all of this has had the indirect effect of her loosing weight.  :smileysad:

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FrugalRican
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Re: Lump sum or drag...it...out...

Does your friend know of any good places where he might be able to rent at within the next year?

 

Because that might be his reality soon, since the roof over his head is seemingly not a priority.

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jimbo831
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Re: Lump sum or drag...it...out...


IOBA wrote:

drkaje - He lives in "Denial Reality, USA" population - millions.

 

UPDATE - I talked to him yesterday and he hasn't given the bank any money yet!!  He said was too busy, maybe tomorrow!  I know, seriously?  He already has had 10 yrs added on to his mortgage from a few years ago of being late.

 

I hope he doesn't loose the house becuase he loves it there.   But I don't see many alternatives if he won't throw money at the bank.   And his choices of not paying when he could have made him unable to refi for a lower rate.  :smileysad:

 

I just found out my neighbor has received her "cure" letter from the bank to be foreclosed on.  She doesn't even begun to deal with the possibility of moving.  As far as I know, she tries.   And the stress of all of this has had the indirect effect of her loosing weight.  :smileysad:


I just can't understand this attitude.  I would think he would be down at the bank the day he had any money and giving it all to them until he is caught up, and setting up payment arrangements with them.  Very sad situation.  Hopefully he gets it together soon.

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laz98
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Re: Lump sum or drag...it...out...

Sorry to hear about that!  Sounds eerily similar to the situation my brother is finding himself in.  Sad, but it's all his own fault.  Same kind of logic :smileysad:

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FrugalRican
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Re: Lump sum or drag...it...out...


IOBA wrote:

  (The IRS already garnishes his wages and intercepts his tax return in addition to the lien on the property which is jointly owned.)

 

Thanks!



As the kids would say: LOLwut?

 

I didn't even read this part because I read the initial part of the question and didn't know the answer.

IOBA, I'm not surprised his math is terribly wrong then. He allows himself to get money taken away from him all the time. His math is superbly off.

 

I spoke to one of the mortgage reps from my job and he confirmed my suspicion. The bank doesn't care if he pays increments every week, he's still late until he matches the total due for that month. From what you've described, he'll probably be late forever.

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