topic Re: Lump sum or drag...it...out... in Mortgage Loans

Lump sum or drag...it...out...

IOBA — Thu, 05 Apr 2012 14:18:33 GMT

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!

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

Anonymous — Thu, 05 Apr 2012 18:00:40 GMT

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.

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

IOBA — Thu, 05 Apr 2012 18:16:13 GMT

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.

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

Anonymous — Thu, 05 Apr 2012 21:00:21 GMT

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

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

Anonymous — Fri, 06 Apr 2012 05:14:19 GMT

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

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

IOBA — Fri, 06 Apr 2012 17:05:34 GMT

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.

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.

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

Anonymous — Fri, 06 Apr 2012 17:07:16 GMT

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.

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

Anonymous — Fri, 06 Apr 2012 17:09:39 GMT

@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.

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.

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.

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

laz98 — Fri, 06 Apr 2012 18:24:31 GMT

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

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

Anonymous — Fri, 06 Apr 2012 18:30:17 GMT

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.

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

IOBA — Sat, 07 Apr 2012 02:58:59 GMT

*sigh* I don't think he can rent at all. He's screwed up his credit - cc charged off, utilities turned on/off, late on his car payment, and so late with mortgage payments. His SO is on the mortgage too, but really has no clue about what is going on. SO says no to bringing in a room-mate. SO expects my friend to be responsible for everything in terms of the actually paying of the bills. They made an arrangement when they started to live together (when they bought the house) of how much money each would put into the "house fund" to pay for the house bills. SO puts in xx amount every payday and is done with it. Never follows up to make sure the mortgage got paid, etc.

At this point, I am not sure if either one of them can get into an apt with their credit. Income is not too bad. But who wants to rent to a couple with dogs? It's a tough renters market out there...and many apts around here will NOT take any pets! *sigh*

None of his family or friends can take him in either.

Anyone with feedback regarding the IRS liens?? Yes, the IRS does take a lot of his money (garnishing wages and intercepting his tax returns). But they do it to get the money he owes. And he owes a large buttload. He had to get permission from the IRS to purchase the house. The IRS said yes but we will immediately put a lien on it. Which they did.

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

Anonymous — Sat, 07 Apr 2012 04:09:17 GMT

I'd rather not force censure but ..... not telling SO is pretty messed up, on his part. Doesn't SO get any notifications from the bank or check credit? Also, where is SO's mortgage payment going if not to the bank?

I can't blame places for not allowing pets, though. I've read and heard some horror stories about places being trashed due to pet owner irresponsibity.

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

IOBA — Sat, 07 Apr 2012 14:07:29 GMT

The SO is "aware" but does not "care" about the finances. And I personally think that the SO can not grasp the consequences of not paying bills on time. The SO has a nice paycheck, puts the required amount into the "house account" and spends the rest. Happy go lucky attitude. Even when told more money was needed because my friend at one time was underemployed, SO said nope.

For that matter, I don't think my friend grasps the consequences or the big picture. He knows foreclosure is probably, maybe coming. But if he gives them a little cash here adn there, it will stall the foreclosure.

Our friendship has definitely changed over this. My friend wants to go out to dinner with me, but I won't. Mainly becuase I know he can not afford to eat out. Probably a shame on me for assuming that. But if it were me, I'd be throwing as much money at the bank as fast as I could, while still praying for a modification, and praying harder that a foreclosure was not coming my way. But that is me.

Like this person, I have no family or friends houses I can move into.

Any feedback on the IRS issue??

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

Anonymous — Sat, 07 Apr 2012 14:30:38 GMT

"Anyone with feedback regarding the IRS liens?? Yes, the IRS does take a lot of his money (garnishing wages and intercepting his tax returns). But they do it to get the money he owes. And he owes a large buttload. He had to get permission from the IRS to purchase the house. The IRS said yes but we will immediately put a lien on it. Which they did."

They're pobably seriously screwed. So is foolish for having hitched their financial wagon to a star about to go supernova.

Re: Lump sum or drag..It...out...

StartingOver10 — Sun, 08 Apr 2012 17:20:44 GMT

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.

Exactly. The bank will put the money in a "suspense account" and not apply the funds until it can cover the amount due.

In the meantime late fees and default interest accrue.

As to the IRS lien, when the bank forecloses, the lien will get removed from the property - but not paid. It will remain an outstanding judgment on the person so the IRS will continue to collect the paycheck amounts (garnishments) and the refunds. If your friend were to ever buy another property then the lien goes back on the new property. The only way to get rid of it is to pay it. There are certain circumstances where the amount due can be discharged in BK, but that involves a certain timeframe for taxes that have been filed. He would need to speak to a BK attorney to get good advice. After he is foreclosed upon, which seem inevitable given the description you posted, he may want to consider a Ch 13 anyway so he can take care of the IRS past due once and for all. Your friend is truly in denial and until he realizes it, things will get much worse. If he were proactive, he would be contacting a BK attorney right now because he might be able to save his house and pay the taxes through a Ch 13.

Re: Lump sum or drag..It...out...

Booner72 — Sun, 08 Apr 2012 20:31:21 GMT

There must be something going on underlying this - the financial mess sounds like a symptom of something - Drugs? Alcohol? Grambling Problem?

Re: Lump sum or drag..It...out...

Anonymous — Sun, 08 Apr 2012 23:25:21 GMT

@Booner72 wrote:
There must be something going on underlying this - the financial mess sounds like a symptom of something - Drugs? Alcohol? Grambling Problem?

Great point. Any of these or possibly some mental disorder.

Re: Lump sum or drag..It...out...

Anonymous — Sun, 08 Apr 2012 23:38:39 GMT

@Booner72 wrote:
There must be something going on underlying this - the financial mess sounds like a symptom of something - Drugs? Alcohol? Grambling Problem?

Why can't it ever just be plain 'ol stupid?

Re: Lump sum or drag..It...out...

StartingOver10 — Mon, 09 Apr 2012 00:21:59 GMT

@Anonymous wrote:
@Booner72 wrote:
There must be something going on underlying this - the financial mess sounds like a symptom of something - Drugs? Alcohol? Grambling Problem?
Why can't it ever just be plain 'ol stupid?

How 'bout "ostrich syndrome"???

Re: Lump sum or drag..It...out...

IOBA — Mon, 09 Apr 2012 00:30:54 GMT

Booner72 - you are sooo good! Yes, it is a sign of laziness and the entitlement attitude.

He still hasn't given the bank a dime. *sigh* I think in his mind, if the payment is $500 (just a figure I am throwing out there), it will never change, regardless of how late he is. He doesn't believe in late fees, penalties, or additional interest. So in his mind, $500 = one payment, $1000 = two payments, no matter when the payment is made.

And he's not saving the money either. Well, if he looses the house, he have very few, if any options for housing.