How Your Payments Can More Than Double

Yesterday I talked to a Parchment Michigan (just north of Kalamazoo) homeowner who’s payment almost doubled within a few months. Here’s how that can happen (and it may happen to you).

1) Lender losses insurance information and thinks there’s no insurance on the house.
2) Insurance agent sends proof of insurnace, but never follows-up to be sure lender got it.
3) Lender puts a $1000/yr policy on the house, and charges the home owner (double what they usually pay).
4) Lender then forces the creation of an escrow account, and expects the owners to fund it (with about $2500); plus they want the $1,000 for the policy they just bought.
5) $210 Escrow is added to payment (to pay future taxes and insurance)
6) $290 Escrow shortage “make-up” is added to payment (to pay the $3500 from 3 & 4 above).
7) The mortgage is variable rate, so it goes up $200.

There you have it – $600 to $1,300 almost overnight, through no fault of this family.

Obviously, if you’re used to a $600 payment and it goes to $1,300, you’re not going to be able to keep up – neither could they. That’s why they’ve asked my team to come in to try to stop the foreclosure so they can sell their house. We’ll have to discount the debt first since they owe more than it’s worth, but hey, that’s what we do (call us the “Bank Bullies” if you have to). The end result will be to allow this family to start over and start rebuilding their credit, while getting them out from this ridiculous house payment. That’s what a short sale is all about.

Don’t think this is rare – I see it often.

Joel

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