DEAR BENNY: I need to write a "request for payment plan" letter to my homeowners association, but I don’t know how to write an effective one. I owe several months of back dues totaling about $3,000, which includes attorney’s fees and interest. I really need help on writing this letter. I have not paid because of major health issues in 2011 to date. –Liz
DEAR LIZ: Actually, your letter does not have to be formal, dramatic or emotional. Keep in mind that you are writing to the board of directors who are human beings just like you (or at least they should be).
The board wants to know if you have the ability to bring yourself up to date. You should know this also. If you do not believe you will have enough money to not only pay what is owed but also to keep current in the future, then perhaps you should consider selling your unit.
I don’t mean to be harsh, but realistic.
Basically, your letter should say, "Here’s my check for XX, which represents this month’s condo fee for my unit. I propose to pay YYY dollars each and every month until the balance I owe is fully paid. In addition, I will pay the condo fee as it comes due every month. I had major health issues that caused financial problems, but I now am able to catch up."
How much should you offer? Again, it has to be a realistic number that you know you will be able to afford.
And if you are unable to make payments, you have a number of options: File for bankruptcy relief; sell your unit; or if you are over 62 years of age, consider obtaining a reverse mortgage.
DEAR BENNY: My husband and I signed a note for my nephew back in 2006 using my home as collateral. Since that time my husband has died, as well as my sister, who left her home to my nephew, and he is renting it out and paying the monthly mortgage on my home. I would like to know if my nephew can transfer the mortgage to his home, as it is paid for and has the same value.
My nephew renovated the home but due to homes not selling he started renting. He was trying to sell my sister’s home to pay off the loan on my home. I would like to be able to be free to make other decisions, as it is a lot of expense and I have to keep up the yard work and pay all bills without any help. I’ve just turned 73 and am trying to look forward to what I need to do down the road. –Nora
DEAR NORA: Your nephew should immediately contact the company that services the loan (i.e., the company where he sends the monthly mortgage payment) and find out if it will be willing to transfer the loan from your house to his.
This would require a new transaction, which will include settlement costs and possible state or local recordation and transfer taxes. If your nephew is financially capable of carrying the new loan, then I suspect that this all can be accomplished.
You should make it clear to your nephew that while you were willing to help him back in 2006, you now need his cooperation. Basically, he has two houses, and should be able to get a new loan on one of them so that your house loan can be paid off.
DEAR BENNY: I am a 70 years old with a dedicated pension, an annuity that preserves it’s principal even as the market fluctuates, IRAs that I must begin to draw down, and a mortgage on which I owe more than $133,000.
Since I will need to withdraw money from the IRAs, and since they are losing rather than increasing in value, I was considering withdrawing all of the funds from them (slightly over $215,000), rolling them over into a small money market account I have and then paying off the mortgage. I have no idea of how this will affect my tax liability or what other issues with which I should be concerned.
Can you help enlighten me? –Name withheld on request
DEAR READER: First, let me advise my readers that I will not respond to questions where no name is provided. However, if a reader requests anonymity, I will certainly honor that request.
You really should consult a financial adviser who can review your specific situation. I cannot provide legal or financial advice to anyone; my responses always have to be general in nature.
Second, I hope you realize that when you withdraw money from your IRA, you have to pay income tax on every penny that you withdraw. If you had a Roth IRA, that would be different, but I suspect that’s not what you have. Assuming you are in the 33 percent bracket, by withdrawing $215,000, you may have to pay the IRS $70,950. Clearly, that’s too much money to lose.
Third, you are still in the prime of your life and hopefully will have many more years to enjoy. Over the years, I have represented too many people who are "house rich and cash poor." Their mortgage was free and clear but they did not have the money to pay the real estate tax or the hazard insurance, let alone enjoy life.
And in light of the economic problems facing this country, especially after the mortgage meltdown we have endured, most mortgage lenders have imposed tight restrictions on who can get a mortgage. If you have no income, you may have problems getting a loan later, even though your house would then be free and clear.
There are some options you should consider. First, based on your annuity, you may currently be able to refinance your existing mortgage. Rates are at an all-time low, and if your current interest rate is 4.5 percent or higher, you should immediately talk with a couple of mortgage bankers/brokers about refinancing.
Next, while I am lukewarm to reverse mortgages, this might be something you should consider. That new loan can pay off the existing mortgage, and (depending on how much equity you have in your house) you may even be able to pull out some cash. You would not have to make any mortgage payments, and the entire loan would become due when you die or move out of the property.
Check out Inman News columnist Jack Guttentag’s website, www.mtgprofessor.com, for its many informative articles, spreadsheets, and tables on a large number of real estate and related topics, including elderly applications.
DEAR BENNY: I’m trying to find a reliable source about being eligible to participate in a short sale (as the seller). A real estate friend is telling me "no." The mortgage broker is saying "yes." I’m thoroughly confused and would like to present my current situation to someone. Any advice? –Brian
DEAR BRIAN: If I understand your question, you are asking if the property owner (seller) can buy his own house back as the buyer at a short-sale.
As a financial matter, if the bank is prepared to accept XX dollars as the short-sale price, it should make no difference where the dollars come from.
However, from a practical point of view, if the seller has the assets to buy the house, why didn’t he just make the bank an offer to modify the loan using the money he has?
Furthermore, title has to be resolved; I have never heard of a deed whereby X conveys to X, and there are no changes or modifications in the way title is held on either side.
DEAR BENNY: My brother who lives in a different state insists that he has a mortgage. I have a deed of trust. Are they the same? –Anna
DEAR ANNA: Some states still use mortgages. Practically, there is no difference. Both are documents recorded among land records to put the world on notice that there is an outstanding loan against the property.
The primary difference is that a mortgage generally has to be judicially foreclosed; in other words, the lender has to ask a judge to allow a foreclosure sale.
With a deed of trust, the homeowner deeds the property in trust to a person or company selected by the lender. The document entitled "deed of trust" gives the trustee the "power" — the right — to sell the property if the borrower is in default.
In some states, this still requires judicial action or at least review. In many states, however, the trustee can sell the property at the courthouse steps, at the property itself or at an auction house.
Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to [email protected].
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