ILL, ILLITERATE & Seeking Help on Note Modification

WE GOT A MORTAGE ,BECAUSE WE WERE IN A SITUATION THAT WE WERE NEEDING HELP BAD, DUE TO ILLNESS (MY HUSBAND HAD HAS 2 CANCER SURGERIES) . WE DID NOT WANT TO LOOSE OUR HOME WE HAD WORKED SO LONG FOR, SO WE ACCEPTED THE MORTAGE. AT THE TIME, WE WERE SO DESPERATE TO SAVE OUR HOME, WE SIGNED THE PAPERS. NOW WE LEARN THAT 100% OF ALL MONEY PAID IS ON INTEREST ONLY. NONE OF THIS IS APPLYING TO THE PRINCIPAL OF THE LOAN. MY HUSBAND CAN NOT READ OR WRITE VERY WELL, AND THE BANK MANAGER EXPLAINED THE LOAN TO HIM, BUT I SOMEHOW BELIEVE WE ARE BEING MIS LED. PLEASE HELP US, TO SAVE OUR HOME, AND EXPAIN WHAT WE CAN DO TO FIX THIS. WE ARE ON A VERY SMALL INCOME, AND WANT TO KEEP OUR HOME THANK YOU VERY MUCH

Hello,

I am so sorry to hear about your husband's illness. I hope that his surgeries were a success and that he is well again! I am concerned that your husband signed documents without the assistance of a literate advocate. This is something that you may want to share with a professional loss mitigation company (there are thousands of them: google one in your area). Be careful, however, and do not pay anything upfront. Most are working on a success fee now. In other words, they do not get paid unless they successfully negotiate your loan. MAKE SURE TO MENTION THE CIRCUMSTANCES AND THAT YOUR HUSBAND IS ILLITERATE!!!! Lenders are not the bad guys they are made out to be. They will likely assist you in some manner: lower rate, longer repayment terms, both, etc. Review some of the blogs in the past on this site. You may find some helpful insight.

MortgageMaster

Debt Forgiveness For Those With Severe Medical Costs

Hi,

Do mortgage companies ever forgive an entire home loan debt ($102,000.00) because of medical reasons? I ask because of severe health problems in my family and medical bills we can't get on top of, even with our credit card. Mr. Warren Buffet recently paid off our credit card and a home equity loan because of our need. But our house payment is nearly half of our monthly income. (We are living on Social Security Disability). Thanks,

Denise


Dear Denise,

Please forgive my more-than-tardy reply: This e-mail was lost in my e-mail files!

I am really very sorry to hear about your medical issues. I hope everything turns out well. To answer your question, simply: It is up to the lender. The fact is that if you are behind, you have several options for a loan modification: lower rate, longer term, a combo, etc. Lowering the principal is certainly not unheard of, but much less common...even in these crazy times. Given your circumstances and the likelihood of some media attention that you received re: Mr. Buffet's generosity, you may be able to get the lender to help. Even if the lender extended your term and lowered your rate, you would be better off than you are now. Just remember, you get more with honey than you do with vinegar. In other words, the lenders want to help. They do not like to be yelled at or assaulted. This is not advice directed specifically at you, but at all those who are looking for loan modifications. Good luck!

MortgageMaster

I Am Paying Too Much Toward Interest!

Good day,

I have concerns that my financial institution (RBC) has made too much money from the interest off my mortgage (You and me both, brother, you and me both!) and I should be able to negotiate terms in lowering my interest rate or at the very most pay principal only (not likely). You may be able to negotiate terms, but it will likely result only from being delinquency on your part. Unfair, I know, but it is the way things are right now.

I’ve lived at my residence for just over 11 years. I originally borrowed $85,000 to buy it.The home was built in 1901 and has had significant upgrades, but marketable for about $90,000.I have re-mortgaged twice, once in 2002 when the balance I believe was around $77,000 for $104,000 to consolidate debt, go back to school and another time in 2007 for the amount owed then, approx. $89,000.I still owe $87,000 on the house and over the course of 11 years I have given the bank approx. $88,530 total principal and interest. I do know that since I have re-mortgaged a couple times, I would have to “bight the bullet” about the amount of dollars paid.But is there rules a bank must follow in order to not take advantage of a client who has obviously paid into a mortgage enough? I know it sucks, but mortgages are "front-loaded" regarding interest. In other words, the VAST majority of your payments will go to interest for the first many years. It is only in the last ten years that you really clobber the principal! Thus, by refinancing as you have, twice, you keep starting the "interest-clock" ticking! The bank is following rules as allowed and as drawn-up in your mortgage note. Do not feel as though you are a "sucker", your mortgage is not likely any different than all the other mortgages out there. I have 148 months remaining on my term at a monthly payment of $769 equalling an additional $113,812 to the already $88,530 totalling $202,342 for a $90,000 home. I truly don’t see the cost advantage. There is not cost advantage, per say. The advantage is in tax deductions and appreciation of value: I do not know the present value, but it is likely to be substantially higher in 148 months. In the meantime, you are also writing off the interest. Home ownership is still a great investment OVER THE LONG RUN! What can I do? Please help any advice is greatly appreciated. Apply extra toward the principal every month or make an extra payment every year. This will reduce the amount to be paid and the time that you continue to make payments. Good luck!

Thanks kindly, Mark

Mis-applied Check?

MortgageMaster,

My homeowners sent me a check for damages to my home, which I sent to my morgage Bank to endorse and return. This was in Sept. all repairs have been completed, I can not get my morgage company to reimburse me for repairs to my home. I think there is federal regulations ,that a morgage company can only hold your insurance check for a certain lenght of time.Please let me know this ruling from the Federal Government.thanks

Hello,

I am not familiar with the regulation that you are writing about. As far as I know, HOA's are regulated by the state(s) they are located and/or operating in. This is also true of mortgage lenders. Thus, I would contact the appropriate state or federal agency to get the correct answer. Based on your e-mail address and a little "googling" on my part, I think you are in California. It does not sound as though you need help with the HOA, but rather, the lender. Lenders can be regulated by a bevy a different organizations. In California it can be California Department of Corporations, FDIC, California Department of Financial Institutions, California Department of Real Estate, etc.

The first thing I would do is look at your October statement and see if the endorsed check was applied as a payment to your mortgage. If so, ask a supervisor to void the transaction and send you a check (you may need to prove the work has been satisfactorily completed). If not applied to your mortgage, where was the money applied (assuming the check was cashed?: Check with the HOA)? If the check was cashed, you are entitle to know where it was applied. It sounds as though there is more of a lack of communication than something nefarious. If the check was not cashed, you are back in the driver's seat. Good luck!

MortgageMaster

Spousal Abandonment: Who Pays The Mortgage?

Dear MortgageMaster,

My (ex) wife and myself have joint names on mortgage agreements some 3 plus years ago. She has left the marriage with no apparentintent on paying her share of payments. She has departed to the Mid West states (U.S.) Kansas City, MO. Before she left she told me if I was to sell her assets, and property she wanted half of profits. When she departed the mortgage owing was $ 90,000 with total debts ( matrimonial ) over $ 25,000.Are there laws in N.S. concerning abandonment of marriage, especially, concerning debts incurred since marriage.

Dear Sir,

I am sorry to hear about your sad turn of events. Unfortunately, I have absolutely no knowledge of Canadian law. Even in the U.S., the laws from state to state differ regarding mortgage obligations. In California, for example, whoever signs the mortgage paperwork as a borrower is responsible for the mortgage, regardless of changes in marital status. You need to speak to an attorney. Sorry I could not help!

MortgageMaster

Can I Pay 1/2 My Mortgage Payment Twice Per Month?

Dear MortgageMaster,

I have spent the last 6 months splitting my mortage payment in half. I will send half the first week of the month and the second half no later than the 18th of the month. I have explained to them that I am a childcare provider and that I pay them as much as possible as soon as possible. I have asked for my due date to be reset for nine consecutive months to reduce or eliminate the late fees that continue to accrue on my account. They refuse to do so. My question is, is there a regulation that mandates that the mortgage company applies funds as received and re figures interest on the outstanding principle or can they hold the funds unapplied and continue to collect interest as if no effort or money was received? My mortgage company it First Franklin Financial Services

Julie

Dear Julie,

Insofar as a regulation that mandates that a mortgage company accept your 1/2 payments as they are received, I do not know of any. Nor am I familiar with any mortgage company that will accept 1/2 payments twice a month on First Mortgages. Since HELOC's are lines of credit, you can arguably use this payment method as long as both 1/2 payments are received before the "late" date. Macquarie Bank, an Australia-based bank, has a heloc first that can be used in the manner you are talking about (as could any Heloc 1st). Other than a Macquarie First, I do not know of any lenders who are set-up to accept payments in the manner described. Perhaps you can try and put aside one payment over the next few months, put it in a separate checking account, and then when you have enough saved up, send it to the lender. Then you will always be on schedule. Also, given the current markets, you may be able to negotiate a loan modification changing your due date. Lenders are becoming increasingly flexible! Good luck!

MortgageMaster

Kentucky Homeowner

MortgageMaster,

I'm in search of some mortgage regulations for the state of kentucky. My primary question is, how long must i be in a home before i can re-sell it? also, questions relating to that with regards to taxes, etc. if i'm in a house for a year and a half, what willhappen when i sell it? is there any fine/fee/ are any gains taxable?
if yuo have any answers, or a reliable location wherei might find them, i would greatly appreciate it.
Regards,Jeremy

Hi Jeremy,

You need to speak to a CPA. I AM NOT OFFERING THE FOLLOWING AS ADVICE, BUT SIMPLY MY OBSERVATIONS OR KNOWLEDGE. PLEASE CONFIRM WITH A TAX PROFESSIONAL: Generally, there are no taxable gains on a property (if < $250k/individual or <$500k for a couple) as long as you have lived in that property for at least two of the past five years, cumulatively). Thus, it makes sense to me that 1 1/2 years may have create a taxable event (it is less than two years, altogether). I am not sure if Kentucky has anything different from the above.

MortgageMaster

Bi-weekly Payment Plans

Dear MortgageMaster,

I am trying to set up a biweekly payment option on our 30 year fixed mortgage. I am told by my mortgage lender that I must use their outside FNC insurance company to accomplish this which will cost me $375 to set up. Iasked to do it myself through my bill pay option at my financial institution. I was informed I could not. Is it legal for the mortgage co.to demand I use their system and not apply my additional $ paid in the same interest saving manner?

Jon

Dear Jon,

Congratulations on tapping into one of the most powerful and painless methods of paying your mortgage off early...thus, saving thousands and thousands of dollars! Your lender can require you to use their program if you need to use them to set up the bi-weekly program. YOU DON'T!!! Simply take one month's payment and divide it by twelve, and then increase your monthly payment by the 1/12. For example, if your monthly principal and interest payment is $1200, divide it by twelve ($100), and add the $100 to your regular payment ($1200 + $100 = $1300). This achieves the same thing as a bi-weekly payment plan (for reasons I will not explain, it actually works a little faster and better), costs nothing, and is relatively painless. A word of caution, make sure that you note on your payment coupon that you are paying extra and want it applied to principal.

MortgageMaster

Will Bank Lower My Principal?

Dear MortgageMaster,

I was told by someone that couldn't make their payments and were behind on their mortgage that they called the lender and they wiped away a large portion of their debt and reduce their monthly payments by almost $1000. They said the lender was able to do this because of Federal program for first time home buyers. Have you heard anything about this?

Katie

Hi Katie,

Your friend is one of the luckier borrowers I have heard about. I have researched and cannot find a Federal loss mitigation program that is specific to first-time home buyers or that mandates lowering principle on a loan. There is a plan called Hope Now through HUD as well as several other programs designed to help the struggling homeowner. That being said, there are plenty of loan modifications occurring via the lenders and third parties (For-Profit and Non-Profit). Most do not involve cutting the principle loan amount. In fact, very few will lower the loan amount. Most will lower the interest rate, defer payments, lengthen the term of the loan repayment, etc. The facts are if it makes dollars and sense (pardon the pun), the lender will entertain the modification.

MortgageMaster

Does One-Time Lawsuit Settlement Affect Underwriting?

Dear MortgageMaster,

I have received a settlement for a personal injury which is not subject to tax reporting or taxation. It will make my personal income look elevated in comparison to next year. Is this a situation that could be explained by letter to a mortgage broker and other creditors so that my ability to seek credit next year won’t be negatively impacted?

Thanks, Susan

Hi Susan,

I hope you have healed from your ordeal. You said that the settlement "was not subject to tax reporting or taxation". How will it make your personal income look elevated? Perhaps it is reported, but not taxed? I do not know. Let's assume that you did claim the income (regardless of its taxability), a simple letter may be required. This income is like a one-time capital gain; lender's will not count it. Capital gains, however, can be counted if they are consistently earned over a two year period (some lender's may request three years of taxes as proof). Thus, dividends, real estate gains, etc. MAY be counted, if they qualify. A one-time settlement will not effect you, one way or another insofar as income qualifications are concerned. You can use this money and source it as your down payment.

MortgageMaster

Payment Deferral

MortgageMaster:

I am in trouble. I have 2 mortgages on my home. It was last appraised inJan 2007 for $950k. Both mortgages total $840k and I am now out of moneyand work. What should I do? I will begin another job in 90 days and I canmake my payments then. Do I contact my mortgage companies and ask toreduce payments for 90 days? Do I file bankruptcy? I don't want to lose myhome but food on the table is more important.
Thank you, Mike

Dear Mike,

I am sorry to hear about your situation. I doubt you have any equity to sell. Thus, your options are to 1) Short-sell, 2) Walk, or 3) Call the lender. I am absolutely sure that a call to the lender is easier than the former options. Even if it is aggravating, EVERYONE should use this option first. Loss Mitigation Departments are there to try and keep you in the home! More often than not, they will explore opportunities to keep you in the house. Given that you are starting another job in 90 days and assuming that you can cover the payment at that time, I am very sure that the lender can help you. They may do a loan modification,: defer the delinquent payments for later, spread-out the late payments over a given number of months, etc. They have many tools at their disposal...particularly given the current enviroment. PLEASE CALL YOUR LENDER ASAP!

MortgageMaster

Refund of Appraisal

I had a loan going with a loan co. and at the last minute they tried to change me to a higher rate of interest. I paid for a appraisal based on the 5% rate. What can i do to recieve my money back or report this co. I still have not receive my appraisal that i paid for. This co will not return any of my calls or hardly ever answer phones. What can i do to get my money back. Or what should be my next step.

Dear Blogger,

I am sorry to hear about your situation. The key verbiage here is "I paid for the appraisal based on a 5% rate". Actually, to get technical, you paid for the appraisal to get a value on your home. You may have agreed to go forward with the appraisal based on your belief that you had a locked interest rate of 5%. If you believe this to be the case and that your lender/broker "baited and switched" you, you should gather up your supporting documents and fax them to the lender/broker, along with the letter that you are sending to the regulatory agency that oversees them in your state. I will gamble that they will call you.

Either way, if you paid for the appraisal, you should be able to get a copy of it.

MortgageMaster

Tax Question on Option ARM Loans

Dear MortgageMaster,

I have had an option mortgage for seven years and it functioned just as I intended. At our age we never planned on paying off our home. We have a 600K loan on a house valued at $1,250,000. We refied and Homecomings became the lender. Unlike our previous lenders, they do not place all the interest paid on the 1098. They only place the difference between interest and the amount going against principal on the 1098. Since the IRS considers interest deductable whether it is paid or accrued, the difference is huge,18K versus 45K. Is there any way I can make Homecomings show all the interest payments on a 1098?

Dear Blogger,

Thank you for not asking me a tax question! I can only assume that Homecomings is reporting according to what their legal counsel advised them to do. In turn, I am sure that their legal counsel did what the IRS advised them to do. If that is the case (which I am only assuming), you may wish to talk to your CPA about the deferred interest (the negative amortization) and see if, when, and how that can be deducted.

On the other hand, asking Homecomings for a new 1098 may provide you with 1) a new 1098 or 2) reasons they do it the way they do. I suspect that in the reasons why they do it the way they do, you will get the answer(s) you are looking for. Either way, your question is a good one for a tax professional..

MortgageMaster

Transferring Loan To Relative

Hi MortgageMaster,

My father has a mortgage on a house. My brother wishes to live in the house and take over ownership. Is there a way for my dad to transfer the mortgage to my brother and be released of responsibility of the mortgage?
My fear is that my brother may default on payments. If this occurs how would this effect my father?

Thanks, Elaine

Hi Elaine,

The only way for your Dad to remove his liability completely from his home is to sell the property and insure the transaction with a Title policy(ies). Your brother can potentially assume the loan, if allowed and approved by the lender. Assumptions, however, are not guaranteed, are tricky, and can still leave the seller responsible in the case of default. i would contact a real estate attorney to best protect your father. As usual, advice from the MortgageMaster is not to be construed as legal advice but is based on experience. Please seek legal/tax counsel before making any decisions.

Assuming a Mortgage

I am selling my home; and I have a buyer who'd like to assume the mortgage. I understand the risks involved and that is not the issue. I have lived in my house since October 2005, with the original mortgage being through TD Canada Trust. Last June (8months ago), I switched to Servus Credit Union. Last month I did a refinance to consolidate debt incurred from my wedding. My wife and I then made a purchase on a new home; have been approved on the second mortgage with no conditions. Initially, we had a tenant to rent it out. We then decided to sell and we're successful; which leaves us in the current situation. Is there any rules or regulations that prevent and individual from assuming our new refinanced mortgage within 6 months? Or does that rule apply to new mortgage where title has been held for under 6 months? My lender is giving the new buyer grief, and I would like some clarity on this issue. Keep in mind, that my lender has yet to even gather personal information from the new buyer as to whether he is qualified.

Thanks Daniel A.

Hi Daniel,

I have researched it in a million places and received as many answers. Most lenders I have spoken to have said they do not have a specific policy regarding the length of time you must have a mortgage before allowing someone else to assume it. Quite frankly, most have not had the scenario. The main point I hear being emphasized, over and over, is that it is up to them to approve an Assumption. Therefore, your buyer is at their mercy. Given the rapid drop in rates recently, the lender might be more willing to allow someone to assume the loan if it is at a higher rate. Otherwise, the Due-On-Sale Clause that is common on most mortgages (ex-FHA, some ARM's, and VA) pretty much gives your lender the right(s) to negotiate any assumtions and approve or deny them.

I have attached a link and article by Jack Guttentag, Ph.d. While I often disagree with his statements or parts of his writings (Ivory Tower versus real life), this article is excellent:

"When a homebuyer assumes responsibility for a home seller�s existing mortgage, it is called an �assumption�. The buyer assumes all the obligations under the mortgage, just as if the loan had been made to her.

The major driving force behind assumptions is the lower interest rate on the assumed mortgage relative to current market rates. If the home seller has a 5.5 % mortgage, for example, and the best the buyer can get in the current market is 7%, both parties can be better off if the buyer assumes the 5.5% loan. An assumption also avoids the settlement costs on a new mortgage.
For years, we heard little about assumptions because market rates were so low. Now that rates are above their lows, and may rise further, we can expect that assumptions will receive increasing attention.
The value of an assumption depends on the difference in rate, the balance and period remaining on the old loan, the term of the new loan, on how long the buyer expects to have the mortgage, and on the �investment rate� � the rate the buyer could earn on her savings. Assuming that the 5.5% loan has a $100,000 balance with 200 months remaining while the 7% loan would be for 30 years, that the buyer expects to be in the house for 5 years and can earn 4% on investments, the value is about $7,000. A spreadsheet that makes this calculation is available on my web site.
The $7,000 of savings does not include the settlement costs on a new loan. On the other hand, the savings would be reduced if the buyer has to supplement the existing loan balance with a new second mortgage at a higher rate. This could well be the case if the existing loan balance has been paid down appreciably, and/or the house has appreciated since that mortgage was taken out. The buyers who do best on assumptions are those who have the cash to pay the difference between the sale price and the balance of the old loan.
However, buyers should not expect to receive the full value of an assumption. The seller must benefit as well; typically, the parties share the savings. The seller�s share will be in the form of a higher price for the house. Indeed, some economists believe that the full value of the assumption should be reflected in the price of the house, but this is as implausible as the opposite view, that only the buyer benefits.
The benefit to buyer and seller from assuming an old loan comes at the expense of the lender. Instead of having the 5.5% loan repaid, which would allow the lender to convert it into a new 7% loan, the 5.5% loan stays on the books. Back in the 70s and 80s, lenders couldn�t do anything about this. Mortgage notes at that time did not prohibit assumptions, and the courts ruled that lenders could not prevent them.
Following that experience, however, lenders have inserted due-on-sale clauses in their notes. (An exception is FHA and VA mortgages, which do not contain these clauses, as discussed next week). These stipulate that if the property is sold, the loan must be repaid. Even with a due-on-sale clause, the lender may allow an assumption -- keeping the loan on the books avoids the cost of making a new loan � but the interest rate will be raised to the current market rate.
Raising the interest rate to market removes most of the benefit of the assumption to the buyer and seller. In some cases, they attempt to retain the benefit by agreeing to a sale using a wrap-around mortgage, without the knowledge of the lender. The seller takes a mortgage from the buyer, which may be for a larger amount than the balance of the old loan, and continues to pay the old mortgage out of the proceeds of the new one. The new mortgage �wraps� the old one.
This is a dangerous business, particularly to the seller, who has given up ownership of the house but retained liability for the mortgage. The seller is in deep trouble if the buyer fails to pay, or if the lender discovers the sale and demands immediate repayment of the original loan. I wouldn�t do it, even if I were selling the house to my mother.
Instead of prohibiting assumptions, thereby encouraging wrap-arounds, why don't lenders explicitly allow them for a price?
Good question. When interest rates are above their lows and new borrowers are concerned that they could go much higher, some would be willing to pay a premium rate for the right to transfer that rate to a home buyer in the future.
For example, a borrower taking a 6.5% 30-year FRM might be willing to pay 6.875% for the right to allow a home buyer to take it over when he sells his house. The higher rate is akin to an insurance premium. If market rates are above 16% when he sells, as they were in 1981, he will save a bundle.
An assumable mortgage has some resemblance to a portable mortgage. If you sell your home and your mortgage is assumable, it can be transferred to the buyer; if it is portable, it can be transferred to a new property you buy. Portability is of no value if you decide to rent, go to a nursing home, or die, whereas an assumable mortgage retains its value in these situations. On the other hand, some portion of the value of an assumable mortgage must be shared with the purchaser. A mortgage that is both assumable and portable would have enhanced value.
Lenders who offer an assumability option will require that any new borrower meet the lender�s qualification requirements. Borrowers purchasing the option will need to be confident that the lender won�t tighten its requirements when market rates increase. The best assurance would be a commitment to accept approval under one of the automated underwriting systems developed by Fannie Mae or Freddie Mac.
Loans insured by FHA or guaranteed by VA have always been assumable. During periods when borrowers are concerned about future rate increases, this gives them an edge.
FHA loans closed before December 14, 1989, and VA loans closed before March 1, 1988 are assumable by anyone. Buyers who assume these mortgages don�t have to meet any requirements at all, but the seller remains responsible for the mortgage if the buyer doesn�t pay.
Any seller who allows assumption by a buyer without a release of liability is looking for trouble. Even if the buyer pays, and that is a crapshoot, the seller�s ability to obtain another mortgage will be prejudiced by his continued liability on the old one.
WARNING: The release of liability must be in writing, and you must preserve the document. This will protect you in the event that the new borrower defaults and the collection agency comes after you � it knows nothing about your release of liability. This happens!
If an old FHA or VA is attractive to a buyer, the seller can request that the agency underwrite the buyer. If the buyer is approved, the seller will be released from liability. At this point, there can�t be many of these loans left with balances large enough to be attractive to buyers.
Assumption of FHA and VA loans closed after the dates shown above requires approval of the buyer by the agencies. The process is much the same as it would be for a new borrower. Upon approval of the buyer and sale of the property, the seller is relieved of liability. FHA allows lenders to charge a $500 assumption fee and a fee for the credit report. VA allows a $255 processing fee and a $45 closing fee, and the VA itself receives a funding fee of ½ of 1% of the loan balance.
FHA and VA loans that were closed during the low-rate years 2000-2003 will become attractive targets for assumption if interest rates continue to rise. Potential sellers who have one of these loans can use the spreadsheet on my web site to estimate how much the assumption would be worth to a potential buyer.

November 17, 2003

Jack Guttentag is Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania. Visit the Mortgage Professor's web site for more answers to commonly asked questions.

Filing Complaint

Dear MortgageMaster,

I’m trying to find out what agency regulates the mortgage industry. I would like to file a formal complaint about my mortgage company, but am unsure who to file the complaint with.

Thanks, Joyce

Hi Joyce,

Alas, dear Joyce, I cannot answer this question. Nor can anyone else without more information: Who is the lender? Are they a bank, Thrift and Loan, Credit Union, etc. What state are they licensed in? There are many questions that need to be asked and answered to know whom a complaint should be directed. For example, in California, numerous agencies regulate the lenders: California Department of Corporations, FDIC, California Department of Financial Institutions, etc., etc. There is an never-ending list of acronyms that regulate lenders throughout the U.S.A., both State and Federal. Hence, some of the problems we are currently witnessing: "Who oversees whom", "Who regulates, what", "Who has the ultimate power to punish", Etc.

You need to contact your lender or do some research to see who they say they are licensed with. I am sure that it will show on their website. It is usually required. Go to the regulatory agency's website and find the section for filing a complaint or a phone number to do so.

MortgageMaster

Using 401k for Down Payment/Gift From Family Member

Hello MortgageMaster,

This is actually my second question; can you pull your down payment from a 401k, and does it have to be a "family" member giving to you as a "GIFT" for your down payment.

You need to check with your 401k Administrator to see if they will allow you to use proceeds from your 401k for your down payment. Some will allow you to do so and some will not.

Regarding the gift source: It depends. If the down payment is over 30-35% of the purchase price, the lender may not care: they are in a safe "Loan-To-Value" position. In most cases, however, the lender will want the gift funds to come from a family member.

MortgageMaster

Gift Funds

Hello MortgageMaster,

Can you tell me how I obtain funds that are being given to me as a GIFT for a down payment on a home? For instance, my brother-in-law is giving me my down payment for my home as a gift from him. Does it matter WHAT type of WAY he gives it like in a regular "CHECK" from his account or does he have to get a cashiers check to give me?

If you are receiving gift funds, the best thing to do is have your brother take the funds from his account using either a wire or cashier's check. Your lender will most likely want your brother to "source" his funds. In other words, they want to see that he had the funds to begin with, and that he actually provided the funds. If your brother uses either of the above, it will provide a paper-trail showing that the funds came from his account. Also, a personal check, if accepted (very doubtful), may take several days to clear. A word of caution: have your brother provide you the funds through escrow/title. If he writes you a check, you deposit it, and you pay for the down payment through your bank account, your brother will have to provide bank statements showing he had the funds PLUS the proof that the fund were written to you and cleared his account.

MortgageMaster