My cousin is 75 and she can take care of herself for the most part. I bring her food once a week and help her with chores like laundry. And cleaning. She only owes $19,000, and has that amount in the bank. Unfortunately she cannot work anymore and her mortgage would need to be renegotiated to make it more affordable. If we could do that she could stay there for another year perhaps maybe longer. She does not want to go to a nursing home could really use assisted care but that is hard to afford. Anyway should we try to save the house? luckily we are in Covid so Banks might be willing to work with us. I am now her POA.
Why consider foreclosure if there's enough to pay it off?
She could pay it off, live there a year or so, and build up some more equity and sell it.
If she's in the US, once she spent down her savings to under 2k, if she wanted to go on SSI due to her age, (if she's not eligible for Social Security) she could do so.
That should give her enough monthly income to pay taxes, utilities, food, etc & hire some extra help at home.
She could also look into Meals on Wheels, and other programs to assist her, too.
1. Foreclosure:
(a) Status. I'm assume she lives in NJ as well? Foreclosure requirements differ by state. With the caveat of not having checked on foreclosures statutes for years, be aware that some states require only public notice but not litigation. Public notice foreclosures proceed more quickly.
(b) Has your cousin received the notice of sale date?
(c) Has she contacted the lender (mortgagee) in an attempt to work out a plan for making payments at a different and more affordable rate, i.e. a " plan in lieu of foreclosure?" I've worked on those for commercial loans; they can reset the monthly payment amount, extend the length of the loan, and make the payment obligations easier to meet for someone with otherwise good credit, and the ability to continue payment and bring the mortgage "current."
(d) Given the widespread Covid induced economic distress, I think most mortgagees (lenders) would rather renegotiate and have an income producing loan on their books than continue through foreclosure, which requires them to maintain the house after acquisition, and through the interim period until the house is sold. In addition, large amounts of nonproducing loans aren't appealing to banks.
(e) Is the lender a reliable bank, or one of the many companies that might be lenders but don't have the staff and support of banks with foreclosure departments and experienced staff?
1. Recommendation: I would contact the lender, in writing and hand delivered to a branch if necessary, or by e-mail (with receipt acknowledgment requested), and request a renegotiated mortgage. Ensure that the POA or DPOA gives you this authority. Make it clear as well in the letter that you're assisting her on this matter. Otherwise, an assumption might be made that your cousin isn't able to manage her affairs, keep up the house, etc.
2. Follow up, by phone, to ask who will be handling the request and how soon can you meet to discuss terms? (this will demonstrate that you and your cousin are serious, and hopefully encourage the lender to act more quickly.
3. My personal opinion is to try to save the house, given that she does have some financial assets. Unless it's in a really dilapidated condition (and there are remedies for that), it's safer, more convenient, and in the long run could be less expensive than an out of home placement.
2. Will her SS and any other income be sufficient to make mortgage payments and pay for her care (if additional help is needed)? This would be factored into the decision to restructure the loan.
3. How did the loan enter the foreclosure stage? Was she cash short? Was it an overwhelming situation in which she just couldn't make decisions? The reason for entering foreclosure should be reviewed thoroughly with your cousin, as the mortgagee may question how the foreclosure stage arrived in the first place.
4. Foreclosures are emotionally challenging, especially when there's a pandemic in place. There are counseling agencies, although I can't name them at this moment. During the 2008+ financial crisis, many agencies provided counseling. That might be an option, just to confirm your path, and/or get suggestions from counselors.
I hope this helps; please post again if anything isn't clear or questions arise from what I've suggested.
And think of what you can do to cheer up your cousin; this has got to be a frightening situation for her. The potential of losing one's home has got to be terrifying.
It makes a very big difference on how she could or should proceed.
Worried, thanks for the insight. I hadn't thought of it as you suggested.
I think that this needs expert help, not advice form us. This may be the tip of an iceberg you are looking at here. Thanks Cali and others for making it clear what we are looking at here.
It mat depend on how much of her mortgage payment is going to interest and how much is going to principle. Has she ever renegotiated her interest? Lets say its 8% and now its 4%, that 4% makes a big difference in a monthly payment.
It always surprises me when someone has a mortgage past retirement. If u talk to the Mortgage company, don't talk to the first person who answers the phone. Make sure its someone with authority to make you a deal.
I would hate to have her use what she has in the bank. Maybe its time to sell the house, pay what is owed and start new. At 75, she really doesn't need the taxes (I live in NJ and pay 6k a year on a 79x100 lot and have a 4 bedroom split) nor the upkeep on the house. Right now interest rates are down and houses are selling. 5 just sold on my street. She could get a nice apartment and only be paying for cable, electric and WiFi. Even a trailer if she has some nice 55 and up parks near her.
Just curious, how long before taxes become delinquent? NJ certainly has some interesting statutes.
In Michigan, a foreclosure can be by advertisement, although I don't recall the time the advertisement has to run. But it can be fairly quick, in about or less than 6 months if I remember correctly (but I'd have to check the statutes to be accurate.)
Unless laws have changed, foreclosures for tax delinquencies are 3 years (of unpaid taxes). People get around this by paying only a portion of taxes.
I stopped paying Moms taxes when she went on Medicaid May of 2017. I could not pay her's and mine too banking on the house selling. I don't have her paperwork handy but the first lean of 5k was applied in Oct of 2018. In our Township the leans are sold that way the Township gets the tax money. Since the house was not selling and going downhill, I asked if I could just turn it over to the lean holder and I mentioned something about a Sheriffs sale. Thats when I was told that NJ does not allow foreclosures for 2 years. And yes, probably to give the owners time to save the house. Even though given 2 years, it may take longer for the lean holder/Morgage holder to actually foreclose.
My Mom passed in 2017, I sold the house Summer of 2019. October seems to be the month leans are placed so the tax lean was still 5k when I sold.
Nursing homes are for people who are debilitated physically and/or mentally. Most also have rehab sections for people recovering from surgery or accidents.
AL is usually less expensive than NC because residents don’t need as much help as in NC. Fewer employees are needed so costs are lower. My mother was paying $4300 a month in AL in Ohio, then close to $7000 in a nursing home.
Most AL do not accept Medicaid payers unless the person has lived there for 2 years so it might be a good idea to get your cousin placed now and figure out how to finance the fees until she might need Medicaid.
Medicare might help pay for NC but only for a limited time. Mom was in rehab and it paid her first 100 days until she plateaued and was discharged to the regular NC. She ended up in the Memory Care in an AL and was very happy and well cared for, it ran about $5000 a month.
AL is a good option because the residents are encouraged to be social and participate in activities although right now that is pretty restricted.
If she has a 90k mortgage outstanding, and say the home needs 50k worth of repairs and it would only sell for 80k then it is pretty easy to make a decision. On the other hand what if it would sell for 180k? Then it makes sense to protect the asset.
I would find out what the drop dead date is, what all the fees are for the foreclosure that has started, that alone can add thousands of dollars that must be paid up front to release the foreclosure and verify that all the taxes and insurances are current. This could be loads expensive than just catching up on the mortgage payments. Unpaid taxes generate fees, penalties and interest, lapsed insurance can increase premiums or make it hard to find coverage.
I would also check into her utilities, they could be behind and because she is vulnerable they can not be shut off.
Sorry for making this bigger than just the mortgage but, these are legitimate issues that you will run into in this situation.
Best of luck getting this sorted out.