heeelllllllllppppppppppppppp!

CJOHNSON · Joined: 25 Jul 2007 Posts: 4

My current lender called to say that our refinance cannot go through unless we tile the shower stall. (we took down the old tile and are in the process of replacing it but need the funds). The appraisal came in lower than expected (our original plan was $280, 000 he says $265,000 as is). Everything else is a go as far as credit, dbt, income, title...this loan was to pay off debt and make some minor improvements...now we are stuck. We owe 159,000 on the first mortrgage, 23,000 on the second, 24,000 on debt. Total 206,000 still below the 80%LTV...Is this for real????? We live in IL and make over 100,000/yr

m2c · Joined: 03 Aug 2005 Posts: 937

Well, this can be ticklish but I think there are possibilities. Since you’re do it yourself (correct?), mechanic liens are an issue. Livability is not assuming there’s more than one bath with shower or tub. In cash-out refis, 70% is the “barrier” for LLPAs (extra cost as far as your concerned) but you’ve have a point on the less-than-80%-LTV argument.

I am still sympathetic with the bank and the appraisal may have specified “subject to” on the completion of the shower. I’d float a proposal of establishing a “repair escrow” for completion of the show by a professional should you not finish it. This is not the type of repair that is normally escrowed but the bank may go along. Funds for the escrow would come from part of the $24K in debt that was to have been paid off and released after inspection of the completed repair. Throw in some incentive that the bank could write the check directly to the creditor for the balance of the $24K not paid at closing. It’s touch and go whether the bank will go along with but it’s worth a try. It they intend to put the mortgage in the secondary market, the probability of approving this plan is lower.

CJOHNSON · Joined: 25 Jul 2007 Posts: 4

Thank you for your reply...it is a second bath. Would you know if it made a difference if we finished it with a all surround to get the loan and then tiled after the settlement...in general, would this be allowable?

m2c · Joined: 03 Aug 2005 Posts: 937

Very likely but check with the lender first. Basically you’d be increasing your total cost and from a big picture point of view, it seems like a make work project. With a nearly 80% LTV cash-out refi I don’t know how much slack an underwriter is going to cut you but you’d might at least say “hey, I could (with your approval) do it this Mickey Mouse way but we all know I’d tear that out and go with tile right after the deal closes”. The sweetener would be holding “repair escrow” funds (funds which otherwise would go partly to pay down the $24K debt) to assure completion of the shower. It would be “pound dirt” if this were a purchase and is a “tight” call on the refi. Lot depends what was said on the appraisal – if you don’t have a copy yet, ask for it now.

Yes, we did something similar a few years back – equity position was much better but the repair (major renovations to 2nd floor) were big. Knew this from the get go and told appraiser to do the appraisal as is. Currently reviewing another with the underwriter (not my deal) which is even trickier – more potential dollar issues and we’re going without MI at 85%. “Problem” arose at tail end and we may end up going with the deal with a small escrow hold back rather than delay the sale a month or so. Sorry to be so vague but this is a deal in process, privacy issues are there, and I want to keep the situation as generic as possible. Point is that there is some flexibility out there but you want to use it with caution. I’d sit down face-to-face with the LO (I NEVER allow applicants to speak directly with the underwriter) and see if there can be some reasoned approach.

m2c · Joined: 03 Aug 2005 Posts: 937

Ops, in fairness to your bank I should add we "eat what we kill and pay for any rotten meat". Basically that means we give a money back guarantee for the life of the loan so if you convince us, we're more likely to be flexable. If your bank says "pound dirt", do not take it personally.

jrhartman · Joined: 01 Apr 2007 Posts: 107 Location: Michigan

what does the appraisal list as the "cost to cure" for the repairs?

CJOHNSON · Joined: 25 Jul 2007 Posts: 4

I believe the cost to cure was $8000 on the bathroom and $500 on the driveway. The LO called back and said that the "powers that be" ok'd the surround and as long as we put up walls and had a full functioning shower, the loan would go through. We did just that and had the appraiser out today to take a picture of the completed shower and then he also took a picture of the back of the house (I think they missed the screened porch off the patio the first time.) Hopefully all will be approved shortly and we can put this nightmare to rest. My husband on the other hand is having a hard time understanding why we had to complete something that we were trying to get the funds for the first time around.

chow · Posted: Tue Jul 31, 2007 12:58 am Post subject:

Because of the cost to cure is a major room in the house, and it isn't done right, then there will be issues later. You should have been open and honest with the Loan officer and told him you had a torn up bathroom. (if you were-shame on LO) They can do repair escrows, but those have a added expense and not every lender wants to follow up on the after closing repairs. It costs you two appraisal fee's if done right.

Any repairs than 5 thousand dollars usually requires a rehab loan!

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

Well, and to be fair not every consumer knows everything that we need to know in the loan process.

That being said, I generally ask about the state of the property before paying someone to tell me that there's something wrong :)

CJOHNSON · Joined: 25 Jul 2007 Posts: 4

I specifically told the loan officer that the refinance was needed to pay debts and for home improvements. He stated that he could do the loan without an appraisal (only a drive by to assure the property exsists and was in proper order)and that he could move it along and possibly close within two weeks. Here we are over a month later and after a full appraisal told we needed to repair the shower/tub stall before the loan could go through. We both had so much invested in the transaction at that point, we agreed to the repairs. Unfortunatley the funds needed to do the bathroom that we wanted to in the first place were not available. We asked permission to install the drywall (greenboard) and tub surround and were given the go ahead. The appraisor came out to take a picture and apologized for the situation and offered the explanation that the requirements are changing and everyone is tightening their requirements before lending. I went with our current lender who is working with Option One.

P.S. We are working on a fixed rate loan at 10% for 30 years to repair our once stellar credit prior to my husband losing his job to privatization. I figure it will be a temporary fix and once credit is re-established we can get a better mortgage and work towards early pay off.

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

:shock:

You're below 80% and you're getting a 10% interest rate?

What part of IL are you in? How recent is the negative credit? In all honesty, I'd hesitate to sign those papers for a day or two until you can provide us some more information. It sounds like you're walking into a painful trap right now.

What are the interest rates on the loans you have now (the mortgages?) Are they fixed or adjustable rates?

chow · Posted: Wed Aug 01, 2007 12:54 am Post subject:

okay, spill the beans, tell us every painful thing about your situation. A loan with work being done, 80% LTV and 10% rates now makes me wonder. Drive by appraisals are not something that is a common place right now, because of the very issue of your loan request.

I've been on some drive by's, and found boarded up homes on the backside. Then I've done some follow up work on drive by's and found the house not even present at the address! Go figure?

I think maybe that's part of the issue the 125% loans got a little slim, dried up and went away?

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

I chatted with her today and we'll likely be talking a bit more tomorrow. I'm hoping to prevent her from paying tons of money on this crazy scheme from their lender, but we shall see how the cards fall.